State and Trendsof Carbon Pricing
2019
Washington DC, June 2019

State and Trendsof Carbon Pricing 2019
Washington DC, June 2019

The preparation of this report was led by the World Bank, with the support of Navigant and with
contributions from the International Carbon Action Partnership.
The World Bank team responsible for drafting and reviewing this report was composed of
Céline Ramstein, Goran Dominioni and Sanaz Ettehad.
The Navigant team included Long Lam, Maurice Quant, Jialiang Zhang, Louis Mark, Sam Nierop,
Tom Berg, Paige Leuschner, Cara Merusi, Noémie Klein and Ian Trim.
The report benefited greatly from the valuable contributions and perspectives of our colleagues
in the climate and carbon finance community, who have ensured the quality and clarity of thisreport: Johannes Ackva, William Acworth, Erik van Andel, Nicolette Bartlett, Daron Bedrosyan,
Daniel Besley, Tanguy de Bienassis, Simon Black, Elliot Bourgeault, David Brock, Nigel Burns,
Dallas Burtraw, Mercedita Garcia Cano, Marcos Castro Rodriguez, Chen Zhibin, Monica Crippa,
Kurt Van Dender, Timila Dhakhwa, Ana Maria Dias, Chandni Dinakaran, Luisa Dressler,
Assia Elgouacem, Dominik Englert, Thomas Erb, Víctor Escalona, Susana Escária, Eduardo Ferreira,
Florens Flues, Moa Forstorp, Harikumar Gadde, Christophe de Gouvello, Stefany Gutu,
Stephane Hallegatte, Dirk Heine, Dafei Huang, Marius Kaiser, Angela Churie Kallhauge,
Junaed Khan, Seoyi Kim, Matt King, Lai Han, Liu Ying, Emídio Lopes, Vincent Marcus, Taisei Matsuki,
Wataru Matsumura, Laura Merrill, Rachel Mok, Klaus Oppermann, Shibani Pandey, Ian Parry,
Sébastien Postic, Neeraj Prasad, Venkata Putti, Barry Rabe, Jeanette Ramirez, Smita Rana,
Suneira Rana, Stephanie Rogers, Germán Romero, Steven Rose, Isabel Saldarriaga Arango,
Lourdes Sanchez, Marissa Santikarn, Chandra Shekhar Sinha, Jason James Smith, William Space,
Sandhya Srinivasan, Kensuke Suda, Nuyi Tao, Erin Taylor, Jonas Teusch, Massamba Thioye,
Michael Toman, John Ward, Peter Zapfel, Environment and Climate Change Canada, andGreenhouse Gas Inventory and Research Center of Korea.
We also acknowledge support from the Carbon Pricing Leadership Coalition, the Partnership forMarket Readiness, CDP, and the Institute for Climate Economics for the preparation of this report.

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3

Foreword
Every year this report presents the latest developments in carbon pricing around the world. Every year the impactsof climate change feel more immediate and daunting, this year even more so than usual as extreme weather andnumerous scientific reports have started screaming at us. Overall, while we see some encouraging trends, action on
carbon pricing is nowhere near where it should be: it still covers only a small part of global emissions at prices too low
to significantly reduce emissions.
First, this report reveals a mixed bag. A growing number of jurisdictions are implementing or planning to implement a
carbon tax or an emission trading system—a total of 57 initiatives compared to 51 in 2018 and this number is set to grow,according to countries’ climate pledges. Most of this action has taken place in the Americas, and particularly in Canada
where the federal carbon pricing approach has prompted new initiatives at the provincial level. Important developments
have also occurred in other parts of the world with new carbon taxes in Singapore and South Africa—the first carbon
pricing instrument implemented in Africa—and new initiatives explored in Colombia, Mexico, the Netherlands, Senegal,
Ukraine, and Vietnam.
But is it enough? Here again, the evidence is clear. Only 20 percent of global GHG emissions are covered by a carbon priceand less than 5 percent of those are currently priced at levels consistent with reaching the temperature goals of the Paris
Agreement. Swift action is needed: carbon pricing is the most effective way to reduce emissions and all jurisdictions mustgo further and faster in using carbon pricing policies as part of their climate policy packages.
Second, while the direction of travel seems clear, the implementation of carbon pricing mechanisms can sometimes bemore difficult than anticipated. In the past year, we witnessed social unrest in part related to carbon pricing initiatives.
These events highlight how critical—and often difficult—it is to gain and maintain public support for carbon pricing
policies. Building on decades of experience in carbon pricing, we have come to learn the vital importance of taking acomprehensive approach. Carefully planning for the design and implementation of these policies entails, for example,
including all stakeholders and having clear communication strategies in place early on that focus on local co-benefits, how
the revenues will be used, and on measures that prevent adverse impacts falling on the poorest households. At the WorldBank Group, we are supporting countries as they explore carbon pricing through our programs offering analytics, technicalassistance, and fora to share their own experiences.
Third, this year’s report goes beyond its traditional focus on explicit carbon pricing and, for the first time, also looks at
implicit carbon pricing. Many countries are already implicitly pricing carbon through other policies, such as fuel taxes orfossil fuel subsidies reforms. Taking this wider view will allow us to obtain a more transparent view of the real price applied
to carbon emissions, to utilize a wider portfolio of instruments to drive climate action, and to strengthen the ability toovercome implementation challenges. Going forward, we will continue to expand these analyses in order to provide amore comprehensive picture of, and advice on, countries’ efforts on carbon pricing and getting incentives right to reduce
emissions.
Finally, the Article 6 of the Paris Agreement offers a major opportunity to lower the costs of mitigation action and enablehigher climate ambition. While the implementation Article 6 and its rules are not yet clarified, several pilot programs havestarted, some of which are being supported by the World Bank, that can enable us to test design options and identify
challenges and innovative solutions.
Pricing carbon pollution is a crucial tool for driving investment and action in the right direction. Getting our prices right, anddoing it now, is key to achieving climate and development goals.
John Roome,
Senior Director, Climate Change Group, World Bank

4

List of abbreviations
and acronyms

A

ADB

Asian Development Bank

F

FCPF
FSB

B

BAU
Business-as-usual
BNDES The Brazilian development bank

G

GCF
Green Climate FundGDP
Gross Domestic Product
GGPPA Greenhouse Gas Pollution Pricing
Act
GHG
Greenhouse gas
GtCO2e Gigaton of carbon dioxide

C

°C
CAR
CARB
CCIR
CDM
CER
CO2

Degrees Celsius
Clean Air Rule
California Air Resources Board
Carbon Competitive Incentive
Regulation
Clean Development Mechanism
Certified Emission Reduction

equivalent

I

Carbon dioxide
CO2eCarbon dioxide equivalent
COP
Conference of the PartiesCORSIA Carbon Offset and Reduction
Scheme for International Aviation
CPLC
Carbon Pricing Leadership
Coalition

ICAO
IEA
IFC
IMO
INDC
IPCC

D

DRC

Democratic Republic of Congo

E

EBRD

European Bank for
Reconstruction and Development
European Commission
Emissions Containment Reserve
European Investment Bank
Emissions Reduction Fund
Emissions reduction purchasing
agreements
Energy Subsidy Reform
Assessment Framework
Emissions Trading System
European Union
European Union Allowance
European Union Emissions
Trading System

ITMO

EC
ECR
EIB
ERF
ERPA
ESRAF
ETS
EU
EUA
EU ETS

Forest Carbon Partnership Facility
Financial Stability Board

International Civil Aviation
Organization
International Energy Agency
International Finance Corporation
International Maritime
Organization
Intended Nationally Determined
Contribution
Intergovernmental Panel on
Climate ChangeInternationally Transferred
Mitigation Outcome

J

JCM

K

KtCO2e Kiloton of carbon dioxide
equivalent

Joint Crediting Mechanism

5

M

MDB
MEPC
MIGA
MRV

Multilateral development bank
Marine Environment Protection
Committee
Multilateral Investment
Guarantee Agency
Monitoring, Reporting andVerification
Market stability reserve

S

SGER

T

O

t

MSR
MtCO2e Megaton of carbon dioxide

TCAF

NACAP Nitric Acid Climate Auctions
Program
NACAG The Nitric Acid Climate Action
Group
NDC
Nationally Determined
Contribution
NZ ETS New Zealand Emissions Trading
SystemTCI

TCDF

equivalent

N

SARPs

OBPS
OECD

Output-Based Pricing System
Organisation for Economic Cooperation and Development

P

PMR
PSS

Partnership for Market Readiness
Performance Standards System

R

RBCF
REDD+

Results-based Climate Finance
Reducing Emissions from
Deforestation and Forest
Degradation including sustainable
forest management, conservationof forests, and enhancement ofcarbon sinks
Regional Greenhouse Gas
Initiative

RGGI

tCO2

tCO2e

Standards and Recommended
Practices
Specified Gas Emitters Regulation
Ton (note that, unless specified
otherwise, ton in this report refers
to a metric ton = 1,000 kg)
Transformative Carbon Asset
Facility
Task Force on Climate-related
Financial Disclosures
Transportation and Climate
Initiative
Ton of carbon dioxide
Ton of carbon dioxide equivalentU

UK
United Kingdom
UNFCCC United Nations Framework
Convention on Climate Change
US
United States

W

WCI

Western Climate Initiative

6

Table
of contents

3

Foreword

4

List of abbreviations and acronyms

8

Executive summary18

1. Introduction20

2. Regional, national, and subnational
carbon pricing initiatives

21
29
47

2.1 Global overview of carbon pricing initiatives
2.2 Detailed overview of carbon pricing initiatives
2.3 Recent developments, emerging and future trends

52

3. International carbon pricing initiatives

64

4. Internal carbon pricing

68

5. Looking beyond explicit carbon pricing

69
70
76

5.1 Explicit and implicit carbon pricing
5.2 Fossil fuel subsidies and fuel taxes as implicit carbon pricing
5.3 The relevance of implicit carbon pricing for explicit carbon pricing policies

80

Annex I, Exchange rates

81

86

Annex II, Detailed overview of carbon pricing
initiatives in the canadian provinces and territories
Annex III, NDC table

7

Figures
13

1

14
15
16

2
3
4

17

5

24

6

25
26
27
28

7
8
9
10

31
36
50

11
12
13

54
59
60
72
73

14
15
16
17
18

Summary map of regional, national and subnational carbon pricing initiatives implemented,
scheduled for implementation and under consideration (ETS and carbon tax)
Regional, national and subnational carbon pricing initiatives: share of global emissions covered
Prices in implemented carbon pricing initiatives
Carbon price, share of emissions covered and carbon pricing revenues of implemented carbon
pricing initiatives
Sectoral coverage and GHG emissions covered by carbon pricing initiatives implemented orscheduled for implementation, with sectoral coverage and GHG emissions covered
Summary map of regional, national and subnational carbon pricing initiatives implemented,
scheduled for implementation and under consideration (ETS and carbon tax)
Regional, national and subnational carbon pricing initiatives: share of global emissions covered
Prices in implemented carbon pricing initiatives
Carbon price and emissions coverage of implemented carbon pricing initiatives
Carbon price, share of emissions covered and carbon pricing revenues of implemented carbon
pricing initiatives
Summary map of key carbon pricing developments in the Canadian provinces and territories
Cumulative trading volume and value of the Chinese ETS pilots in 2018
Sectoral coverage and GHG emissions covered by carbon pricing initiatives implemented orscheduled for implementation, with sectoral coverage and GHG emissions covered
Status of NDC submissions
Historic CDM and JI issuances and CER prices
Historic issuance of VCS and Gold Standard
Illustrative example of pre- and post-tax subsidies on gasoline
Global energy subsidies, 2011–15

