Carbon pricing is a fundamental tool in the fight against climate change, encouraging the reduction of greenhouse gas emissions. The chart published by The World Bank in May 2024 reveals a diverse panorama of carbon prices around the world, highlighting both emissions trading systems (ETS) and carbon taxes.But how do these strategies apply globally and what can we learn from them?
Emissions Trading Systems (ETS) systems establish a general emissions limit and allow the trading of emission allowances. This model creates a market where CO₂ emissions have a cost, encouraging companies to reduce their emissions to save money or profit from selling excess allowances.
The carbon tax imposes a direct cost on each ton of CO₂ emitted, increasing the costs of carbon-intensive activities and encouraging the transition to cleaner alternatives.
The European Union’s ETS system, introduced in 2005, is a striking example of success. Between 2022 and 2023, this system resulted in a 16% reduction in emissions from covered activities, generating US$47 billion. Furthermore, several EU countries have implemented additional mechanisms for carbon pricing, directing revenues to domestic initiatives and complementing the European ETS.
According to a graph from The World Bank, the price needed to meet the Paris Agreement targets ranges between US$40 and US$80 per ton of CO₂. However, only 1% of global emissions are currently priced within this range, suggesting a long way to go to align global prices with climate needs. Among the countries that exceed this target are Uruguay, Switzerland and Liechtenstein, standing out for their ambitious policies.
The main global challenge is the low carbon price in many countries. Insufficient pricing could lead to a continuation of emission practices without significant investment in abatement technologies. This is especially critical in regions where economic and political pressure limits the implementation of more stringent taxes or emissions trading systems.
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We invite you to learn more about our services and get involved in the fight against climate change. Whether through purchasing carbon credits, implementing sustainable projects, or simply seeking more information on how to reduce your carbon footprint, together we can make a difference.
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