Carbon Pricing in Action

As of April 2019, 46 national and 28 subnational jurisdictions are putting a price on carbon.

Summary of regional, national and subnational carbon pricing initiatives implemented, scheduled for implementation and under consideration (ETS and carbon tax)

As of June 2019, there are 57 carbon pricing initiatives implemented and scheduled for implementation. This consists of 28 emission trading systems (ETSs) in regional, national and subnational jurisdictions, and 29 carbon taxes, primarily applied on a national level. In total, these carbon pricing initiatives cover 11 gigatons of carbon dioxide equivalent (GtCO2 e), or about 20  percent of global GHG emissions, similar as compared to last year. In 2018 and 2019, the number of carbon pricing initiatives around the world increased and existing systems were strengthened as jurisdictions assessed their policies to better align with their climate objectives. 11 new initiatives were implemented during this time-period. Examples include:

In 2018:

  • An ETS in Massachusetts covering power plants, which will continue to be subject to the Regional Greenhouse Gas Initiative (RGGI);

  • A carbon tax in Argentina covering most liquid fuels.

 In 2019:

  • A backstop system at the federal level in Canada with two carbon pricing initiatives: an ETS that applies to power generation and industrial facilities, and a carbon tax-like fuel charge that covers a wide range of fossil fuels and combustible waste. The backstop system applies to provinces and territories that opt for it, or else have failed to establish their own carbon pricing initiative that meets federal benchmarks;

  • An ETS in Nova Scotia, applying to the industry, electricity, building, and transport sectors;

  • An ETS and a carbon tax in Newfoundland and Labrador, with the ETS applying to large industrial facilities and electricity generation, and a carbon tax covering fuels primarily used in transportation, heating of buildings and electricity generation;

  • A carbon tax in Prince Edward Island similar to the fuel charge of the federal backstop system;

  • An ETS in Saskatchewan covering large industrial facilities, which is complemented with the federal backstop system on all other emissions in the province as the ETS alone did not meet the federal benchmark;

  • A carbon tax in Singapore that applies to all large emitters;

  • An economy-wide carbon tax in South Africa—the first carbon tax in Africa.

Carbon pricing continues to expand with various initiatives under consideration. On the national level, this includes Colombia, Mexico, the Netherlands, Senegal, Ukraine and Vietnam. Within the subnational context, in Canada, Ontario and the Northwest Territories are working on new initiatives, while in the United States (US), New Jersey and Virginia are looking to join the RGGI and other states—such as Oregon and New Mexico—are considering developing their own carbon pricing initiatives.

However, to shift investment at scale, carbon pricing coverage must expand, and prices must be stronger. Most initiatives saw increases in carbon prices in 2018 compared to price levels in 2017. But despite these, most initiatives are still below the $40-$80/tCO2e needed in 2020 to stay consistent with achieving the temperature goal of the Paris Agreement, as identified by the High-Level Commission on Carbon Prices led by Joseph Stiglitz and Nicholas Stern.

The private sector is finding innovative ways to use carbon pricing to identify greater opportunities for GHG mitigation and reduce climate-related financial risks. Traditionally, companies use internal carbon pricing in their investment decisions to evaluate risks from mandatory carbon pricing initiatives. However, businesses are exploring new ways of using internal carbon pricing to manage long-term climate risks and align their investments with climate objectives. For instance, major banking institutions are using carbon pricing approaches to review credit applications and assess their own portfolio footprint, while major indices are accounting for climate risks and climate policy including carbon pricing. Financial institutions are also increasingly applying internal carbon pricing in their investment decisions to manage climate-related risks and opportunities.