Tables
32

1

44
56

2
3

80
86

4
5

Summary of recent developments in key carbon pricing initiatives in the Canadian provinces
and territories
Key carbon pricing developments in US states
Overview of countries seeking to use the outcomes such as ITMOs and potential credits fromthe Article 6.4 mechanism to help meet their NDCs
Currency conversion rates, as of April 1, 2019
Unconditional and conditional targets and intended use of carbon pricing and/or market
instruments stated in NDCs

Boxes
12
22
36
46
49
51
67
71

1
2
3
4
5
6
7
8

Carbon pricing in numbers
Carbon pricing trajectories to meet the objectives of the Paris Agreement
Chinese ETS pilot market highlights for 2018
Summary of selected changes in regional, national and subnational carbon pricing initiatives
Catalyzing public support for carbon pricing
Carbon pricing in numbers
Case studies on private sector finance
Types of fossil fuel subsidies and estimates by IEA, IMF, and OECD

8

Executive
summary

In 2018 and 2019, the number of carbon
pricing initiatives around the world increased
and existing systems were strengthened as
jurisdictions assessed their policies to betteralign with their climate objectives. But we arestill very far from where we need to be to meetthe Paris Agreement objectives. The coverageand price levels of carbon pricing initiatives isstill insufficient. It is crucial that jurisdictions
take action now to increase the breadth andthe depth of carbon pricing. 2019 is also a
critical year for clarifying the implementationof the international carbon pricing mechanisms
stated in the Paris Agreement and unlock theirpotential for accelerating action and increasing
ambition.
The challenge of reducing global greenhouse gas (GHG)
emissions sufficiently to mitigate dangerous impactsof climate change remains daunting. According to theInternational Energy Agency (IEA),1 increased energy
demand contributed to a 1.7 percent rise in energyrelated GHG emissions in 2017, the highest rate of
growth in four years. In 2018, total GHG emissions
reached historic heights, and the Intergovernmental
Panel on Climate Change (IPCC) stressed that thewindow of opportunity to limit global warming and its
dramatic consequences is closing fast.2

1
2
3
4
5

Carbon pricing is increasingly recognized as an
essential instrument to cost-effectively deliver thetransition to low-carbon societies.3 In the past year,
the IPCC, the International Monetary Fund (IMF)
and the Organisation for Economic Co-operation
and Development (OECD) all reiterated the need forstrengthening and accelerating carbon pricing, andthe IMF recently pushed for establishing a voluntarycarbon price floor among large emitters.4 At the
recent World Bank Group Spring Meetings, Finance
Ministers from more than 20 countries endorsed the“Helsinki Principles,” which promote national climate
action mainly through fiscal policy and the use of
public finance.5
Countries are committed to using carbon pricing
to meet national climate targets. Of the 185 Parties
that have submitted their Nationally Determined
Contributions (NDCs) to the Paris Agreement, 96—
representing 55 percent of global GHG emissions—have stated that they are planning or considering
the use of carbon pricing as a tool to meet theircommitments. That is an increase of eight Parties
from last year.
Regional, national and subnational jurisdictions
continue to adopt carbon pricing as a key policy tomeet their climate targets, with 11 new initiatives

Source: IEA, Global Energy & CO2 Status Report 2018, April 26, 2019.
Source: IPCC, Global Warming of 1.5°C, 2018.
Source: IPCC, Global Warming of 1.5°C, 2018.
Source: IMF, Getting Real on Meeting Paris Climate Change Commitments, May 3, 2019, https://blogs.imf.org/2019/05/03/getting-real-on-meeting-parisclimate-change-commitments/.
Source: WBG, The Helsinki Principles, April 2019. https://www.worldbank.org/en/news/press-release/2019/04/13/coalition-of-finance-ministers-forclimate-action

Executive summary

implemented in 2018 and 2019 so far. This increases
the total carbon pricing initiatives implemented andscheduled for implementation to 57. This consists of
28 emission trading systems (ETSs) in regional, nationaland subnational jurisdictions, and 29 carbon taxes,
primarily applied on a national level. In total, thesecarbon pricing initiatives cover 11 gigatons of carbon
dioxide equivalent (GtCO2e), or about 20 percent of
global GHG emissions, similar as compared to lastyear.
New carbon pricing initiatives are emerging,
mostly at a subnational level and in the Americas.
Five new carbon pricing initiatives are in Canadianprovinces and territories, driven by Canada’sfederal carbon pricing approach. 11 initiatives were
implemented globally in 2018–2019 so far.
In 2018:−− An ETS in Massachusetts covering power plants,
which will continue to be subject to the Regional
Greenhouse Gas Initiative (RGGI);−− A carbon tax in Argentina covering most liquid
fuels.6
In 2019:−− A backstop system at the federal level in Canada
with two carbon pricing initiatives: an ETS thatapplies to power generation and industrial
facilities, and a carbon tax-like fuel charge thatcovers a wide range of fossil fuels and combustible
waste. The backstop system applies to provinces
and territories that opt for it, or else have failed
to establish their own carbon pricing initiative thatmeets federal benchmarks;−− An ETS in Nova Scotia, applying to the industry,electricity, building, and transport sectors;−− An ETS and a carbon tax in Newfoundland andLabrador, with the ETS applying to large industrial
facilities and electricity generation, and a carbon
tax covering fuels primarily used in transportation,
heating of buildings and electricity generation;−− A carbon tax in Prince Edward Island similar to thefuel charge of the federal backstop system;

6−− An ETS in Saskatchewan covering large industrial
facilities, which is complemented with the federal
backstop system on all other emissions in theprovince as the ETS alone did not meet the federal
benchmark;−− A carbon tax in Singapore that applies to all large
emitters;−− An economy-wide carbon tax in South Africa—thefirst carbon tax in Africa.
Carbon pricing continues to expand with various
initiatives under consideration. On the national
level, this includes Colombia, Mexico, the Netherlands,
Senegal, Ukraine and Vietnam. Within the subnational
context, in Canada, Ontario and the Northwest
Territories are working on new initiatives, while in the
United States (US), New Jersey and Virginia are looking
to join the RGGI and other states—such as Oregon
and New Mexico—are considering developing theirown carbon pricing initiatives.
Governments raised approximately US$44 billion
in carbon pricing revenues in 2018, with more thanhalf generated by carbon taxes. This is an increase ofnearly US$11 billion compared to the previous year.
Most of the revenue growth came from the higher
European Union (EU) allowance price with othercontributions from larger allowance sales in California
and Québec, and an increase in revenues in Alberta,
British Colombia and France due to higher carbon tax
rates.
Many jurisdictions are broadening and deepening
their carbon pricing instruments to better alignwith their climate goals, but prices remain
too low to deliver on the objectives of theParis Agreement. Governments are increasingly
recognizing carbon pricing as a key policy instrument
to meet climate mitigation targets. Strategies tostrengthen carbon pricing action included bothdeepening, i.e. increasing prices or stringency, andbroadening, i.e. increasing emission coverage. For
example, Iceland increased its carbon tax rate by
10 percent in 2019 to bolster its effort to reach its NDC

For fuel oil, mineral coal, and petroleum coke, the tax is applied since the beginning of 2019.

9

10

targets, and Portugal is gradually reducing its carbon
tax exemptions to transition away from coal. The EU
and New Zealand have also significantly reformed
and strengthened their respective ETSs to align with
their NDCs, and Kazakhstan has relaunched its ETS
after a two-year suspension. In the US, more states
have opted to join the RGGI, and California is in theprocess of implementing significant reforms in its ETS.
However, these efforts are insufficient, as lessthan five percent of global emissions covered
under carbon pricing initiatives are priced at alevel consistent with achieving the goals of theParis Agreement, i.e. US$40tCO2 to US$80/tCO2 by2020 and US$50/tCO2 to US$100/tCO2 by 2030.7 Dueto the recent price increases, this represents some
progress compared to last year when one percent of
the covered emissions were in this range. It is still too
low to meet the objectives of the Paris Agreement.
Moreover, about half of the emissions coveredby carbon pricing initiatives are still priced below
US$10/tCO2e. While this number remains unchanged

from 2018, it is encouraging to see that the drop fromthree-quarters of the covered emissons that werepriced below US$10/tCO2e in 2017 has persisted.

The timid upward trends in adopting andstrengthening carbon pricing initiatives areaccompanied by increasing awareness that
implementing carbon pricing can be challenging.
In the past year, various initiatives have experienced
pushback, such as the freeze of the carbon tax rateincrease in France and the public rejection of a
proposed carbon tax in the US state of Washington.
This highlights the importance of obtaining andmaintaining public support for carbon pricing. To
help close the gap between current carbon prices
and Paris-compatible levels and enable jurisdictions

7
8

to adopt carbon pricing, learning from past examples
and good practices will be key. This report contributes
to supporting this effort by describing the latest
developments and some of the lessons learned fromjurisdictions around the world.
Considering policies that put an implicit price on
carbon can also help action on carbon pricing.
Various policies can be seen as putting an implicit
price on carbon, such as fuel taxes and removal offossil fuel subsidies.8 Accounting for these policies inthe debate on carbon pricing can play an importantrole in pushing forward the carbon pricing agenda.
The ambition needed on carbon pricing depends on
the overall policy environment, with stronger action
required when other policies do not sufficiently
support the transition to decarbonization.
Broadening the debate on explicit carbon pricing
to carbon prices implicitly imposed via otherpolicies can help policymakers and analysts
obtain a more comprehensive and transparent
view of the price applied to GHG emissions. This
enables a better understanding of the price on
GHG emissions in various jurisdictions across timeand helps in aligning carbon pricing with overall
ambitions. Discussing implicit carbon pricing canalso help governments communicate about carbon
pricing with relevant stakeholders, for instance,by highlighting the existence of—often large—
co-benefits from policies that implicitly and explicitly
price carbon. Importantly, some measures that
implicitly price carbon face similar implementation
challenges as those that price carbon explicitly.
Policymakers can thus learn useful lessons fromexperience in implementing implicit carbon pricing
policies to strengthen action on carbon taxes and
ETSs.

Source: CPLC, Report of the High-Level Commission on Carbon Prices, May 29, 2017.
Work that goes in this direction has been conducted by OECD and IMF, see: OECD, Effective Carbon Rates 2018 - Pricing Carbon Emissions Through Taxes andEmissions Trading, September 18, 2018; IMF (2019), Fiscal Policies For Paris Climate Strategies—From Principle To Practice, IMF Policy Paper.

