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Carbon Pricing

Global Cooperation On Carbon Trading Could Reduce Climate Change Mitigation Costs By 32%

According to a new World Bank report released this week, increased global cooperation through carbon trading could reduce the cost of climate change mitigation by 32% by 2030.

world-bank-7Released at an international carbon event held in Vietnam on Tuesday, the State and Trends of Carbon Pricing 2016 report shows that increased international cooperation on carbon trading could enable large-scale emissions reductions at much lower costs than are currently present, based on the carbon mitigation goals currently outlined in the Intended Nationally Determined Contributions (INDCs) filed under the Paris Agreement. A total of 189 countries representing 96% of global greenhouse gas emissions and 98% of the world’s population have committed to reducing greenhouse gas emissions and adapting to climate change, but now these governments must follow through on these promises.

The new report subsequently concludes that, while the INDCs will rely on a variety of policies and programs, the World Bank believes that carbon pricing initiatives are going to play an increasing role. Already 100 Parties, representing 58% of global greenhouse gas emissions, are planning or considering carbon pricing, and around 40 national jurisdictions and over 20 cities, states, and regions, are putting a price on carbon, translating to a total coverage of around 7 gigatonnes, or 13% of global greenhouse gas emissions.

Summary map of existing, emerging and potential regional, national and subnational carbon pricing initiatives (ETS and tax)


“The more we cooperate through carbon trading, the larger the savings and the greater the potential to increase ambition by countries in the short term,” said John Roome, Senior Director for Climate Change at the World Bank. “To be effective, carbon pricing policies must be coordinated with other energy and environmental policies — this will require collaboration within and between countries.”

The authors of the report believe 2017 could be a watershed year for carbon pricing. Specifically, if China’s national Emissions Trading Scheme (ETS) is implemented on schedule in 2017, unofficial estimates predict that emissions covered by carbon pricing initiatives could theoretically increase from 13% to between 20% to 25% of global greenhouse gas emissions — a phenomenal increase. On top of China’s planned ETS are similar schemes in Ontario, Alberta, Chile, and South Africa — and France is expected to introduce a carbon price floor as well.


“While carbon pricing has expanded significantly in recent years, in many instances these initiatives are still at an early stage in achieving impact,” the authors conclude. “To mobilize political support, some policymakers have introduced carbon prices at relatively low levels. However, implementation of a carbon pricing policy framework and institutional structure is nonetheless a first step that can lay the groundwork for future increases in ambition and impact.”

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