Carbon Pricing in Action
As of November 2018, 46 national and 28 subnational jurisdictions are putting a price on carbon.
As of 2018, carbon pricing initiatives implemented or scheduled for implementation would cover 11 gigatons of carbon dioxide equivalent (GtCO2e), or about 20% of global GHG emissions. The number of carbon pricing initiatives implemented or scheduled for implementation has almost doubled over the past 5 years, reaching 51 in 2018. Examples include:
Alberta introduced a carbon tax, covering all emissions from combustion that are not already covered by its existing carbon pricing initiative for large emitters. In 2018, the province's tax rate increased from CAN$20/tCO2 (US$16/tCO2e) in 2017 to CAN$30/tCO2e (US$23/tCO2e) in 2018.
Argentina adopted a carbon tax of $US10/tCO2e in december 2017. Beginning January 1, 2019, the tax will be levied at the full rate for most liquid fuels, increasing annually by 10% to reach 100% by 2028. The carbon tax is estimated to cover about 20% of the country's GHG emissions and is expected to raise approximately ARS11.5 billion (US$571 million) in revenue per year.
Mexico launched a year-long ETS simulation exercise in 2017 with a view to strengthen national capacities regarding the design and operation of an ETS. In December 2017, amendments to the General Law on Climate Change mandated the design and launch of an ETS in Mexico. This ETS would operate in a pilot phase for 36 months, followed by a formal launch phase planned in 2022.
Colombia implemented a carbon tax on all liquid and gaseous fuels used for combustion, covering around 24 percent of the country's GHG emissions. Revenue raised is earmarked for the Colombia in Peace Fund to support ecosystem protection and coastal erosion management.
Chile's carbon tax came into effect January 1, 2017, and targets large thermal power plants at US$5/tCO₂e. The country has a target of cutting greenhouse gas emissions to 20 percent below 2007 levels by 2020.
China's national ETS was officially lanuched in December 2017 and the initial phase of its ETS roadmap is underway, with a focus on completing the infrastructure and legal foundation for the ETS. Once operational, China will host the largest carbon market in the world.
Republic of Korea launched its ETS in January 2015, covering 525 businesses from 23 sectors that account for about two-thirds of the country's national emissions. The country has a target to reduce emissions 30 percent below business as usual by 2020.
The European Union pioneered international carbon emissions trading in 2005. The system, currently the world's largest, covers more than 11,000 power stations and industrial plants, along with airlines, in the 28 EU countries plus three other countries. It has struggled with low prices and excess allowances and has been developing plans for reform.
Finland escalated its carbon tax rate for coal, heavy fuel oil and light fuel oil by €4 to €62/tCO2e (US$77/tCO2e) aligning carbon tax rates for heating fuels and liquid transport fuels.
Singapore plans to launch in carbon tax in 2019 on direct emitters and use the revenues generated to help finance industrial emission reduction measures.
The private sector is also taking proactive steps to put a price on carbon.
Internal carbon pricing has emerged as an important tool to help companies manage climate risks and identify opportunities in the low-carbon economy transition. Today, nearly 1,400 companies disclose to Climate Disclosure Project (CDP) their current practices or plans to use internal carbon pricing, up from 150 in 2014. This includes more than 100 Fortune Global 500 companies with collective annual revenues of roughly US$7 trillion. In the past 2 years, there has been particularly strong increase in corporate internal carbon pricing initiatives in China, Japan, Mexico, and the United States. Further adoption of internal carbon pricing is anticipated following the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures.
Through the UN Global Compact’s Caring for Climate Business Leadership Criteria on Carbon Pricing, corporate leaders have also aligned with the following measures: 1) set an internal carbon price high enough to materially affect investment decisions to drive down GHG emissions; (2) publicly advocate the importance of carbon pricing through policy mechanisms that take into account country specific economies and policy contexts; and (3) communicate on progress over time on those criteria.