Governments around the world that have set a cost for carbon emissions have raised $ 84 billion collectively in 2021, but the World Bank has warned that this is “far from adequate” to limit global warming.
The 60 percent increase over the previous year in funding generated by countries that charge companies for their emissions was due to rising prices and more countries deploying. Coal pricing schemesthe latest World Bank report said this week.
Data on global carbon prices is coming as the EU seeks to expand its carbon trading scheme to finance its exit from Russian energy.
The EU operates the largest emissions trading scheme by value, harvesting more than 40 percent of all coal revenue last year. The buyer of bonuses is allowed to emit a ton of carbon.
The move by the bloc to raise an additional € 20 billion under the scheme has outraged green groups, as the sale of more carbon permits would allow the release of around 250 million tonnes of CO₂.
Under the EU scheme, the price of carbon rose to more than 80 euros per tonne earlier this year, more than about 30 euros per tonne a year earlier.
While the World Bank report said the “impressive increase” in cash generated by such schemes showed the potential to encourage companies to decarbonise, it also warned that it is not enough to slow global warming in line with the world’s ideal 1.5C . Paris agreement. The earth has been warming at about 1.1C since pre-industrial times.
Only four new carbon-priced instruments were implemented last year, the report noted. “Despite record prices in some jurisdictions, the price in most jurisdictions remains well below the levels required to comply with the Paris Agreement temperatures,” it said.
A total of 68 regions now value carbon to help reduce emissions and achieve their national climate goals, or to implement a similar emissions trading scheme.
For the first time in 2021, emissions trading systems (ETS) have generated more revenue than carbon taxes. Under a carbon tax regime, governments set the price per metric tonne of carbon to encourage companies to reduce their emissions. Under ETS governments limit the volume of greenhouse gases that can be emitted. Companies can often choose to buy additional compensation or sell additional compensation to other companies.
La World Bank said the jump in ETS revenues reflected a faster rise in carbon prices between these schemes than in fixed-rate instruments such as carbon taxes. It said the second factor was the increase in government auction permits instead of allocating them for free, as is the case in China.
Although China’s ETS is the world’s largest scheme, in terms of the volume of emissions covered, the carbon contributions are allocated free of charge to companies and therefore its scheme has generated no revenue.
Overall, carbon prices cover about 23 percent of total greenhouse gas emissions. But only 4 percent of global emissions are currently covered by a carbon price that is high enough to reduce emissions by the amount needed to reach 2030 climate targets.
Earlier this year, the report of the UN Intergovernmental Panel on Climate Change found that a 43 percent reduction in global greenhouse gas emissions by 2030, compared to 2019, will be necessary to achieve the goals of the Paris climate agreement.
The IPCC report, compiled by 278 scientists across 195 countries, found that without immediate action the world is on track for a 3.2C rise in temperatures by the end of the century.
The World Bank has noted that so far direct carbon prices, such as carbon taxes and ETS, have been concentrated in high to medium income economies. It said indirect schemes, such as fuel taxes, were more often implemented than direct carbon pricing, including in many developing countries.
In the United States, historically the largest emitter of greenhouse gases in the world, only the states of California, Washington and Oregon have a direct carbon pricing scheme in place.