Executive summary

At the global level, there has been an increased
interest in international cooperation. North
America and Europe have taken steps towards
creating linkages across several regions of the world.
For example, the European Commission held its firstpolicy dialogue with China's newly created Ministryof Ecology and Environment, reaffirming continued
bilateral cooperation in developing China’s national
ETS. At the Global Climate Action Summit 2018,
the EU and California agreed that officials fromboth jurisdictions would increase the frequency of
exchanges, including on principles of alignment andthe role of carbon pricing.
International cooperation through carbon pricing
can play an important role in reducing the cost of
implementing mitigation actions and increasing
resource mobilization by crowding in public andprivate capital. Cooperation can lead to substantial
cost savings in achieving the mitigation objectives of
the NDCs. Article 6 of the Paris Agreement provides forvoluntary cooperation among Parties to implement
their NDCs, raise ambition, and promote sustainable
development and environmental integrity. Article
6 can also provide a basis for establishing new
linkages among different jurisdictions to reducethe current fragmentation of carbon markets. The
linking of markets also offers greater depth andliquidity in markets and increased cost-efficiency andeffectiveness in achieving emissions mitigation.

The package includes operational guidance forgovernments in preparing their NDCs and rules forthe functioning of the Transparency Framework.
However, the negotiations did not agree onmodalities and procedures for Article 6 mechanisms.
Several outstanding issues remain to be discussed at
COP 25 in Santiago, Chile. In this context, piloting
activities initiated in several regions can play animportant role in demonstrating opportunities andchallenges based on practical experience, building
capacity, and enhancing international cooperation.
The private sector is finding innovative ways to use
carbon pricing to identify greater opportunities
for GHG mitigation and reduce climate-related
financial risks. Traditionally, companies use
internal carbon pricing in their investment decisions
to evaluate risks from mandatory carbon pricing
initiatives.9 However, businesses are exploring new
ways of using internal carbon pricing to manage
long-term climate risks and align their investmentswith climate objectives. For instance, major banking
institutions are using carbon pricing approaches
to review credit applications and assess their own
portfolio footprint, while major indices are accounting
for climate risks and climate policy including carbon
pricing. Financial institutions are also increasingly
applying internal carbon pricing in their investment
decisions to manage climate-related risks andopportunities.

Guidelines for implementing Article 6 of the Paris
Agreement are still being clarified, but pilots are
already starting. At the 24th Conference of the Parties(COP 24) held in December 2018 in Katowice, Poland,
an important milestone was met with the adoptionof the Katowice Climate Package, which sets out theimplementation guidelines for the Paris Agreement.

9

Source: CDP, Putting a Price on Carbon- Integrating Climate Risk into Business Planning, October 2017.

11

12

Box 1 / Carbon pricing in numbers

Executive summary

13

Figure 1 / Summary map of regional, national and subnational carbon pricing initiatives implemented,
scheduled for implementation and under consideration (ETS and carbon tax)
SwedenNewfoundlandand Labrador

AlbertaBeijingFinland

NorwayDen­mark
UK

Hubei
Chongqing

Estonia
LatviaIreland

PolandQuébecSaitamaTokyo

Tianjin
ShanghaiFujianUkraineTaiwanGuangdong
Shenzhen

Saskatchewan
RGGI

Ontario

Spain

TCI

Portugal
Prince ­Edward Island

Virginia

Nova Scotia

FranceCatalonia

New Brunswick

Slovenia
Liechtenstein
Switzerland

Massachusetts

Northwest
Territories Canada
IcelandEU

British­Columbia

Republicof Korea

Kazakhstan

Washington
OregonJapan

California

China
TurkeyMexicoSenegalColombia

Thailand

VietnamSingapore

Côte d’Ivoire
BrazilRio de JaneiroSão Paulo
Chile

Tally of carbon pricing initiatives
implemented or scheduled for
implementation

17
8
21
National level

46

South Africa

New
Zealand

ETS implemented or scheduled for implementation

ETS and carbon tax implemented or scheduled

Carbon tax implemented or scheduled for
implementation

Carbon tax implemented or scheduled, ETS under consideration

ETS or carbon tax under consideration

ETS and carbon tax implemented or scheduled, ETS or carbon
tax under consideration

ETS implemented or scheduled, carbon tax under consideration

The large circles represent cooperation initiatives on carbon pricing between subnational jurisdictions. The small circles represent
carbon pricing initiatives in cities.

3
1
24

Argentina

Australia

28

Subnational level

Note: Carbon pricing initiatives are considered “scheduled for implementation” once they have been formally adopted throughlegislation and have an official, planned start date. Carbon pricing initiatives are considered “under consideration” if the government
has announced its intention to work towards the implementation of a carbon pricing initiative and this has been formally confirmed
by official government sources. The carbon pricing initiatives have been classified in ETSs and carbon taxes according to how they
operate technically. ETS not only refers to cap-and-trade systems, but also baseline-and-credit systems as seen in British Columbia andbaseline-and-offset systems as seen in Australia. The authors recognize that other classifications are possible.

14

Share of global annual GHG emissions

Figure 2 / Regional, national and subnational carbon pricing initiatives: share of global emissions covered

25%

57
20%

56

15%

46 47
41
37

38

32
10%
24

5%

9

Finland carbon tax (1990 )
Poland carbon tax (1990 )
Norway carbon tax (1991 )
Sweden carbon tax (1991 )
Denmark carbon tax (1992 )
Slovenia carbon tax (1996 )
Estonia carbon tax (2000 )
Latvia carbon tax (2004 )
EU ETS (2005 )Alberta CCIR (2007 )
Switzerland ETS (2008 )
New Zealand ETS (2008 )
Switzerland carbon tax (2008 )
Liechtenstein carbon tax (2008 )
BC carbon tax (2008 )
RGGI (2009 )
Iceland carbon tax (2010 )Tokyo CaT (2010 )
Ireland carbon tax (2010 )
Ukraine carbon tax (2011 )

21

Saitama ETS (2011 )
California CaT (2012 )
Japan carbon tax (2012 )Australia CPM (2012 - 2014)
Québec CaT (2013 )
Kazakhstan ETS (2013 )
UK carbon price floor (2013 )
Shenzhen pilot ETS (2013 )
Shanghai pilot ETS (2013 )
Beijing pilot ETS (2013 )
Guangdong pilot ETS (2013 )
Tianjin pilot ETS (2013 )France carbon tax (2014 )
Mexico carbon tax (2014 )Spain carbon tax (2014 )
Hubei pilot ETS (2014 )
Chongqing pilot ETS (2014 )
Korea ETS (2015 )Portugal carbon tax (2015 )BC GGIRCA (2016 )

2019
2020

2018

2017

2016

2015

2013
2014

2011
2012

2010

2009

2008

2007

2005
2006

2003
2004

2002

8

2001

2000

1999

7

1997
1998

6

1995
1996

5

1994

4

1992
1993

2

1991

0%

1990

Number of
implemented initiatives

16 19
10 15

Australia ERF Safeguard Mechanism (2016 )
Fujian pilot ETS (2016 )
Washington CAR (2017 )
Ontario CaT (2017 - 2018)
Alberta carbon tax (2017 )
Chile carbon tax (2017 )
Colombia carbon tax (2017 )
Massachusetts ETS (2018 )
Argentina carbon tax (2018 )
Canada federal OBPS (2019 )Singapore carbon tax (2019 )Nova Scotia CaT (2019 )
Saskatchewan OBPS (2019 )
Newfoundland and Labrador carbon tax (2019 )
Newfoundland and Labrador PSS (2019 )
Canada federal fuel charge (2019 )
Prince Edward Island carbon tax (2019 )South Africa carbon tax (2019 )
China national ETS (2020 )Note: Only the introduction or removal of an ETS or carbon tax is shown. Emissions are presented as a share of global GHG emissions in 2012 from (EDGAR) version 4.3.2
including biofuels emissions. Annual changes in GHG emissions are not shown in the graph. In 2018, the Alberta Carbon Competitiveness Incentive Regulation (CCIR) replaced
the Alberta Specified Gas Emitters Regulation, which was launched in 2007. The information on the China national ETS represents early unofficial estimates based on theannouncement of China’s National Development and Reform Commission on the launch of the national ETS of December 2017.

Executive summary

15

Carbon price (US$/tCO2e)

Figure 3 / Prices in implemented carbon pricing initiatives
130
127

Sweden carbon tax

96

Switzerland carbon tax,
Liechtenstein carbon tax

Note: Nominal prices on April 1, 2019, shown for illustrative purpose
only. The Australia ERF Safeguard Mechanism, British Columbia
GGIRCA, Canada federal OBPS, Kazakhstan ETS, Nova Scotia
CaT, Newfoundland and Labrador PSS, Saskatchewan OBPS andWashington CAR are not shown in this graph as price information
is not available for those initiatives. Prices are not necessarily
comparable between carbon pricing initiatives because of differencesin the sectors covered and allocation methods applied, specificexemptions, and different compensation methods.

120

110

100

EU ETS 25
24 UK carbon price floor
Denmark carbon tax (F-gases) 23

90

22

Alberta CCIR,
Alberta carbon tax
Ireland carbon tax
Korea ETS17

New Zealand ETS,
Spain carbon tax

80
Slovenia carbon tax 19
70

60

50

70

60
59

50

Finlandcarbon tax(transport fuels)
Finland carbon
tax (otherfossil fuels)
Norway carbon
tax (upper)

Minimal pricerange neededby 2020 to beconsistent withachieving theParis Agreement
temperaturetarget.

Québec CaT,
16
California CaT

Portugal carbon tax 14

Newfoundland andLabrador carbon tax,
15 Canada federal fuelcharge, Prince Edward
Island carbon tax

Francecarbon tax
11 Beijing pilot ETS

40

30

31

Iceland carbon tax

26

Denmark carbon tax(fossil fuels), BC carbon tax

Argentina carbon tax (most liquid
fuels), Saitama ETS, Tokyo CaT

6

20

5
Shanghai pilot ETS, Hubei pilot ETS,Singapore carbon tax

100

Estonia carbon tax,
Tianjin pilot ETS, Fujian pilot ETS

4
3

Norway carbon tax (lower),
Mexico carbon tax (upper),Guangdong pilot ETS,Japan carbon tax

1

Argentina carbon tax(fuel oil, mineral coaland petroleum coke),
Shenzhen pilot ETS,
Chongqing pilot ETS

2Mexico carbon tax (lower),<1
Ukraine carbon tax, Poland carbon tax

Switzerland ETS,
Colombia carbon tax,
Latvia carbon tax,
Chile carbon tax, RGGI16

Carbon price (US$/tCO2e)

Figure 4 / Carbon price, share of emissions covered and carbon pricing revenues of implemented
carbon pricing initiatives
150

125
Swedencarbon tax

Switzerland
carbon tax

Liechtensteincarbon tax

100

75

Finlandcarbon tax

France carbon tax

50

Denmark
carbon tax
Alberta carbon tax
Alberta CCIR

Icelandcarbon tax
UK carbon
price floor
25
Spaincarbon tax
Estonia
carbontax
Polandcarbon tax
0
0%

10%

Norwaycarbon tax

BC carbon tax

Ireland carbon tax
Slovenia
carbon tax

Latviacarbontax
Argentina
carbon tax

RGGI
20%

Québec CaT

Chile
carbontax

New Zealand ETSPortugalcarbon tax

30%

Korea ETSEU ETS

40%

Mexicocarbon tax

Shanghaipilot ETS

50%

60%

Japan
carbon tax
California CaT
Ukraine carbon tax

70%

80%

90%

100%

Share of GHG emissions covered in the jurisdiction

Note: The size of the circles is proportional to the amount of government revenues except for initiatives with government revenues below US$100 million in 2018;
the circles of these initiatives have an equal size. For illustrative purposes only, the nominal prices on April 1, 2019 and the coverages in 2019 are shown. The carbon
tax rate applied in Argentina, Finland, Mexico and Norway varies with the fossil fuel type and use. The carbon tax rate applied in Denmark varies with the GHG type.
The graph shows the average carbon tax rate weighted by the amount of emissions covered at the diﬀerent tax rates in those jurisdictions. The middle point of eachcircle corresponds to the price and coverage of that initiative.

