Global carbon pricing revenue reached US$84 billion in 2021, almost 60% higher than in 2020, providing an important source of funding to support a long-term economic recovery, finance broader fiscal reforms, and invest in communities, according to the World Bank’s new report.
The international financial institution last week released its annual ‘State and Trends of Carbon Pricing’ report, stating that there are currently 68 direct carbon pricing instruments in operation, including 36 carbon tax scheme and 32 Emissions Trading Systems(ETSs). Over the past year, four new carbon pricing instruments have been introduced, including one in Uruguay and three in North America.
While carbon prices have reached record highs in many countries, the report concluded that fewer than 4% of global emissions are currently covered by a direct carbon price in the range required by 2030 to meet the Paris Agreement’s temperature goal.
Bernice Van Bronkhorst, World Bank Global Director for Climate Change highlighted that there has been good progress toward resolving cross-border challenges related to carbon pricing and the adoption of new rules for international carbon markets, which helps create a clearer policy direction.
She went on to say that it is now critical to build on this momentum and significantly increase both coverage and price levels to realize the full potential of carbon pricing in aiding inclusive decarbonization.
In an effort to curb global warming, Members of the Group of Seven industrialized nations, or G7, have committed to halt public support for fossil fuel projects in other countries by the end of this year to help decarbonize hard-to-abate fossil fuel sectors.
In addition, the seven economies have also agreed to achieve “predominantly decarbonized” electricity sectors by 2035, which is seen as a commitment to an eventual phase-out of coal power generation.