Currently, one or another scheme is applied to a quarter of global emissions

Global revenues from carbon pricing schemes will continue to grow, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

Of the 196 countries that signed the agreement at COP21 in Paris, more than two-thirds have identified the use of carbon credits in their nationally determined contributions.

Carbon pricing schemes currently apply to a quarter of global emissions and have raised more than $500 billion from polluters. At the same time, the European Cross-Border Carbon Adjustment Mechanism (CBAM) will encourage other trading partners to implement some form of carbon pricing.

According to the IEEFA, in 2022, the cost of climate change was estimated at $10 trillion, or 10% of global GDP. At the same time, revenues from carbon trading were approaching $100 billion, which is only about 1% of the global cost of these emissions to society. Based on the movement towards the polluter pays principle, the cost of emissions is likely to increase significantly in the coming decades.

Carbon pricing, the researchers note, is increasingly being used as a policy tool to meet commitments to achieve zero emissions, finance a just transition and redistribute costs in favor of low-carbon energy, and support the most vulnerable households and businesses. Currently, there are 66 jurisdictions in the world with carbon prices and 48 countries with some kind of revenue-generating CO2 pricing scheme.

The IEEFA believes that this trend will continue as the number of territories with carbon pricing schemes grows (as part of their nationally determined contributions under the Paris Agreement). Over time, carbon credits will cover more sectors and a larger share of emissions in each country. In addition, the European CBAM will come into force, and possibly other international trading mechanisms.

Analysts also called the European system EU ETS a global test case and an indicator of the future direction of carbon pricing.

As GMK Center reported earlier, the introduction of the European CBAM is prompting other countries to introduce their own border carbon charges, while others are considering retaliatory measures, according to a study by the International Emissions Trading Association (IETA).