Executive summary

17

Figure 5 / Sectoral coverage and GHG emissions covered by carbon pricing initiatives implemented or scheduled
for implementation, with sectoral coverage and GHG emissions covered
WASHINGTONMASSACHUSETTS

39%
67%

20%

EU**
18%

KAZAKHSTAN
41%

33%

SWITZERLAND

RGGI

CANADA****

50%

71%

11%

41%

2%

65%

REPUBLIC OFKOREAUKRAINE

7%

70%JAPAN***

4%

MEXICO85%

CALIFORNIA

46%

CHILE

24%

33%

SOUTH AFRICA
20%

39%
80%

COLOMBIANEWZEALANDSINGAPORE

80%

ARGENTINAETS implemented or scheduled for implementation
Carbon tax implemented or scheduled for implementation
ETS and carbon tax implemented or scheduled
40% Estimated coverage

CHINA*

Industry
PowerTransport
Aviation50%

AUSTRALIA

Buildings
Waste
Forestry
Agriculture

All fossil fuels (tax only)
Solid fossil fuels
Liquid fossil fuels
Shipping

Note: The size of the circles reflects the volume of GHG emissions in each jurisdiction. Symbols show the sectors and/or fuels covered under the r­ espective carbon pricing
initiatives. The largest circle (China) is equivalent to 12.4 GtCO2e and the smallest circle (Switzerland) to 0.05 GtCO2e. The carbon pricing initiatives have been classified in
ETSs and carbon taxes according to how they operate technically. ETS does not only refer to cap-and-trade systems, but also baseline-and-credit systems such as British
Columbia and baseline-and-offset systems such as in Australia. Carbon pricing has evolved over the years and they do not necessarily follow the two categories in a strict
sense. The authors recognize that other classifications are possible.
* The coverage includes the China national ETS and eight ETS pilots. The coverage represents early unofficial estimates based on the announcement of China’s National
Development and Reform Commission on the launch of the national ETS of December 2017 and takes into account the GHG emissions that will be covered under thenational ETS and are already covered under the ETS pilots. The sector symbol refers to the covered sectors in the national ETS or (one of the) ETS pilots. The national ETS
will initially cover the power sector only. The covered sectors vary per ETS pilot.
** Also includes Norway, Iceland and Liechtenstein. Carbon tax emissions are the emissions covered under various national carbon taxes; the scope varies per tax.
*** ETS emissions are the emissions covered under the Tokyo CaT and Saitama ETS.
**** The coverage includes both components of the Canada federal backstop system and the subnational carbon pricing initiatives.

51%

1

Introduction

19

1

Introduction

The dangerous consequences of climate change
are clearer than ever before. Yet, analyses indicatethat countries’ implemented policies and Nationally
Determined Contribution (NDC) pledges fall far shortof what is needed to keep the global temperature risewell below 2°C and pursue efforts to limit it to 1.5°C by
2100.10 Carbon pricing can play a key role in the urgent
efforts needed to accelerate the transition toward a
low-carbon, climate-resilient future and increase thecurrent level of ambition.11
This report takes stock of the latest developments incarbon pricing initiatives across the globe. It presents
trends surrounding their development, the role theyplay in various economic sectors, and the policy choices
involved. Tracking these developments helps identify
gaps between current carbon pricing initiatives andthose that would be needed to deliver on the objectivesof the Paris Agreement. To this end, the reportcovers a variety of ways of putting a price on carbon
emissions, which are here classified as carbon pricing,internal carbon pricing and implicit carbon pricing.
For the purpose of this report, carbon pricing refers
to initiatives that put an explicit price on greenhousegas (GHG) emissions expressed in a monetary unit per
tCO2e. This includes carbon taxes, emissions trading
systems (ETSs), offset mechanisms, and results-based
climate finance (RBCF).12 Internal carbon pricing refers
to the practice of organizations assigning a monetary
value to GHG emissions in their policy analyses anddecision making. Where this report discusses implicit
carbon pricing, it refers to other policies that implicitly
price GHG emissions, such as the removal of fossil fuelsubsidies and fuel taxation.
10
11
12

» There is a growing consensus
that carbon pricing—charging
for the carbon content of fossil
fuels or their emissions—is
the single most effective
mitigation instrument. «Christine Lagarde, Managing Director of the International Monetary Fund andVitor Gaspar, Director of the International Monetary Fund's Fiscal Affairs Department

Chapter 2 of this report provides an overview ofrecent developments in carbon pricing initiatives
at the regional, national, and subnational level andhighlights trends occurring across these jurisdictions.
Chapter 3 summarizes the latest international
cooperation on carbon pricing, including the status of
the implementation of the Paris Agreement and NDCs.
This chapter also discusses voluntary carbon markets,
RBCF, and carbon pricing in international aviation andinternational maritime transport. Chapter 4 reports on
internal carbon pricing initiatives with a focus on theirrole in the private sector’s effort to integrate climaterelated financial risks and opportunities in theirdecision making with other instruments. For the firsttime in the State and Trends of Carbon Pricing reportseries, Chapter 5 has been added to discuss measuresthat put an implicit price on carbon, such as fossil
fuel subsidy reforms and fuel taxes. This section goesbeyond the traditional scope of the report to provide
readers with a brief introduction of implicit carbon
pricing in the context of, and relevance to, explicit
carbon pricing.

Source: Climate Analytics, New Climate Institute, and Ecofys, a Navigant company, Climate Action Tracker - Warming Projections Global Update, December 11,
2018, https://climateactiontracker.org/documents/507/CAT_2018-12-11_Briefing_WarmingProjectionsGlobalUpdate_Dec2018.pdf.
The key role of carbon pricing in driving low carbon transition was recently recognized by IMF Managing Director Christine Lagarde and Fiscal Affairs
Director Vitor Gaspar, https://blogs.imf.org/2019/05/03/getting-real-on-meeting-paris-climate-change-commitments/
RBCF has a carbon pricing component in that the amount of funding received per unit of GHG reduction target achieved creates the incentive for following
through on the project.

2

Regional, national,
and subnational
carbon pricing initiatives

21

2

Regional, national,
and subnational
carbon pricing initiatives

2.1
Global overview of carbon
pricing initiatives
As of April 1, 2019, 57 carbon pricing initiatives
have been implemented, or are scheduled for
implementation. This consists of 28 ETSs, spread
across national and subnational jurisdictions,and 29 carbon taxes, primarily implemented ona national level. In total, as of 2019,13 46 nationaland 28 subnational jurisdictions14 are putting a
price on carbon, as shown in Figure 6.15 Carbon
pricing initiatives implemented and scheduled for
implementation cover 11 gigatons of carbon dioxide
equivalent (GtCO2e) or about 20 percent of GHG
emissions, as displayed in Figure 7.16
Details on the main developments that occurred in thepast year in regional, national and subnational carbon
pricing initiatives are presented below and overall
trends analyzed over the past year are presented at
the end of this section.

13
14
15
16
17

Carbon prices vary substantially, from less than
US$1/tCO2e to a maximum of US$127/tCO2e, as
shown in Figure 8. With some exceptions, carbon tax
levels in 2019 remained unchanged while prices inmany ETSs increased.17 Most carbon taxes are linked
to inflation only, which showed limited evolution
in the past year. The carbon tax rate increases that
occurred include i) the Portugal carbon tax rate that
almost doubled from €6.85/tCO2e (US$8.50/tCO2e) to€12.74/tCO2e (US$14.31/tCO2e) as it is linked to theEuropean Union Allowance (EUA) price; and ii) the
Iceland carbon tax rate, which increased by 10 percent
to approximately ISK3850/tCO2 (US$31/tCO2). In
France, the social protests resulted in the government
shelving its planned carbon tax increase as describedin more detail in Section 2.2. The increase of prices inmany ETSs reflects strengthened trust and increased
stringency. The EUA price continued to grow from
€13/tCO2e to €21/tCO2e (US$16/tCO2e to US$25/tCO2e)
as more certainty developed on the future of theEuropean Union Emissions Trading System (EU ETS)
after 2020. California and New Zealand also saw priceincreases thanks to increased clarity on their post2020 situation.

This report covers developments from January 1, 2018 until April 1, 2019.
Cities, states, and subnational regions.
The authors have kept the format of presenting this information consistent with the previous editions of the State and Trends of Carbon Pricing forcomparison purposes.
The 2012 GHG emissions data of the Emissions Database for Global Atmospheric Research (EDGAR) version 4.3.2 including biofuels emissions has beenused in this report. Source: EC JRC and PBL, EDGAR’s Global Greenhouse Gas Emissions from 1970 to 2012 (EDGARv4.3.2 Dataset), October 2017.
Price of April 1, 2018 compared with April 1, 2019.

22

Nonetheless, most jurisdictions still have carbon pricesthat are lower than those needed to cost-effectively
deliver on the Paris Agreement. As discussed in Box 2
below, carbon prices of at least US$40–80/tCO2 by2020 and US$50–100/tCO2 by 2030 are required tocost-effectively meet the temperature targets of theParis Agreement. At present less than 5 percent of
GHG emissions currently covered under a carbon
price initiative is in line with required 2020 prices asshown in Figure 9. This is a slight increase from only
one percent last year, but it is still very insufficient.
Moreover, about half of the emissions covered bycarbon pricing initiatives are still priced at less than
US$10/tCO2e. While this number remains unchanged
from 2018, it is encouraging to see that the drop fromthree-quarters of the covered emissons that werepriced below US$10/tCO2e in 2017 has persisted.

Governments raised more than US$44 billion
in carbon pricing revenues in 2018, consisting ofrevenues from carbon taxes, auctioned allowances,and direct payments to meet compliance obligations.
This represents an increase of nearly US$11 billion
compared to the US$33 billion raised in 2017. The
EU ETS contributed most to the increase in revenues
due to the increase in the EUA price, followed by
California and Québec due to a larger share ofallowances bought at auctions over the year.18 The
France carbon tax contributed to more than a thirdof global carbon tax revenue, followed by the carbon
taxes of Canadian provinces Alberta and British
Columbia where the carbon tax rates had also
increased in 2018. An overview of the government
revenues from carbon pricing is shown in Figure 10.

