Efforts to Expand Global Carbon Pricing Run Into Economic Headwinds

The share of global emissions covered by carbon prices has inched up, but inflation could crimp governments’ appetite for more stringent measures, World Bank warns

A coal-fired power plant in Hubei province, China. In all, there are now 36 carbon taxes and 32 emission trading systems in place around the world, the World Bank said, with four added in the past year.

Photo: Getty Images/Getty Images

Companies are paying more for their greenhouse-gas emissions than ever before, but prices aren’t high enough to curb global warming and economic headwinds could deter governments from raising them, the World Bank said.

Around the world, revenue from carbon-pricing policies such as carbon taxes and emissions-trading systems surged to around $84 billion in 2021, up 60% from 2020. This was largely driven by the rising cost of pollution allowances on emissions markets in the European Union, California and elsewhere, according to a World Bank report published on Tuesday. Nearly 23% of global greenhouse-gas emissions are now covered by a carbon price of some kind, up from 21.5% last year, the report said, but prices are generally too low to motivate low-carbon investments that could reduce reliance on fossil fuels, it said.

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