From Niche to Norm: Carbon Pricing Goes Mainstream<\/strong><\/p>\n Carbon pricing, a mechanism that puts a price on emissions, continues to grow as a global policy tool. Axel van Trotsenburg, World Bank Senior Managing Director, remarked:<\/p>\n \u201cCarbon pricing remains a powerful tool for advancing multiple policy goals. It helps countries cut emissions, raise domestic revenues\u2026 and stimulate green growth and job creation. Carbon credit markets can also help mobilize private capital and channel funds to development priorities.\u201d<\/p>\n As of early 2025, 80 carbon pricing instruments are in operation across the world, including 43 carbon taxes and 37 emissions trading systems (ETSs). This is a big jump from only 10 such instruments 20 years ago.<\/p>\n This trend shows how popular carbon pricing has become. These figures come from the World Bank\u2019s State and Trends of Carbon Pricing 2025<\/strong><\/a> report.<\/p>\n Combined, these systems now cover approximately 28% of global greenhouse gas emissions<\/strong>, up from 24% in 2023. This growth in coverage reflects major policy moves, especially the expansion of China\u2019s national ETS.<\/p>\n In 2024, China<\/a> expanded its system beyond just the power sector. Now, it includes major heavy industries like cement, steel, and aluminum. This change means the system now covers 15% of global emissions, as noted in the Global Carbon Accounts 2025 from I4CE<\/a> (Institute for Climate Economics).<\/p>\n In Latin America, Chile has expanded its pricing scheme to include non-electric sectors. In Africa, South Africa\u2019s carbon tax is being strengthened. Meanwhile, countries like Brazil, T\u00fcrkiye, and India are designing new systems with support from international institutions.<\/p>\n Most new carbon pricing programs in 2024 were ETSs, as governments seek more flexible, market-driven tools. ETSs allow companies to buy and sell allowances, creating a price signal while giving industries a pathway to adjust.<\/p>\n Still, many jurisdictions are layering ETSs on top of existing carbon taxes, or phasing in taxes where market systems are not yet feasible.<\/p>\n Another important trend is regional cooperation. The European Union is moving forward with its carbon border adjustment mechanism (CBAM<\/a>). Meanwhile, U.S. states<\/a> are looking into connected carbon markets. These changes show a worldwide shift to linked carbon pricing systems. This could boost climate efforts and enhance efficiency in the long run.<\/p>\n Over $100 Billion in Revenue\u2014and Growing Potential<\/strong><\/p>\n Carbon pricing is not only a climate policy\u2014it\u2019s also a growing source of public revenue. In 2024, governments around the world collected about $103 billion<\/strong> through carbon taxes and emissions trading systems. This figure, reported in the Global Carbon Accounts 2025, represents more than three times<\/strong> the total carbon revenue collected in 2013.<\/p>\n Most of this revenue came from ETSs, which generated 67% of the total<\/strong>, while carbon taxes accounted for the remaining 33%<\/strong>. The biggest source was the European Union\u2019s Emissions Trading System (EU ETS). It provided 41% of global carbon revenues.<\/p>\n Germany\u2019s national ETS<\/strong> came second with 14%<\/strong>, followed by Canada\u2019s federal carbon tax<\/strong><\/a>, which generated 9%<\/strong>. Just ten jurisdictions made up 86% of global carbon revenues. This shows how important major economies are.<\/p>\n In 2024, revenues were a bit lower than in 2023<\/a> because of price changes in some markets. Still, the long-term trend is strong.<\/p>\n Similarly, the State and Trends of Carbon Pricing 2025 shows that around $102 billion in revenue was generated. The report also notes that average carbon prices<\/a> in ETSs and taxes continued to rise or stabilize in most systems. This is especially true in the EU, the U.K., and New Zealand.