Box 2 / Carbon pricing trajectories to meet the objectives of the Paris Agreement

Identifying carbon price trajectories that can deliver on the Paris Agreement is crucial toguide climate action. In the past years, various price trajectories have been published that areneeded to deliver on the Paris Agreement, each with important distinctions:−− The 1.5°C Intergovernmental Panel on Climate Change (IPCC) report, released in October 2018,provides price ranges of US$135–6,050/tCO2e in 2030, US$245–14,300/tCO2e in 2050, US$420–
19,300/tCO2e in 2070, and US$690–30,100/tCO2e in 2100 (undiscounted values) under a pathway
to keep peak temperatures below 1.5°C in the 21st century with 50–66 percent probability.19
These price ranges are estimates of marginal abatement costs and comprise both prices frompolicies that put an explicit price on GHG emissions and costs on emissions from other policies.20−− The High-Level Commission on Carbon Prices indicates that carbon prices of policies that put
an explicit price on GHG emissions need to be at least in the range of US$40–80/tCO2 by 2020
and US$50–100/tCO2 by 2030 to deliver on the Paris Agreement.21 These prices are suggested
under the condition that a sufficiently ambitious climate policy environment is in place.

18
19
20

21

Source: California Air Resources Board, Archived Auction Information and Results, accessed March 5, 2019, https://www.arb.ca.gov/cc/capandtrade/auction/auction_archive.htm.
Source: IPCC, Global Warming of 1.5°C, 2018.
IPCC price estimates are based on Global Integrated Assessment Models, which are tools to inform the implementation of carbon pricing trajectories.
These models allow studying how the biophysical system and the economy interact and can provide insights on how to cost-effectively reach atemperature increase target. Marginal abatement costs are often used as an indication of the carbon price needed to yield mitigation because emitters
prefer to abate carbon emissions if the cost of emitting an additional ton of carbon is higher than the cost of abating it.
Source: CPLC, Report of the High-Level Commission on Carbon Prices, May 29, 2017.

2 / Regional, national, and subnational carbon pricing initiatives−− The Carbon Pricing Corridors initiative provides sectorial estimates of carbon pricing trajectories
compatible with the Paris Agreement.22 For the chemical sector, prices of US$30–50/tCO2e
in 2020—increasing to US$50–100/tCO2e by 2035—are needed. The power sector would needprices between US$24–35/tCO2e in 2020, rising to US$38–100/tCO2e by 2035.23 These prices
assume that carbon pricing is a part of a larger package of complementary policies that support
infrastructure development, market design, low cost of financing for low-carbon projects, andlow-carbon research and development.
The key difference between the different price trajectories is that the IPCC prices show
the marginal cost of reducing GHG emissions, while the other sources provide carbon priceranges in the presence of ambitious complementary policies. The High-Level Commission
report also estimates that explicit carbon prices would need to be higher if sufficient complementary
climate policies are not implemented, or if explicit carbon prices are kept lower in the short term.
This shows that the mitigation effectiveness of carbon pricing depends on the policy environment,
and reiterates the importance of having a suite of complementary policies to reach the temperaturetargets set in the Paris Agreement as also highlighted in the 1.5°C IPCC report.24 This will be discussed
further in Chapter 5.
While these global estimates can serve as important tools to guide climate action, choosing
the appropriate price level in each jurisdiction requires a careful analysis of the local context
and attention towards ethical and distributional issues, as well as the imperative for global
emissions curbs. This balancing is an inherent challenge to be overcome through international
cooperation under the auspices of the United Nations Framework Convention on Climate
Change (UNFCCC). The High-Level Commission notes that when considering which price level isneeded in a given jurisdiction, several factors must be taken into account, also to ensure the lasting
acceptability and credibility of the policy, including: i) prevailing policy environment; ii) price elasticity
of emissions; iii) distributional and ethical issues related to, for example, historical contributions toclimate change, capacity levels, abatement costs; and iv) the need to address potentially competing
policy goals, such as poverty reduction.25 Nonetheless, global estimates remain essential for climate
action, as they provide common guidelines to policymakers across the globe on the pathway towards
deep decarbonization, thus enabling coordination between jurisdictions. International coordinationand the alignment of prices over time is essential to effectively tackle climate change as it can createsynergies in action, address potential negative consequences of carbon pricing, such as potential
carbon leakage, and increase trust, enabling higher ambition overall.

22
23
24
25

Source: CDP, Carbon Pricing Corridors - The Market View 2018, May 2017.
Source: Ibid.
Source: IPCC, Global Warming of 1.5°C, 2018.
Source: CPLC, Report of the High-Level Commission on Carbon Prices, May 29, 2017.

23

24

Figure 6 / Summary map of regional, national and subnational carbon pricing initiatives implemented,
scheduled for implementation and under consideration (ETS and carbon tax)
SwedenNewfoundlandand Labrador

AlbertaBeijingFinland

NorwayDen­mark
UK

Hubei
Chongqing

Estonia
LatviaIreland

PolandQuébecSaitamaTokyo

Tianjin
ShanghaiFujianUkraineTaiwanGuangdong
Shenzhen

Saskatchewan
RGGI

Ontario
TCI

Spain
Portugal
Prince ­Edward Island

Virginia

Nova Scotia

FranceCatalonia

New Brunswick

Slovenia
Liechtenstein
Switzerland

Massachusetts

Northwest
Territories Canada
IcelandEU

British­Columbia

Republicof Korea

Kazakhstan

Washington
OregonJapan

California

China
TurkeyMexicoSenegalColombia

Thailand

VietnamSingapore

Côte d’Ivoire
BrazilRio de JaneiroSão Paulo
Chile

Argentina

Australia
South Africa

New
Zealand

ETS implemented or scheduled for implementation

ETS or carbon tax under consideration

Carbon tax implemented or scheduled, ETS under consideration

Carbon tax implemented or scheduled for implementation

ETS and carbon tax implemented or scheduled

ETS implemented or scheduled, carbon tax under consideration

The large circles represent cooperation initiatives on carbon pricing between subnational jurisdictions.
The small circles represent carbon pricing initiatives in cities.

ETS and carbon tax implemented or scheduled, ETS or carbon
tax under consideration

Note: RGGI = Regional Greenhouse Gas Initiative. TCI = Transportation and Climate Initiative. Carbon pricing initiatives are considered “scheduled for implementation” once they have been formally
adopted through legislation and have an official, planned start date. Carbon pricing initiatives are considered “under consideration” if the government has announced its intention to work towards theimplementation of a carbon pricing initiative and this has been formally confirmed by official government sources. The carbon pricing initiatives have been classified in ETSs and carbon taxes according
to how they operate technically. ETS not only refers to cap-and-trade systems, but also baseline-and-credit systems as seen in British Columbia and baseline-and-offset systems as seen in Australia. The
authors recognize that other classifications are possible.
Initiatives implemented or scheduled for implementation: National ETSs: Australia, Austria, Belgium, Bulgaria, China, Croatia, Cyprus, Czech Republic, Germany, Greece, Hungary, Italy, Kazakhstan,
Lithuania, Luxembourg, Malta, the Netherlands, New Zealand, the Republic of Korea, Romania, and Slovakia. National carbon taxes: Argentina, Chile, Colombia, Japan, Mexico, Singapore, South Africa,and Ukraine. Both national ETSs and carbon taxes: Canada, Denmark, Estonia, Finland, France, Iceland, Ireland, Latvia, Liechtenstein, Norway, Poland, Portugal, Slovenia, Spain, Sweden, Switzerland,
and the United Kingdom. Subnational ETSs: Beijing, California, Chongqing, Connecticut, Delaware, Fujian, Guangdong, Hubei, Maine, Maryland, Massachusetts, New Hampshire, New York, Nova Scotia,
Québec, Rhode Island, Saitama, Saskatchewan, Shanghai, Shenzhen, Tianjin, Tokyo, Vermont, and Washington State. Subnational carbon tax: Prince Edward Island. Both subnational ETSs and carbon taxes:
Alberta, British Columbia, Newfoundland and Labrador. Initiatives under consideration: National ETS or carbon tax: Brazil, Canada, Chile (ETS), Colombia (ETS), Côte d’Ivoire, Japan (ETS), Mexico (ETS), theNetherlands (carbon tax), Senegal, Thailand, Turkey, Ukraine (ETS), and Vietnam. Subnational ETS or carbon tax: Catalonia, New Brunswick, Northwest Territories, Ontario, Oregon, Rio de Janeiro, São Paolo,
Taiwan, China, and Virginia.

2 / Regional, national, and subnational carbon pricing initiatives

25

Share of global annual GHG emissions

Figure 7 / Regional, national and subnational carbon pricing initiatives: share of global emissions covered

25%

57
20%

56

15%

46 47
41
37

38

32
10%
24

5%

9

Finland carbon tax (1990 )
Poland carbon tax (1990 )
Norway carbon tax (1991 )
Sweden carbon tax (1991 )
Denmark carbon tax (1992 )
Slovenia carbon tax (1996 )
Estonia carbon tax (2000 )
Latvia carbon tax (2004 )
EU ETS (2005 )Alberta CCIR (2007 )
Switzerland ETS (2008 )
New Zealand ETS (2008 )
Switzerland carbon tax (2008 )
Liechtenstein carbon tax (2008 )
BC carbon tax (2008 )
RGGI (2009 )
Iceland carbon tax (2010 )Tokyo CaT (2010 )
Ireland carbon tax (2010 )
Ukraine carbon tax (2011 )

21

Saitama ETS (2011 )
California CaT (2012 )
Japan carbon tax (2012 )Australia CPM (2012 - 2014)
Québec CaT (2013 )
Kazakhstan ETS (2013 )
UK carbon price floor (2013 )
Shenzhen pilot ETS (2013 )
Shanghai pilot ETS (2013 )
Beijing pilot ETS (2013 )
Guangdong pilot ETS (2013 )
Tianjin pilot ETS (2013 )France carbon tax (2014 )
Mexico carbon tax (2014 )Spain carbon tax (2014 )
Hubei pilot ETS (2014 )
Chongqing pilot ETS (2014 )
Korea ETS (2015 )Portugal carbon tax (2015 )BC GGIRCA (2016 )

2019
2020

2018

2017

2016

2015

2013
2014

2011
2012

2010

2009

2008

2007

2005
2006

2003
2004

2002

8

2001

2000

1999

7

1997
1998

6

1995
1996

5

1994

4

1992
1993

2

1991

0%

1990

Number of
implemented initiatives

16 19
10 15

Australia ERF Safeguard Mechanism (2016 )
Fujian pilot ETS (2016 )
Washington CAR (2017 )
Ontario CaT (2017 - 2018)
Alberta carbon tax (2017 )
Chile carbon tax (2017 )
Colombia carbon tax (2017 )
Massachusetts ETS (2018 )
Argentina carbon tax (2018 )
Canada federal OBPS (2019 )Singapore carbon tax (2019 )Nova Scotia CaT (2019 )
Saskatchewan OBPS (2019 )
Newfoundland and Labrador carbon tax (2019 )
Newfoundland and Labrador PSS (2019 )
Canada federal fuel charge (2019 )
Prince Edward Island carbon tax (2019 )South Africa carbon tax (2019 )
China national ETS (2020 )Note: Only the introduction or removal of an ETS or carbon tax is shown. Emissions are presented as a share of global GHG emissions in 2012 from (EDGAR) version 4.3.2
including biofuels emissions. Annual changes in GHG emissions are not shown in the graph. In 2018, the Alberta Carbon Competitiveness Incentive Regulation (CCIR) replaced
the Alberta Specified Gas Emitters Regulation, which was launched in 2007. The information on the China national ETS represents early unofficial estimates based on theannouncement of China’s National Development and Reform Commission on the launch of the national ETS of December 2017.

