More Countries Are Pricing Carbon, but Emissions Are Still Too Cheap

As the world gears up to avoid a climate catastrophe by limiting global warming to 1.5 to 2 degrees Celsius, more countries are putting carbon pricing at the center of their mitigation strategies. Yet designing ways to put a price on carbon can be complicated and countries face multiple choices.

The Chart of the Week shows the expansion of carbon pricing schemes. So far, 46 countries are pricing emissions through carbon taxes or emissions trading schemes (ETS) and others are considering it.

Globally, ETSs and carbon taxes cover 30 percent of emissions, with prices rising as high as $90 per ton (in the European Union).

Despite the proliferation of carbon pricing schemes, policymakers should do more. To limit global warming, coverage must expand while prices rise from a global average of $6 per ton of CO2 today to $75 by 2030.

Policymakers considering introducing or scaling up carbon pricing face multiple decisions when choosing among and within policy instruments, as we explain in an IMF Staff Climate Note. These include ease of implementation, price levels, competitiveness concerns, alignment with other mitigation instruments, and coordination across countries. Countries may choose different approaches based on their own circumstances and objectives.

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