The price of carbon

Manuel Lonfat

Nearly 80% of all emissions are not covered by existing pricing programs. We are still far from a situation that meets the needs of the Paris Agreement.

"Despite ongoing developments, most carbon prices are low, with almost half of the covered emissions priced at less than US$10/tCO2e".

Each year, the world bank publishes a report on ongoing carbon pricing and tax programs around the world.

The report can be found on the knowledge hub of the World Bank. It is encouraging to see many countries establishing and expending programs. The past year has seen the first country in Asia and the first in South America joining the effort. Kudos to them for acting. 

But only 22% of all emissions are currently targeted by existing programs, which means that we have along way to go until carbon pricing can truly help us meet the commitments of the Paris agreement.
And the prices set in the existing programs are generally still too low to really make a difference. Only about 5% of the emissions in scope are priced high enough today. And as we continue delaying action, every year it the gap increases. The average carbon price in existing programs is well below 10$, when it should already be between 75$ and 100$.

Despite the price shortfall, countries earned $45B in revenues from existing carbon programs. Only about 50% of ti net back to climate mitigation. Much of the rest ended up in the general budget of the participating countries. This is yet another dilution of impact that we cannot afford today given the criticality of the problem.

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