Carbon pricing is a critical tool governments and organizations use to reduce greenhouse gas emissions and combat climate change. The issue of carbon emissions and their pricing is a global concern that has gained significant attention in recent years.
2024 State of Carbon Pricing
According to the World Bank’s annual “State and Trends of Carbon Pricing 2024” report, carbon pricing revenues reached a record $104 billion in 2023. There are now 75 pricing instruments in operation worldwide, and over half of the collected revenue is being used to fund climate and nature-related programs. Additionally, the report revealed that carbon taxes and Emission Trading Systems (ETS) cover 24% of global emissions as of 2024, an increase of 17% over the last two decades.
Large, middle-income countries, including Brazil, India, Chile, Columbia, and Turkey, are making substantial progress in carbon pricing implementation and could soon see covered global emissions increase to 30%.
Traditionally, carbon pricing has been focused on high-impact sectors such as power generation and heavy manufacturing industries. However, it’s now being considered in new sectors such as shipping, waste, and aviation. The EU’s Carbon Border Adjustment Mechanism (CBAM), currently in a transitional phase, is also pushing governments to consider carbon pricing for sectors such as iron, steel, aluminum, cement, fertilizers, and electricity.
Carbon Pricing
The price range for carbon emissions varies significantly across jurisdictions due to differences in coverage, compliance, and compensation arrangements. As of April 2024, global carbon prices ranged from $0.46 to $167 per tonne of CO2 equivalent, with the worldwide average at $32 per tonne.
Europe and Central Asia have an average price of $50 per tonne. In the United States and Canada, the average price is slightly lower, at $48 per tonne. Uruguay has the highest carbon tax in the world, at $167 per tonne.
Despite record revenues and growth, global carbon price coverage and levels remain too low to meet the Paris Agreement goals. Only 1% of global emissions are currently priced high enough to meet the Paris Agreement’s temperature target in 2024.
Looking Ahead
ETSs and Carbon Taxes are currently the primary compliance instruments implemented by jurisdictions, but governments are progressively using multiple carbon pricing instruments in parallel to expand coverage or price levels.
Governments are increasingly including crediting frameworks in their policy mix to support both compliance and voluntary markets, particularly in middle-income countries. The compliance landscape is changing, and companies can anticipate carbon pricing initiatives growing as nations worldwide work toward meeting the Paris Agreement goals.
Conclusion
The current state of carbon emission prices reflects a global commitment to mitigating climate change. However, the wide range of prices and the limited coverage of high pricing levels indicate that there is still much work to be done. Policymakers, businesses, and researchers must continue to monitor and adapt these initiatives to ensure they effectively incentivize reductions in carbon emissions.
For expert guidance in navigating compliance complexities and changing regulations, contact Tetra Tech’s compliance experts today. We offer tailored solutions, from reporting management to compliance training courses, and we can help you keep your compliance on track for 2024 and beyond.
