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Carbon Pricing

Governments Could Raise $22 Billion From Carbon Pricing

[Edit: The original title stated $22 Million, which was a typo, and has now been corrected to read $22 Billion.]

A growing number of governments around the world are implementing carbon pricing schemes, and the resulting carbon pricing revenues are beginning to be substantial, with one recent estimate predicting a cumulative total of about $22 billion for 2015. This figure comes from a recent paper published by the Climate Markets & Investment Association (CMIA), which also highlights the “significantly higher” revenue this year than last, which was about $15 billion globally.


Indicative estimates of revenue from carbon pricing in 2015 (CMIA)

According to the paper, Carbon Pricing Revenues, these monies come from an array of different mechanisms, from a carbon tax to emissions trading schemes, and the majority of it is generated in Europe. However, the figures used for the paper don’t include those from New Zealand, South Korea, or China, as there is no auctioning or allowances in those countries, and Mexico’s carbon tax was excluded for this paper, as it doesn’t price emissions from natural gas, “so more resembles an energy tax on some fuels.”

The increase from last year’s $15 billion to this year’s estimated $22 billion “mainly reflects increases in” a handful of factors, namely the level of carbon price support in the UK, the level and coverage of France’s carbon tax, the volumes and prices of EUAs auctioned, and the recently expanded coverage of both California’s and Quebec’s emissions trading schemes. The level of carbon pricing revenue could “increase greatly” in the near future due to an expansion of coverage in existing schemes, a rise in carbon prices in major schemes, or the implementation of new programs, such as the one in the works in South Africa, which could bring in more than $1 billion annually, or China’s, which could effectively double the current global total even at today’s prices.

$22 billion is a substantial amount of money, and the countries receiving this carbon bounty are spending in a variety of ways, which the CMIA paper puts in seven main categories, only a few of which are actually focused on climate change solutions. According to Carbon Pricing Revenues, under some schemes, governments are providing financial support for “vulnerable groups” (lower income residents), reducing other taxes as a result of additional carbon revenue, retaining the revenues for deficit reduction or other general expenses, or returning it equally to all citizens (a “cap-and-dividend” system).

On the other hand, three other categories of spending for carbon pricing revenues have potential to develop climate solutions, such as being used for financial support for emissions reduction research, energy efficiency measures, and low-carbon energy R&D, as is currently done in California, Canada, and the EU. The other two categories, spending on adaptation measures and distributing funds to those affected by climate change, while appropriate, aren’t getting any concrete traction in current schemes, but may in the future as carbon revenues increase and the discussion of how best to use them comes more to the forefront.

The paper can be downloaded at CMIA (PDF).

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Derek lives in southwestern New Mexico and digs bicycles, simple living, fungi, organic gardening, sustainable lifestyle design, bouldering, and permaculture. He loves fresh roasted chiles, peanut butter on everything, and buckets of coffee. Catch up with Derek on Twitter, Google+, or at his natural parenting site, Natural Papa!


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