Energize Weekly, June 6, 2018
The use of carbon pricing mechanisms by countries and regions, as a way to control greenhouse gas emissions, has tripled in the past decade and is poised to be more widely used in the coming years, according to the World Bank.
Seventy jurisdictions—45 nations, 25 sub-national entities such as states, provinces and cities—have implemented or are scheduled to initiate carbon pricing schemes, according to the World Bank’s State and Trends of Carbon Pricing 2018 report.
Those mechanisms, including auction allowances, carbon taxes and direct payments for compliance obligations, raised $33 billion in 2017 for the jurisdictions—a 50 percent increase over revenues collected in 2016.
Looking forward, the World Bank said 88 signatory parties to the Paris climate accord in their national plans say they are planning or considering using carbon pricing to meet their commitments to reduce emissions.
“The growing momentum for carbon pricing and the increasing prevalence of the topic in climate change discussions in recent years take us in a new direction,” the report said.
In 2016 and 2017, the rise in carbon pricing programs was driven by jurisdictions in the Americas, including Chile and Colombia, as well as the Canadian provinces of Alberta and Ontario, and in the U.S. by California, Massachusetts and Washington.
In December 2017, China also announced plans to begin operating its national emissions trading system (ETS) in phases, starting with the power sector.
“With a fully operational Chinese ETS, carbon pricing mechanisms around the world are projected to cover 11 gigatons of carbon dioxide equivalent or about 20 percent of global greenhouse gas emissions, up from 15 percent last year,” the report said.
The Kazakhstan ETS was also restarted in 2018 following a two-year suspension. Carbon taxes in Argentina and Singapore are scheduled to come into force in 2019, the report said.
Prices for carbon are also rising, with about half of emissions now covered by carbon pricing initiatives valued at more than $10-a-ton carbon dioxide equivalent, compared to one-quarter of emissions covered in 2017.
The most popular mechanism has been the carbon tax, used by countries such as Finland, South Africa, Ireland and the Canadian providence of Alberta. Another widely employed instrument is the ETS, which is used in South Korea, Switzerland and California among others. There are also ETS pilots in Beijing and Shanghai.
Carbon taxes range from $139-a-ton carbon dioxide equivalent in Sweden to $29 in Denmark. In 2017, the ETS price in South Korea was $21-a-ton carbon dioxide equivalent, and it was $16 in the European Union.
The United Kingdom used another technique setting a floor price for carbon—$25-a-ton.
“Governments at all levels are starting to see the effectiveness of carbon pricing in their efforts to cut harmful carbon pollution while also raising revenues for climate and other policies, including environmental action,” John Roome, World Bank Senior Director for Climate Change, said in a statement. “As countries take stock of their Paris Agreement commitments and set a path towards increased ambition, carbon pricing mechanisms with robust pricing levels are proving to be essential elements of the toolkit.”