26

Carbon price (US$/tCO2e)

Figure 8 / Prices in implemented carbon pricing initiatives
130
127

Sweden carbon tax

96

Switzerland carbon tax,
Liechtenstein carbon tax

Note: Nominal prices on April 1, 2019, shown for illustrative purpose
only. The Australia ERF Safeguard Mechanism, British Columbia
GGIRCA, Canada federal OBPS, Kazakhstan ETS, Nova Scotia
CaT, Newfoundland and Labrador PSS, Saskatchewan OBPS andWashington CAR are not shown in this graph as price information
is not available for those initiatives. Prices are not necessarily
comparable between carbon pricing initiatives because of differencesin the sectors covered and allocation methods applied, specificexemptions, and different compensation methods.

120

110

100

EU ETS 25
24 UK carbon price floor
Denmark carbon tax (F-gases) 23

90

22

Alberta CCIR,
Alberta carbon tax
Ireland carbon tax
Korea ETS17

New Zealand ETS,
Spain carbon tax

80
Slovenia carbon tax 19
70

60

50

70

60
59

50

Finlandcarbon tax(transport fuels)
Finland carbon
tax (otherfossil fuels)
Norway carbon
tax (upper)

Minimal pricerange neededby 2020 to beconsistent withachieving theParis Agreement
temperaturetarget.

Québec CaT,
16
California CaT

Portugal carbon tax 14

Newfoundland andLabrador carbon tax,
15 Canada federal fuelcharge, Prince Edward
Island carbon tax

Francecarbon tax
11 Beijing pilot ETS

40

30

31

Iceland carbon tax

26

Denmark carbon tax(fossil fuels), BC carbon tax

Argentina carbon tax (most liquid
fuels), Saitama ETS, Tokyo CaT

6

20

5
Shanghai pilot ETS, Hubei pilot ETS,Singapore carbon tax

100

Estonia carbon tax,
Tianjin pilot ETS, Fujian pilot ETS

4
3

Norway carbon tax (lower),
Mexico carbon tax (upper),Guangdong pilot ETS,Japan carbon tax

1

Argentina carbon tax(fuel oil, mineral coaland petroleum coke),
Shenzhen pilot ETS,
Chongqing pilot ETS

2Mexico carbon tax (lower),<1
Ukraine carbon tax, Poland carbon tax

Switzerland ETS,
Colombia carbon tax,
Latvia carbon tax,
Chile carbon tax, RGGI

2 / Regional, national, and subnational carbon pricing initiatives

27

Carbon price (US$/tCO2e)

Figure 9 / Carbon price and emissions coverage of implemented carbon pricing initiatives
130

Poland carbon tax

Sweden carbon tax

Ukraine carbon tax

Switzerland carbon tax

Chongqing pilot ETS
120

Liechtenstein carbon tax

Shenzhen pilot ETS

Finland carbon tax

Fujian pilot ETS

France carbon tax
Norway carbon tax

Tianjin pilot ETS
110

Estonia carbon tax

Iceland carbon tax

Mexico carbon tax

Denmark carbon tax

Japan carbon tax

BC carbon tax

Guangdong pilot ETSSingapore carbon tax

100

Hubei pilot ETS
Shanghai pilot ETS
RGGI

90

Chile carbon tax
Latvia carbon tax
Colombia carbon tax
Switzerland ETS

80

Tokyo CaT
Saitama ETS
Argentina carbon tax

Minimalprice range
needed by2020 to beconsistentwithachieving
the Paris
Agreement
temperaturetarget.

70

Beijing pilot ETS
Portugal carbon tax
Canada federal fuel charge
Newfoundland and Labrador carbon tax

60

Prince Edward Island carbon tax
California CaT
Québec CaT

50

Spain carbon tax
New Zealand ETS
Slovenia carbon tax
Korea ETS

40

Ireland carbon tax
Alberta carbon tax
Alberta CCIR30

UK carbon price floor
EU ETS

20

10

0
0

500

ETS

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000 6,500 7,000 7,500
Emissions covered (MtCO2e)

Carbon tax

Note: The Australia ERF Safeguard Mechanism, British Columbia GGIRCA, Canada federal OBPS, Kazakhstan ETS, Nova Scotia CaT, Newfoundland and Labrador PSS,
Saskatchewan OBPS, and Washington CAR are not shown in this graph as price information is not available for those initiatives. The carbon tax rate applied inArgentina, Finland, Mexico and Norway varies with the fossil fuel type and use. The carbon tax rate applied in Denmark varies with the GHG type. The graph shows
the average carbon tax rate weighted by the amount of emissions covered at the diﬀerent tax rates in those jurisdictions.

28

Carbon price (US$/tCO2e)

Figure 10 / Carbon price, share of emissions covered and carbon pricing revenues of implemented
carbon pricing initiatives
150

125
Swedencarbon tax

Switzerland
carbon tax

Liechtensteincarbon tax

100

75

Finlandcarbon tax

France carbon tax

50

Denmark
carbon tax
Alberta carbon tax
Alberta CCIR

Icelandcarbon tax
UK carbon
price floor
25
Spaincarbon tax
Estonia
carbontax
Polandcarbon tax
0
0%

10%

Norwaycarbon tax

BC carbon tax

Ireland carbon tax
Slovenia
carbon tax

Latviacarbontax
Argentina
carbon tax

RGGI
20%

Québec CaT

Chile
carbontax

New Zealand ETSPortugalcarbon tax

30%

Korea ETSEU ETS

40%

Mexicocarbon tax

Shanghaipilot ETS

50%

60%

Japan
carbon tax
California CaT
Ukraine carbon tax

70%

80%

90%

100%

Share of GHG emissions covered in the jurisdiction

Note: The size of the circles is proportional to the amount of government revenues except for initiatives with government revenues below US$100 million in 2018;
the circles of these initiatives have an equal size. For illustrative purposes only, the nominal prices on April 1, 2019 and the coverages in 2019 are shown. The carbon
tax rate applied in Argentina, Finland, Mexico and Norway varies with the fossil fuel type and use. The carbon tax rate applied in Denmark varies with the GHG type.
The graph shows the average carbon tax rate weighted by the amount of emissions covered at the diﬀerent tax rates in those jurisdictions. The middle point of eachcircle corresponds to the price and coverage of that initiative.

2 / Regional, national, and subnational carbon pricing initiatives

2.2
Detailed overview of carbon
pricing initiatives

in revenue in 2018. Tax exemptions apply tointernational aviation and shipping, export of covered
fuels, the biofuel content of liquid fuels and the use offossil fuels as raw materials in chemical processes.29

Australia
This section provides a detailed overview of carbon
pricing initiatives around the world. The information
reported below focuses on key developments that
occurred in the last year. For developments on GHG
coverage and price levels across time, the reader isreferred to the Carbon Pricing Dashboard and to
Figure 2 of this report.26

Argentina
The government of Argentina implemented a carbon
tax on January 1, 2018 for most liquid fuels, replacing
previous fuel taxes.27 The full rate of this tax was
based on the local currency equivalent of US$10/tCO2e
on January 1, 2018 and varies quarterly according to
the consumer price index. Due to the depreciation of
the Argentine peso in 2018, the equivalent carbon tax
rate is US$6/tCO2e from April 1, 2019. The revenue
is designated to multiple beneficiaries, including the
National Housing Fund, the Transport Infrastructure
Trust, and the social security system, among others.
For fuel oil, mineral coal, and petroleum coke, the tax
rate became operational from the beginning of 2019,at 10 percent of the full tax rate, and will increase
annually by 10 percentage points to reach 100 percent
in 2028. 100 percent of this revenue is distributed
according to the Federal Revenue Distribution
System.28 The carbon tax was estimated to coverabout 20 percent of the country’s GHG emissions andraise approximately ARS8.5 billion (US$300 million)

26
27

28
29
30
31
32
33

34
35

On March 7, 2019, the Australian Government
amended the Emissions Reduction Fund (ERF)
Safeguard Mechanism.30 Key changes to the
Safeguard Mechanism include: bringing baselines
up-to-date; simplifying baseline calculations to lower
administrative costs by increasing options for using
default emissions intensity values and prescribed
production variables; and allowing baselines to be
updated annually to reflect actual production. Thechanges would see baselines that are based more on
emissions intensity of output than historical absoluteemissions,31 also known as grandparenting.
The ERF is a program that involves the government
purchase of emissions reductions using a reverse
auction to select projects. As of December 18, 2018,
over 90 percent of the ERF—about A$2.3 billion(US$1.6 billion) out of the A$2.55 billion (US$1.8 billion)
initially allocated—has been committed to 477
domestic emission reduction projects representing
193 MtCO2e in abatement.32, 33 On February 25, 2019,
the government announced the Climate Solutions
Package, a A$3.5 billion (US$2.44 billion) investment
to deliver on Australia’s NDC targets.34 This package
includes the Climate Solutions Fund, which provides
an additional A$2 billion (US$1.4 billion) to thenearly-depleted ERF, expanding it to A$4.55 billion(US$3.2 billion) to support further domestic emission
reductions projects.35

https://carbonpricingdashboard.worldbank.org/
The adopted carbon tax legislation differs from the initial Executive proposal of October 2017 as it is based on a lower rate than the initially proposed
US$25/tCO2e and exempts jet fuel, butane, propane and natural gas. Source: Argentinian Ministry of the Environment and Sustainable Development,
Argentina Participated in the Dialogue on Carbon Pricing Instruments in the Americas, January 23, 2018, http://ambiente.gob.ar/noticias/argentina-participodel-dialogo-sobre-instrumentos-de-precio-al-carbono-en-las-americas/.
According to Law no. 23548 Coparticipación Federal de Recursos Fiscales.
Source: Argentinian Ministry of Justice and Human Rights, Tax on Liquid Combustibles and Natural Gas, accessed March 5, 2018, http://servicios.infoleg.gob.
ar/infolegInternet/anexos/0-4999/365/texact.htm.
Source: Australian government - Department of the Environment and Energy, National Greenhouse and Energy Reporting (Safeguard Mechanism) Amendment
Rule (No. 1) 2019, March 4, 2019, https://www.legislation.gov.au/Details/F2019L00258.
Source: Australian government - Department of the Environment and Energy, Explanatory Document, April 2019, https://www.environment.gov.au/system/
files/consultations/56b64cc6-6455-4aa1-9b72-d00b7e09bfb3/files/safeguard-mechanism-rule-amendment-explanatory-document.pdf.
Source: Australian government - Department of the Environment and Energy, Emissions Reduction Fund Update, December 18, 2018, http://www.
environment.gov.au/climate-change/publications/emissions-reduction-fund-update.
Source: Australian government and Clean Energy Regulator, Carbon Abatement Contract Register, February 22, 2019, http://www.cleanenergyregulator.gov.
au/ERF/project-and-contracts-registers/carbon-abatement-contract-register?Paged=TRUE&p_ID=164&p_manual_x0020_order=2%2e00000000000000&Vie
w=%7bB54F4D19-14DE-4AC8-8653-73984BC42391%7d&PageFirstRow=301.
Source: Australian government - Department of the Environment and Energy, Climate Solutions Package, March 5, 2019, https://www.environment.gov.au/
climate-change/climate-solutions-package.
Source: Australian government - Department of the Environment and Energy, Climate Solutions Fund - Emissions Reduction Fund, accessed March 5, 2019,http://www.environment.gov.au/climate-change/government/emissions-reduction-fund.