<\/p>\n The revenue potential of carbon pricing is even more striking when modeled globally. If 2024 emissions were priced at $50 per ton of CO\u2082 equivalent, total annual revenue could hit an impressive $2.6 trillion, says the Global Carbon Accounts 2025. This would represent about 2% of global GDP<\/strong> and far exceed current climate finance flows.<\/p>\n Many systems have carbon prices that fall below the $40\u201380 per ton range. This range is recommended by the High-Level Commission on Carbon Prices. It\u2019s crucial to stay on track for Paris Agreement goals. This price gap limits both the environmental and fiscal impact of carbon pricing instruments.<\/p>\n The current revenue stream is crucial for funding clean energy, public transport, and climate resilience, despite these limitations. As more places use carbon pricing, this funding can help fill the climate finance gap<\/a>. It also reduces the need for general taxes or debt.<\/p>\n How Are Carbon Revenues Used?<\/strong><\/p>\n How governments use carbon revenues can affect public support and climate impact. In 2024, about 56%<\/strong> of all revenues were earmarked for environmental, climate, and development projects, according to both reports. These funds went to areas like green infrastructure, clean technology<\/a>, and climate adaptation.<\/p>\n Meanwhile, 25%<\/strong> of revenues were used for social and economic support, such as direct transfers to households (19%) or tax breaks for businesses (6%). The remaining 19%<\/strong> went into general government budgets without a specific climate-related use.<\/p>\n Some countries use innovative models. For example, Germany uses its carbon revenues to fund the \u201cClimate and Transformation Fund.\u201d This fund helps clean energy<\/a>, boosts energy efficiency, and provides social protections. The EU ETS recently mandated that 100% of its revenue be spent on climate and energy purposes, up from 50% before 2023.<\/p>\n Private Sector and Carbon Credit Market Growth<\/strong><\/p>\n Beyond government pricing, the voluntary carbon market<\/a> is playing a bigger role in driving emissions reductions. In 2024, private companies, especially in tech and energy-heavy sectors, drove the need for high-quality carbon credits<\/a>. They focused on nature-based removal credits.<\/p>\n Although prices dropped slightly overall, credits with strong environmental benefits or international compliance status attracted premiums. Nature-based projects like reforestation<\/a> and clean cooking saw strong issuance and demand.<\/p>\n By late 2024, nearly 1 billion tons<\/strong> of carbon credits remained unretired, mostly from older forestry or renewable energy projects<\/a>.\u00a0Companies use carbon credits for different reasons:<\/p>\n To meet voluntary climate goals,<\/p>\n<\/li>\n To comply with emissions laws, and<\/p>\n<\/li>\n To offset travel.<\/p>\n<\/li>\n<\/ul>\n![\"Global](\"https:\/\/carboncredits.com\/wp-content\/uploads\/2025\/06\/Global-map-of-ETS-and-carbon-taxes-300x185.png\")
Source: World Bank Report<\/p>\n![\"GHG](\"https:\/\/carboncredits.com\/wp-content\/uploads\/2025\/06\/GHG-emissions-covered-by-carbon-pricing-300x200.png\")
Source: World Bank Report<\/p>\n\n
![\"carbon](\"https:\/\/carboncredits.com\/wp-content\/uploads\/2025\/06\/carbon-revenues-2024-300x258.png\")
Source: Institute for Climate Economics<\/p>\n![\"carbon](\"https:\/\/carboncredits.com\/wp-content\/uploads\/2025\/06\/carbon-prices-for-covered-emssions-300x199.png\")
Source: World Bank Report<\/p>\n\n
![\"carbon](\"https:\/\/carboncredits.com\/wp-content\/uploads\/2025\/06\/carbon-revenue-use-in-2024-239x300.png\")
Source: Institute for Climate Economics<\/p>\n\n
![\"sectors](\"https:\/\/carboncredits.com\/wp-content\/uploads\/2025\/06\/sectors-covered-by-ETS-300x282.png\")
Source: World Bank Report<\/p>\n