Carbon Pricing Explained: Emerging Pricing Trends And Approaches

What is carbon pricing?

Carbon pricing is a policy mechanism that aims to capture the costs of Greenhouse Gas (GHG) emissions. In our societies, GHG emissions indirectly lead to increases in healthcare costs, damage to crops, damage to infrastructure, and other costs. Carbon pricing attempts to pay for these costs usually in the form of a price on the carbon dioxide (CO2) emitted.

Common carbon pricing approaches

An Emissions Trading System (ETS) — also known as a ‘Cap and Trade’ system — limits (or caps) the GHG emissions from particular sectors of the economy. Industries are given a ‘right to emit’ within the limit — provided that they have been allocated or purchased emission allowances.

Source: Carbon Pricing For Climate Action, WBG
Source: State and Trends of Carbon Pricing 2021

Carbon pricing trends

Trend 1 — The share of emissions covered by carbon pricing is increasing each year

Global action on climate change is increasing. This can clearly be seen in the growth of carbon pricing schemes over the past decade. Since 2010, the number of carbon pricing schemes in operation globally has increased each year from 19 to 64 in 2021. This development means over 20 percent of GHG emissions are now being priced compared to just over 5 percent in 2010.‍

Source: State and Trends of Carbon Pricing 2021

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
FlexiDAO

FlexiDAO

FlexiDAO is a software provider in the energy sector aiming to accelerate the transition toward a decabornised world, leveraging on blockchain applications.