29

30

CanadaAs of 2019, carbon pricing applies throughout
Canada. The Greenhouse Gas Pollution Pricing Act,
adopted on June 21, 2018, established a federal
carbon pricing initiative—also known as the federal
backstop system. This follows from the Pan-CanadianApproach to Pricing Carbon Pollution announced by
the Prime Minister of Canada in October 2016. The
approach gave provinces and territories the flexibility
to develop their own carbon pricing initiative andoutlined the criteria that all initiatives must meet,thus establishing a federal benchmark for carbon
pricing.36 The federal government also committed
to implementing a federal carbon pricing initiative inprovinces and territories that requested it or did nothave a carbon pricing initiative meeting the federal
benchmark.37
The federal backstop system is made up ofcomponents similar to a carbon tax and a baselineand-credit ETS component:38−− The tax-like component is a regulatory charge
on fossil fuels with rates set at CAN$20/tCO2e(US$15/tCO2e) in 2019, rising by CAN$10/tCO2e(US$8/tCO2e) per year to CAN$50/tCO2e(US$38/tCO2e) in 2022. It covers a broad range offossil fuels—including various liquid, solid, andgaseous fuels—and combustible waste. The federal
fuel charge does not generally apply to fuels used
at industrial facilities whose emissions are coveredby the Output-Based Pricing System (OBPS).39

36
37
38
39
40

41

42

−− The ETS component is called the OBPS, which sets
an emissions-intensity standard for each sector
under the system. The OBPS applies to power
generation and emissions-intensive and tradeexposed industrial facilities emitting more than
50 kilotons of carbon dioxide equivalent (ktCO2e)
per year or any eligible facility that voluntarilychooses to participate.40 Facilities with emissions
above their standard must either pay a carbon
price in line with the federal fuel charge, submit
surplus credits purchased from facilities that
performed better than their limit, or submit
eligible offset credits.41

The revenues from the federal backstop system
are returned to the provinces and territories where
they were collected.42 Provincial and territorial
governments that have voluntarily adopted thebackstop will receive these revenues directly and candecide how to use them. In other provinces, revenues
from the federal fuel charge are returned to theprovince through direct payments to households via
Climate Action Incentive payments that can be claimed
when residents file their income tax and benefit
return. Households in small and rural communities
receive additional payments in recognition of theirincreased energy needs and reduced access toenergy-efficient transportation options. It is proposedthat the remainder be returned as financial support
for sectors in the province particularly affectedby the backstop system. The intent of the federal
government is to invest the revenues from the federal
OBPS in GHG reduction projects in the jurisdiction
where the revenue is raised. Further details on OBPS
revenues will be released later in 2019.

Source: Government of Canada, Government of Canada Announces Pan-Canadian Pricing on Carbon Pollution, October 3, 2016, https://www.canada.ca/en/
environment-climate-change/news/2016/10/government-canada-announces-canadian-pricing-carbon-pollution.html.
Source: Government of Canada, Next Steps in Pricing Carbon Pollution, December 20, 2017, https://www.canada.ca/en/environment-climate-change/
news/2017/12/carbon_pricing_backgrounderministerslettertoprovincesandterritor.html.
Source: Canadian Department of Finance, Legislative and Regulatory Proposals Relating to the Greenhouse Gas Pollution Pricing Act and Explanatory Notes,
January 2018, https://www.fin.gc.ca/drleg-apl/2018/ggpp-tpcges-eng.asp.
Source: Government of Canada, Technical Paper: Federal Carbon Pricing Backstop, January 5, 2018, https://www.canada.ca/en/services/environment/
weather/climatechange/technical-paper-federal-carbon-pricing-backstop.html
Source: Government of Canada, Technical Paper: Federal Carbon Pricing Backstop, January 5, 2018, https://www.canada.ca/en/services/environment/
weather/climatechange/technical-paper-federal-carbon-pricing-backstop.html; Government of Canada, Policy Regarding Voluntary Participation in the
Output-Based Pricing System, March 2019.
Source: Government of Canada, Pricing Carbon Pollution for Large Industry: Backgrounder, December 20, 2018, https://www.canada.ca/en/environmentclimate-change/services/climate-change/pricing-pollution-how-it-will-work/output-based-pricing-system/large-industry-backgrounder.html; Governmentof Canada, Notice of Intent to make regulations under Part 2 of the Greenhouse Gas Pollution Pricing Act, December 20, 2018.
Source: Government of Canada, How We’re Putting a Price on Carbon Pollution, November 20, 2018, https://www.canada.ca/en/environment-climate-change/
services/climate-change/pricing-pollution-how-it-will-work/putting-price-on-carbon-pollution.html.

2 / Regional, national, and subnational carbon pricing initiatives

31

Figure 11 / Summary map of key carbon pricing developments in the Canadian provinces
and territories

Yukon

Northwest
Territories

Nunavut

Ontario
Newfoundlandand Labrador

QuébecBritishColumbia

Alberta

Manitoba

Saskatchewan

Prince Edward
IslandNew ­Brunswick

ETS implemented
ETS and carbon tax implemented
Carbon tax under consideration
Federal backstop system opt-in

Nova Scotia

Federal backstop system fully imposed
ETS implemented, federal backstop system partially imposed
ETS under consideration, federal backstop system fully imposed
Carbon tax implemented, federal OBPS opt-in

Note: A carbon tax in Northwest Territories (NWT) is to be introduced by July 1, 2019 pending passage of Bill 42 “An Act to Amend the Petroleum Products Tax
Act”. As of April 1, 2019— the cut-off date of this report—Bill 42 has not been adopted yet. The NWT carbon tax will be changed from "Under consideration" to“Implemented or scheduled for implementation” once the bill has been formally adopted through legislation.

The federal government has introduced several
measures to the federal backstop system such as
exemptions on certain fuels to reduce the impact
on farmers and remote communities that have little
means for reducing their emissions.43
For the past two years, the federal government has
worked with provinces and territories to ensure
there is a price on carbon in across Canada. On
October 23, 2018, following a systematic assessment

43

44

of provincial and territorial carbon pricing
approaches against the federal benchmark, thefederal government announced the provinces
and territories that met the federal benchmark
and where the federal backstop system would
apply as shown in Figure 11.44 For the provinces
and territories where the federal backstop
system applies, the federal OBPS took effect onJanuary 1, 2019 and the federal fuel charge on
April 1, 2019.

Source: Canadian Department of Finance, Backgrounder: Proposed Refinements to the Federal Carbon Pollution Pricing System, accessed April 11, 2019,https://www.fin.gc.ca/n19/data/19-023_1-eng.asp?utm_source=CP+Daily&utm_campaign=8cfef9e47e-CPdaily19032019&utm_medium=email&utm_
term=0_a9d8834f72-8cfef9e47e-110276633.
Source: Government of Canada, Government of Canada Fighting Climate Change with Price on Pollution, October 23, 2018.

32−− Three provinces that meet the federal
benchmark will continue to implement their
existing carbon pricing initiatives: Alberta,
British Colombia and Québec.
−− Three provinces and one territory developed
their own carbon pricing initiatives that meetthe federal benchmark: Newfoundland andLabrador, Northwest Territories, Nova Scotia, andPrince Edward Island (for large industrial facilities,
the province opt for the federal OBPS).
−− Two territories and one province opted for thefederal backstop system to apply: Nunavut,
Yukon, and Prince Edward Island. To take theunique circumstances of the territories into
account, the federal backstop system will apply
in Nunavut and Yukon starting July 1, 2019.45

In Prince Edward Island, only the federal OBPS
applies as the province has implemented its own
carbon tax.
−− Four provinces did not meet the federal
benchmark and the federal backstop systemapplies to these provinces: Manitoba, New
Brunswick, Ontario, and Saskatchewan (in part).46
In Saskatchewan, the federal OBPS applies only toelectricity generation and natural gas transmission
pipelines, as the province’s own OBPS for large
industrial facilities meets the federal benchmark.47
All four provinces are challenging the federal
decision to impose the backstop system on themin court.
Key facts on the carbon pricing initiatives in place inthese provinces and territories are listed in Table 1.
A more detailed overview is provided in Annex II.

Table 1 / Summary of recent developments in key carbon pricing initiatives in the
Canadian provinces and territories48
Jurisdiction Type and status
Alberta

ETS and carbon
tax implemented
Federalbenchmark met

BritishColumbia

ETS and carbon
tax implemented
Federalbenchmark met

45
46
47
48
49
50

Key developments
Following the Federal Court of Appeal’s ruling against the Trans Mountain Pipeline
expansion on August 30, 2018, the Alberta government announced its intention to pullout of the Canadian federal climate plan, which includes the pan-Canadian approach tocarbon pricing.49
The British Columbia carbon tax increased from CAN$30/tCO2e to CAN$35/tCO2e(US$23/tCO2e to US$26/tCO2e) on April 1, 2018 and will continue to increase annually by
CAN$5/tCO2e (US$4/tCO2e) until the rate is CAN$50/tCO2e (US$38/tCO2e) in 2021.50

Source: Government of Canada, Output-Based Pricing System, December 21, 2018, https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/output-based-pricing-system.html.
Source: Government of Canada, Pricing Carbon Pollution for Large Industry: Backgrounder, December 20, 2018, https://www.canada.ca/en/environmentclimate-change/services/climate-change/pricing-pollution-how-it-will-work/output-based-pricing-system/large-industry-backgrounder.html.
Source: Government of Canada, Saskatchewan and Pollution Pricing, 21 2019, https://www.canada.ca/en/environment-climate-change/services/climatechange/pricing-pollution-how-it-will-work/saskatchewan.html.
For further details on each carbon pricing initiative, please refer to: World Bank, Carbon Pricing Dashboard, accessed March 14, 2019, https://carbonpricingdashboard.worldbank.org/.
Source: Government of Alberta, Trans Mountain Pipeline: Premier Notley, August 30, 2019, https://www.alberta.ca/release.cfm?xID=585428633B909-DEF92B91-6773792AA5DA51A9.
Source: Ministry of Finance (British Columbia), Budget and Fiscal Plan 2018/19-2020/21, February 20, 2018, https://bcbudget.gov.bc.ca/2018/bfp/2018_
Budget_and_Fiscal_Plan.pdf.

