Who Is Using It?
Almost 40 countries and more than 20 cities, states and provinces already use carbon pricing mechanisms or are planning to implement them.
These jurisdictions are responsible for more than 22 percent of global emissions. Others are developing or considering systems that will put a price on carbon in the future. Altogether, these actions will encompass almost half of global CO2 emissions. Examples include:
- China launched pilot emissions trading systems in seven cities and provinces in 2013 and 2014 and plans to create to a national system in 2016. It has a goal to reduce emissions intensity by 40-45 percent compared with 2005 levels by 2020.
- Mexico has a national climate change law and a target to reduce greenhouse gas emissions 30 percent below a business-as-usual (BAU) scenario by 2020. It started a carbon tax in 2014, has a voluntary carbon market, and is exploring innovative approaches to carbon pricing as a member of the Partnership for Market Readiness, a group of 31 countries helping to develop the carbon pricing systems of the future.
- Chile approved a carbon tax to start in 2018 that will target large thermal power plants and charge US$5 per metric ton of CO2 emitted. The country has a target of cutting greenhouse gas emissions to 20 percent below 2007 levels by 2020.
- British Columbia created a revenue-neutral carbon tax that directs the C$30 per ton of CO2-equivalent charged back to taxpayers through lowered personal and business income taxes and into targeted support for low-income individuals and families.
- South 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. South Korea 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.
- California and Quebec both launched emissions trading systems in 2013 and formally linked their systems in 2014, allowing the two systems to trade each other's carbon allowances. Linking markets expands the pool of participants and can broaden emission reduction opportunities and reduce volatility.
Corporations are also responding.
A growing number of companies are also taking ambitious steps to demonstrate and disclose their progress on carbon pricing.
Last year, 150 companies publicly disclosed to CDP their use of carbon pricing as a tool to manage the risks and opportunities to their current operations and future profitability. Close to 500 global companies responding to CDP’s survey said they were operating within carbon pricing systems. A growing number of business leaders recognize carbon pricing as the most efficient and cost effective means of reducing emissions, and they are publicly supporting it.
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.