By Anders Lorenzen

In 2023 a record $104 billion was raised globally through various carbon pricing schemes, such as the European Union’s (EU) emissions trading scheme (EU ETS), the world’s largest carbon revenue system.

These schemes charge companies for emitting CO2. But, despite the record sum, a report by the World Bank warned that prices are still too low to drive the changes needed to meet the targets set out in the 2015 Paris Agreement.  

The World Bank’s report, State and Trends of Carbon Markets, did support these mechanisms, stating “Carbon pricing is a critical part of the policy mix needed to both meet the Paris Agreement goals and support low emissions growth.”

The number of carbon pricing systems around the world is on the rise. They have now reached 75, two more than the previous year. And they are now covering around 24% of global greenhouse gas (GHG) emissions. The figure raised in 2022 was $95 billion representing a $9 billion increase between 2022 and 2023.

However, the report said that less than 1% of global greenhouse emissions are covered by a direct carbon price at or above the range recommended by the High-level Commission on Carbon Prices.  This was designed to meet the 2015 Paris Agreement target limiting temperature rise to well below 2 degrees C.

The price is too low

In 2017, a report by the High-Level Commission indicated that carbon prices need to be in the $50-100 per ton range by 2030, to keep a rise in global temperatures below 2 degrees C. Adjusted for inflation those prices would now need to be in a $63-127 metric ton range, the World Bank report explained.

There are concerns that things could become worse before getting better, as the report indicated that due to recent drops in the EU ETS price, revenues could fall in 2024.

The benchmark EU carbon contract is currently trading around €73 per ton, down from around €80 per ton at the start of the year, and having touched a record over €100 per ton in February 2023.