State and Trends of Carbon Pricing Dashboard

The World Bank Group in (World Bank Group, 2024) defines carbon pricing as a policy tool “to align the costs of consuming carbon-intensive fuels or using carbon-intensive processes with the social costs of doing so.” It is explained that when well-designed and ambitious, carbon pricing can drive technological advancements, raise revenues more efficiently than other methods such as labor taxes, and provide societal benefits beyond climate mitigation. 

The world bank provides Carbon pricing dataset (e.g., Dataset 2024 in excel format) from “direct carbon pricing” systems and methods. Direct carbon pricing systems are designed to provide price signals closely linked to actual emissions, and they include: 

• Emissions Trading Systems (ETSs):  the government places a limit on the amount of GHG emissions from covered entities and Entities must surrender emission units (or “allowances”) to cover their emissions within a compliance period. There are “cap-and-trade” (e.g., EU) and “rate-based” ETS (e.g., China) approaches. 

• Carbon Taxes: a tax fee is imposed on covered entities for their GHG emissions. The government sets the price of emissions (i.e., the tax rate).  

• Carbon Crediting: tradable credits (each one representing 1 tCO₂e) are generated through voluntary emissions reduction activities. That is, Carbon credits are issued to activities that reduce emissions, according to protocols that aim to ensure each credit represents a genuine emission reduction. Carbon credits can result from emissions reduction achieved through either avoidance (preventing GHG emissions), or removal (e.g., through sequestering carbon through afforestation). Carbon credit can then be sold to buyers, generating revenue.  

ETS, Carbon Taxes and Carbon crediting are often used in complementary ways, sometimes combined into hybrid approaches. Depending on the implemented policy, Carbon Credits can be sold to buyers that need them for compliance instruments such as ETS and carbon taxes that allows to use offsets.   

Other type of carbon pricing also addressed including “indirect carbon pricing” and “internal carbon pricing”: 

• Indirect Carbon Pricing: change the product prices associated with CO₂ in non-proportional manner to emissions (e.g., fuel taxes and fuel subsidies) 

• Internal Carbon Pricing: companies voluntarily assign a monetary value to their carbon emission (shadow price, internal carbon price (ICP)). The internal carbon fees are used to fund emissions reduction activities.  

The Carbon Price provided in the STCP dashboard from the world bank is the nominal price as of April 1 of the relevant year while revenue is accounted from January to December. 

Furthermore, under the United Nations Framework Convention on Climate Change (UNFCCC) treaty, carbon emissions can be traded between countries to meet their targets. This gives rise to international carbon pricing. Cooperative approaches between countries are included in the dataset.