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2024 Carbon Pricing state and trends: A Market on the Rise, But Challenges Remain

Writer: Jonathan PHILLIP, George K. KIONGSON

Social Media Team: George K. KIONGSON

The World Bank’s recently released 2024 State and Trends of Carbon Pricing report offers an inspiring glimpse into the remarkable progress made while also highlighting the critical challenges that lie ahead. The fight against climate change requires a comprehensive and urgent strategy, and carbon pricing has emerged as a potent tool in this effort. By putting a price on carbon emissions, policymakers aim to incentivize polluters to reduce their emissions and encourage substantial investment in clean technologies. This article delves into these vital insights, offering a comprehensive and compelling overview of the current state and future direction of carbon pricing worldwide. Dive in to discover how carbon pricing can shape a sustainable future for our planet.

#1 A Market on the Rise: Expanding Coverage and Record Revenues

In 2024, a total of 75 carbon pricing instruments are in operation worldwide. These instruments cover a significant portion of global emissions – around 24% - and with additional carbon taxes and Emission Trading Systems (ETSs) under consideration, this figure could rise to 30%. This expansion is particularly notable with the inclusion of large middle-income countries like Brazil, India, and Turkey, demonstrating a broader global commitment to carbon pricing.

The market’s growth is further reflected in record-breaking carbon pricing revenues. In 2023, revenues exceed $100 billion, driven by the high prices in the EU and a temporary shift in some German ETS revenues from 2022 to 2023. Encouragingly, over half of these revenues were directed towards climate and nature-related programs, demonstrating a commitment to utilizing these resources effectively in the fight against climate change.

Source: 2024 Carbon Pricing state and trends report

#2 Beyond Borders: Expanding the Reach

The focus isn’t solely on national-level implementation. Subnational initiatives continue to gain traction, despite some setbacks. Additionally, there’s been progress in sector-specific initiatives targeting aviation and shipping, two major contributors to greenhouse gas emissions. The recently launched EU Carbon Border Adjustment Mechanism (CBAM) is another noteworthy development. This mechanism requires importers of certain goods to report the embedded emissions associated with those goods, essentially leveling the playing field for European producers facing stricter climate regulations.

Source: 2024 Carbon Pricing state and trends report

#3 Challenges Remain: Closing the Ambition Gap and Price Levels

Despite the positive developments, the report also underscores the significant challenges that remain. A major concern is the gap between the ambitious emissions reduction goals outlined in agreements like the Paris Agreement and the actual policies implemented. While the expansion of carbon pricing is a positive step, the current implementation falls short of what is needed to achieve the desired results.

Another key challenge lies in the price levels themselves. While some carbon tax rates have increased recently, overall pricing levels within established ETSs have seen mixed results. For example, the EU ETS experienced price decreases in 2023. To effectively incentivize emissions reduction and drive clean energy transitions, carbon prices need to be at a level that discourages polluting activities and makes clean alternatives more attractive.

#4 The Road Ahead: Key to Effective Implementation

The 2024 State and Trends of Carbon Pricing report offers a cautiously optimistic outlook. The market for carbon pricing is expanding, with new players and innovative approaches emerging. However, the urgency of the climate crisis demands a faster pace of implementation and more ambitious pricing structures.

Policymakers around the world need to recognize the critical role of carbon pricing in achieving climate goals. They must demonstrate the political will to establish robust carbon pricing schemes with pricing levels that effectively incentivize a rapid transition towards a low-carbon economy. Additionally, international cooperation and the development of more comprehensive carbon pricing frameworks, like the EU’s CBAM, are crucial to create a global market that can effectively address climate challenge.

#5 Conclusion

In Conclusion, the 2024 carbon pricing landscape is characterized by both positive developments and persistent challenges. While the market is demonstrably growing, achieving the necessary level of emission reduction requires accelerated implementation and strengthened policies. By harnessing the power of carbon pricing and fostering international cooperation, we can create a more sustainable future for our planet.

For further assistance in navigating the Carbon Market, don’t hesitate to contact Mt.Stonegate, as we lead to a better future. We offer comprehensive one-stop solution services and hold a prominent position in the Asian market.



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