There are a number of signs we are entering a golden age for carbon pricing. Perhaps the most important one is that many countries around the world are currently considering carbon pricing policies to achieve their greenhouse gas emissions reduction goals.
And for good reason.
A price on carbon gives emitters a powerful incentive to reduce emissions at the lowest possible cost, it promotes innovation while rewarding the development of even more cost-effective technologies, it drives private finance, and it can generate government revenue.
This spring, World Bank Group President Jim Yong Kim and International Monetary Fund Managing Director Christine Lagarde convened the Carbon Pricing Panel to urge countries and companies around the world to put a price on carbon. On April 21, 2016, the Panel announced the goals of doubling the amount of GHG emissions covered by carbon pricing mechanisms from current levels (about 12 percent, as illustrated in the map below) to 25 percent of global emissions by 2020, and doubling it again to 50 percent within the next decade.
EDF and the International Emissions Trading Association (IETA) worked together to explore a range of possible, though non-exhaustive, scenarios for meeting these goals. You can see the results in a series of maps which show how carbon pricing can be expanded worldwide.
Achieving the Carbon Pricing Panel’s goals will be a crucial stepping stone to realizing the ambition of the Paris Agreement, which aims to hold the increase in the global average temperature to well below 2°C above pre-industrial levels. Meeting that objective will require countries not only to implement the targets they have already announced, but to ratchet up their efforts dramatically in the years ahead. Carbon pricing will have to play a key role in that effort.