Global Coverage and Price Levels
Carbon pricing has grown from a handful of pioneering jurisdictions to a global phenomenon. As of 2024, 75 carbon pricing instruments are in operation, covering about 23% of global greenhouse gas emissions. This lesson maps the current landscape of carbon pricing worldwide.
The Growth Story
Carbon pricing has expanded rapidly:
| Year | Number of instruments | Global emissions covered |
|---|---|---|
| 2000 | 7 | ~3% |
| 2010 | 21 | ~7% |
| 2015 | 40 | ~12% |
| 2020 | 61 | ~22% |
| 2024 | 75 | ~23% |
In just 24 years, carbon pricing has grown from a few Nordic experiments to covering nearly a quarter of global emissions. This represents one of the most rapid expansions of an environmental policy instrument in history.
Geographic Distribution
Carbon pricing is now present on every continent:
Europe: The most extensive coverage, led by the EU ETS and Nordic carbon taxes. Nearly all European emissions face some form of carbon pricing.
North America: California and Quebec cap-and-trade, RGGI in the Northeast, and the federal Canadian carbon pricing system.
Asia-Pacific: China's national ETS (the world's largest by emissions), Korea's ETS, Japan's carbon tax, and various pilot systems.
Latin America: Mexico's carbon tax and pilot ETS, Colombia's carbon tax, Chile's carbon tax.
Africa: South Africa's carbon tax is the primary example; several countries are exploring systems.
Oceania: New Zealand's ETS and Australia's Safeguard Mechanism.
Carbon Prices Around the World
Prices vary enormously:
| Jurisdiction | Instrument | Price (USD/tCO2e) | Coverage |
|---|---|---|---|
| Sweden | Carbon tax | ~$130 | Non-ETS sectors |
| Switzerland | Carbon tax | ~$130 | Heating fuels |
| EU | ETS | ~$65-85 | Power, industry |
| UK | ETS | ~$50-70 | Power, industry |
| Canada (federal) | Tax/OBP | ~$50-65 | Economy-wide |
| California | ETS | ~$35-40 | Economy-wide |
| New Zealand | ETS | ~$35-50 | Most sectors |
| Korea | ETS | ~$10-15 | Power, industry |
| China | ETS | ~$8-12 | Power sector |
| Mexico | Carbon tax | ~$3-4 | Fossil fuels |
| South Africa | Carbon tax | ~$10 | With allowances |
The Price Gap
There is a significant gap between current prices and what experts say is needed:
Stiglitz-Stern Commission recommendations:
- $50-100/ton by 2030
- Higher thereafter
Current reality:
- Only ~5% of global emissions face prices above $50/ton
- Average global carbon price is about $20/ton
- Many prices are below $10/ton
Carbon prices are like medicine doses. A small dose might not be effective. Experts say we need at least $50-100 per dose, but most of the world is taking $10-20 doses. The treatment is underway, but at sub-therapeutic levels.
Coverage Depth
Coverage varies not just by existence of carbon pricing but by what share of national emissions is priced:
High coverage (over 80% of emissions):
- Nordic countries (combined with EU ETS)
- Canada (federal backstop ensures broad coverage)
- New Zealand
Medium coverage (50-80%):
- EU member states
- California
- Korea
- Switzerland
Lower coverage (under 50%):
- China (power sector only, but large absolute coverage)
- Japan (modest carbon tax)
- Most developing country systems
Revenue Generation
Carbon pricing generates substantial government revenue:
2023 global carbon pricing revenue: Approximately $95 billion
Major revenue generators:
- EU ETS: ~$43 billion
- UK ETS: ~$7 billion
- California: ~$4 billion
- Canada: ~$7 billion
- China: Growing (primarily allowance value, limited auctioning)
Countries use carbon pricing revenue differently:
Climate investments (most common):
- EU: At least 50% for climate purposes (often more)
- California: Climate investments through GGRF
Household protection:
- Canada: 90% returned through Climate Action Incentive
- Switzerland: Two-thirds returned via health insurance premium cuts
Tax reduction:
- British Columbia (originally): All revenue returned through tax cuts
General budget:
- UK: Significant portion to general revenue
The trend: More jurisdictions are explicitly linking revenue to climate investments or household protection. Pure general budget use is becoming less common as the politics of earmarking become clearer.
The Effective Carbon Rate
Looking beyond explicit carbon pricing, the OECD measures "effective carbon rates" (ECRs) that include:
- Explicit carbon prices (taxes and ETS)
- Fuel excise taxes
- Minus fossil fuel subsidies
Key findings:
- About 40% of energy-related emissions face zero effective carbon rate
- Only 10% face rates above €60/ton
- Transport typically faces higher ECRs (due to fuel taxes)
- Industry often faces very low ECRs
- Subsidies significantly reduce effective rates in many countries
Trends and Momentum
Several trends are shaping the future:
Rising prices:
Carbon prices in established systems have increased substantially. EU ETS prices rose from under €10 in 2017 to over €80 in 2024.
Expanding coverage:
Systems are expanding to new sectors (EU adding maritime, buildings, and transport) and new jurisdictions (Indonesia, Vietnam, Turkey developing systems).
Border adjustments:
The EU CBAM is creating pressure on trading partners to adopt their own carbon pricing.
Convergence:
There is discussion of minimum carbon price floors and international coordination mechanisms.
The direction is clear: more coverage, higher prices, broader scope. The pace of progress remains the question. Current trajectories are better than a decade ago but still short of what climate science requires.
Looking Ahead
The following lessons examine specific major systems in detail, starting with the EU Emissions Trading System, the world's oldest and most developed carbon market.