Global Carbon Pricing Landscape (2025)
- Coverage: Direct carbon pricing now covers 28% of global GHG emissions, up from 24% in 2024.
- Instruments: 80 carbon pricing instruments are operational worldwide: 43 carbon taxes and 37 Emissions Trading Systems (ETSs).
- Revenue: Over $100 billion raised in 2024 for the second year in a row—more than half allocated to environmental, infrastructure, and development goals.
Key Trends
- ETS Expansion:
- China expanded its ETS to cover cement, steel, and aluminum, adding 3 billion tCO₂e.
- ETS implementation progress in Brazil, India, and Türkiye.
- Adoption of rate-based ETSs is increasing (e.g., India, Indonesia, Colorado, Türkiye).
- Carbon Prices & Revenues:
- Carbon prices held steady in real terms.
- Average price of implemented carbon pricing instruments: ~$19/tCO₂e.
- Global average carbon price (accounting for unpriced emissions): ~$5/tCO₂e.
- Prices are still below the level needed to meet climate targets (e.g., ~$50–100/tCO₂e by 2030).
- Sectoral Coverage:
- Power sector: >50% covered.
- Industry: >40% due to China’s ETS.
- Transport, buildings, agriculture, and waste: significantly lower coverage.
- Agriculture remains largely unpriced, with Denmark planning the first livestock carbon tax.
Carbon Credit Markets
- Retirements: Tripled for compliance markets in 2024, especially under California and Québec ETSs.
- Buyers: Shift in voluntary demand toward nature-based removals and clean cooking projects.
- Prices: Premiums observed for:
- Nature-based removals.
- Credits rated highly by third parties.
- Credits eligible for international compliance (e.g., CORSIA, Article 6).
- Unretired Supply: ~1 billion tCO₂e, mostly older credits (pre-2022), dominated by forestry and renewable energy.
International Developments
- COP29 Agreement: Advanced clarity for Article 6 international carbon markets, expected to enhance market trust and enable cross-border trading.
- Border Carbon Adjustments (BCAs): Being pursued by EU, UK, Australia, Japan, Türkiye, and others—driving more countries to adopt domestic carbon pricing to avoid trade penalties.
Private Sector & Innovation
- Internal Carbon Pricing: 1,753 companies use internal carbon prices (+89% since 2021).
- Market Innovations:
- Insurance tools (e.g., political risk coverage by MIGA) to de-risk carbon market investment.
- Efforts to standardize and improve credit quality and transparency.
Conclusion
Carbon pricing continues to expand, evolve, and mobilize significant revenue, especially in middle-income countries. While coverage and average prices are rising, current levels remain below those needed to meet global climate targets. Carbon credit markets are adapting with a focus on quality, removals, and compliance use, signaling long-term potential despite short-term market fluctuations.
https://www.worldbank.org/en/publication/state-and-trends-of-carbon-pricing
