Carbon Pricing in Action

As of 2017, 42 national and 25 subnational jurisdictions are pricing carbon.


These jurisdictions are responsible for more than 22 percent of global emissions. The number of carbon pricing initiatives implemented or scheduled for implementation has almost doubled over the past 5 years, reaching 47 in 2017. Altogether, these actions will encompass almost half of global CO₂ emissions. 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. 
     
  • China's pilot ETSs in seven cities and provinces--launched in 2013 and 2014--have continued to evolve and expand. In parallel, China is preparing to launch a national ETS, with the goal of reducing emissions intensity by 40-45 percent compared with 2005 levels by 2020.
     
  • 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. It introduced 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.
     
  • 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.
  • 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.
     
  • Ontario launched an ETS in January 2017 covering emissions from  electricity generators and importers, natural gas distributors and fuel suppliers. The province formally agreed to link its carbon market with Quebec and California in 2018. 
     
  • 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 responding proactively.

Internal carbon pricing has emerged as an important tool to help companies manage climate risks and identify opportunities in the low-carbon economy transition  In 2017, over 1,300 companies disclosed to 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. This year has seen particularly strong increase in corporate internal carbon pricing initiatives in China, Japan, Mexico, and the United States.
 
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.