A new report by the World Bank revealed that the carbon pricing efforts around the world have contributed to a record high of $104 billion in revenue in 2023. According to the report, the current pace and pricing levels are insufficient to achieve the ambitious targets set by the Paris Agreement.

Carbon pricing, implemented through carbon taxes or emissions trading systems (ETS), is a crucial tool for reducing greenhouse gas emissions and fostering a low-carbon economy.

The World Bank report, “State and Trends of Carbon Pricing 2024,” highlights the following key points:

Growth in Middle-Income Countries: There’s been a positive rise in carbon pricing adoption, particularly among middle-income nations like Brazil, India, and Turkey. Globally, there are now 75 carbon pricing instruments in operation, two more than last year.

Price Gap Remains: Despite this progress, current carbon prices are simply not high enough to meet the goals of the Paris Agreement. Only 24% of global emissions are covered by carbon pricing, and less than 1% are subject to prices that could effectively limit global warming. The report suggests a price range of $63-$127 per ton by 2030 to achieve significant emissions reductions.

Record Revenues, Limited Impact: 2023 saw record-breaking carbon pricing revenues, driven by high prices in the EU and a temporary shift in some German ETS revenues. However, this windfall represents a small portion of national budgets and doesn’t translate to sufficient action on climate change.

There are some bright spots. Over half of the revenue collected is being directed towards climate and nature-related programs. There’s also a growing trend of governments using multiple carbon pricing instruments and applying them to new sectors like maritime transport and waste management.

The report also acknowledges emerging challenges. The integrity of carbon credit markets remains a concern, with efforts underway to establish stricter quality benchmarks. Voluntary demand for carbon credits is declining, while credit issuances are down for the second year.

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