2 / Regional, national, and subnational carbon pricing initiatives

Jurisdiction Type and status

Key developments

Manitoba

Federal backstop
system fully
imposedThe government of Manitoba renounced its intention to implement a provincial carbon
tax on October 3, 2018. This carbon tax did not meet the federal benchmark.51 Manitoba
is now challenging the imposition of the federal backstop system in court as it argues it
already has a credible GHG reduction plan of its own.52

New
BrunswickETS under
consideration

New Brunswick’s carbon pricing plan did not meet the federal benchmark. Therefore, on
March 21, 2019, the provincial government made amendments to its Petroleum Products
Pricing Act to allow the federal fuel charge to be incorporated into the province.53 New
Brunswick is challenging the imposition of the federal backstop system in court arguingthat it unfairly targets its businesses and unduly burden rural households who do nothave the option to use less fuel.54 The provincial government is also developing analternative OBPS for large industrial facilities.55

Federal backstop
system fully
imposed

Newfoundland ETS and carbon
and Labrador
tax implemented
Federalbenchmark met

The Newfoundland and Labrador carbon tax and provincial baseline-and-credit ETS
were implemented as of January 1, 2019.56 The ETS is called the Performance Standards
System (PSS) and it applies to large industrial facilities and electricity generation. The
carbon tax covers fuels primarily used in transportation, building heating, and electricity
generation and starts at CAN$20/tCO2e.57
Both initiatives build on the province’s Management of Greenhouse Gas Act, which
was adopted in 2016 and already included provisions for a carbon tax and ETS. These
provisions were, however, not in force yet. Therefore, the provincial government
adopted required amendments in Fall 2018.

Northwest
Territories

Carbon tax underconsideration58
Federalbenchmark met

Nova Scotia

ETS implemented
Federalbenchmark met

The Northwest Territories (NWT) carbon tax is planned to be introduced as part of thePetroleum Products Tax Act starting at CAN$20/tCO2e (US$15/tCO2e) on July 1, 2019,
increasing annually in July by CAN$10 (US$8/tCO2e) to reach CAN$50/tCO2e (US$38/tCO2e).
The carbon tax will cover almost all fossil fuels as part of the territory’s Made-in-the-North
approach to incentivize investments in initiatives and programs that lead to greater useof renewable and cleaner fuels while minimizing impacts on the cost of living and doing
business.
Nova Scotia passed its final ETS regulations in November 2018 and its cap-and-trade
ETS launched in January 2019. The ETS compliance period is 2019–2022. The programapplies to the industry, electricity, building, and transport sectors and covers
approximately 80 percent of GHG emissions in Nova Scotia.59
The ETS legislation includes the ability to develop offsets. However, offsets will not be
available to the ETS at the start date of January 1, 2019. The province intends to develop
offset protocols or adapt them from existing protocols in other jurisdictions.60
In May 2018, Nova Scotia became a member of the Western Climate Initiative (WCI),a collaboration of American and Canadian subnationals advancing emissions trading,though they are not linked for the purposes of trading allowances across jurisdictions.

Nunavut

51
52
53
54
55
56
57
58

59
60

Federal backstop
system opt- in

Nunavut has been working with the federal government on a carbon pricing approachthat considers its unique circumstances, including high costs of living and energy andchallenges with food security. This resulted in several fuel exemptions additional to thefederal ones and a delayed start of the federal backstop system to July 1, 2019.

Source: Government of Manitoba, Manitoba Rejects Carbon Tax, Moves Ahead With Made-In-Manitoba Climate and Green Plan, October 3, 2018,https://news.gov.mb.ca/news/index.html?item=44667&posted=2018-10-03.
Source: Government of Manitoba, Manitoba to Challenge Ottawa’s Carbon Tax in Court, April 3, 2019, https://news.gov.mb.ca/news/index.
html?item=45161&posted=2019-04-03.
Source: Government of New Brunswick, Amendments Introduced to Allow for Carbon Tax, March 20, 2019, https://www2.gnb.ca/content/gnb/en/news/
news_release.2019.03.0182.html.
Source: Government of New Brunswick, Commitment to Made-in-New Brunswick Approach to Climate Change, December 5, 2018, https://www2.gnb.ca/
content/gnb/en/news/news_release.2018.12.1311.html.
Source: Government of New Brunswick, Get the Facts on the Federal Carbon Tax, accessed April 11, 2019, https://www2.gnb.ca/content/gnb/en/corporate/
promo/carbon_tax.html.
Source: Statutes of Newfoundland and Labrador 2018, An Act to Amend the Management of Greenhouse Gas Act and the Revenue Administration Act,
December 5, 2018, https://www.assembly.nl.ca/Legislation/sr/Annualstatutes/2018/1840.chp.htm.
Source: CBC News, Why the Lax Tax? Finance Minister Says Muskrat Burden Played Role in Carbon Pricing Social Sharing, October 23, 2018, https://www.cbc.ca/
news/canada/newfoundland-labrador/carbon-tax-newfoundland-labrador-1.4874616.
The NWT carbon tax is to be introduced by July 1, 2019 pending passage of Bill 42 “An Act to Amend the Petroleum Products Tax Act”. As of April 1, 2019—the cut-off date of this report—Bill 42 has not been adopted yet. The NWT carbon tax will be considered “scheduled for implementation” once it has beenformally adopted through legislation. Any upcoming developments regarding the status of the NWT carbon tax will be included in the next edition of theState and Trends of Carbon Pricing report and the Carbon Pricing Dashboard.
Source: Government of Nova Scotia, Cap-and-Trade Program Regulations Made under Section 112Q of the Environment Act, November 13, 2018,https://www.novascotia.ca/just/regulations/regs/envcapandtrade.htm.
Source: Government of Nova Scotia, Nova Scotia’s Cap and Trade Program - Regulatory Framework, October 2018, https://climatechange.novascotia.ca/sites/
default/files/Nova-Scotia-Cap-and-Trade-Regulatory-Framework.pdf.

33

34

Jurisdiction Type and status
Ontario

ETS under
consideration
Federal backstop
system fully
imposedPrinceEdwardIslandCarbon tax
implemented
Federal OBPS
only opt-in

Key developments
On October 31, 2018, the new Ontario government formally abolished the Ontario cap-andtrade program61 following measures put in place in July 2018 to wind-down the program.
Since then, the provincial government has been working to compensate industrial facilities
for voided allowances they bought at earlier auctions. This process was completed by March
25, 2019 with compensation totaling to CAN$5 million (US$4 million).62
On February 12, 2019, the provincial government announced its intention to develop a
provincial baseline-and-credit ETS that shows similarities with the federal OBPS.63 However,since the deadline to develop a carbon pricing approach that meets the federal benchmark
has already passed, the federal backstop system was imposed. Ontario is challenging thisin court, arguing that the backstop system exceeds the power of the federal government.64
The Prince Edward Island carbon tax has been in force since April 1, 2019.65 The carbon
tax is part of the province’s Climate Leadership Act and broadly similar to the federal fuelcharge, starting at CAN$20/tCO2e (US$15/tCO2e) and increasing annually. Prince Edward
Island has been working with the federal government to tailor the carbon tax to its own
region. This resulted in additional exemptions for certain fuels and allowed the provincial
government to partially offset the impact of the carbon tax on the overall tax burden by
reducing the excise tax on gasoline.66
At the request of the province, the federal OBPS for large power generation andindustrial facilities was implemented as of January 1, 2019.67

QuébecETS implemented
Federalbenchmark met

Saskatchewan

ETS
implemented
Federal backstop
system partially
imposedSince January 1, 2018, emitters from capped sectors in the Québec Cap-and-Trade
System that reported emissions between 10,000 tCO2e/year and 25,000 tCO2e/year may
voluntarily register to the initiative as a covered entity.
As of January 1, 2019, Saskatchewan implemented its own baseline-and-credit ETS aspart of its Prairie Resilience climate change strategy. The Saskatchewan OBPS covers
industrial facilities that emit over 25 ktCO2e, with a voluntary opt-in for facilities between
10–25 ktCO2e.68
Saskatchewan has also implemented non-pricing regulatory mechanisms that requireemission reductions in the electricity sector and methane emissions from upstream oil
and gas.69, 70 These regulations cover 45 percent of GHG emissions, in addition to the
12 percent covered under the Saskatchewan OBPS.
The Saskatchewan OBPS only partially meets the federal benchmark as it does not coverelectricity generation and natural gas transmission pipelines facilities. Thus, the federal
OBPS was imposed on those sectors. In addition, the federal fuel charge also applies.71
Saskatchewan is challenging the imposition of the federal backstop system in court,
questioning the federal government’s constitutional right to do so.72

Yukon

61
62
63
64
65
66
67
68
69
70
71
72
73

Federal backstop
system opt-in

Yukon has been working with the federal government on a carbon pricing approachthat considers its unique circumstances to avoid putting the territory’s competitivenessat a disadvantage and penalizing citizens who rely on fossil fuels, while rewarding
businesses that invest in clean technology and operations.73 This resulted in several fuelexemptions in addition to the federal ones and a delayed start of the federal backstop
system to July 1, 2019.

Source: Government of Ontario, Cap and Trade Cancellation Act, 2018, September 14, 2018, https://www.ontario.ca/laws/statute/18c13.
Source: Government of Ontario, Ontario Closes the Book on Cap and Trade Carbon Tax Era, March 25, 2019, https://news.ontario.ca/ene/en/2019/03/ontariocloses-the-book-on-cap-and-trade-carbon-tax-era.html.
Source: Government of Ontario, Making Polluters Accountable: Industrial Emission Performance Standards, February 12, 2019, https://ero.ontario.ca/
notice/013-4551.
Source: Government of Ontario, Ontario Files Arguments to Challenge the Federal Government’s Carbon Tax, September 14, 2018, https://news.ontario.ca/ene/
en/2018/09/ontario-files-arguments-to-challenge-the-federal-governments-carbon-tax.html/.
Source: Minister of Finance (Prince Edward Island), Climate Leadership Act - Chapter 41, December 5, 2018, http://www.assembly.pe.ca/bills/pdf_
chapter/65/3/chapter-41.pdf.
Source: Government of Prince Edward Islands, Carbon Levy, February 22, 2019, https://www.princeedwardisland.ca/en/information/finance/carbon-levy.
Source: Government of Canada, Prince Edward Island and Pollution Pricing, November 23, 2018, https://www.canada.ca/en/environment-climate-change/
services/climate-change/pricing-pollution-how-it-will-work/prince-edward-island.html.
Source: Saskatchewan Gazette, The Management and Reduction of Greenhouse Gases (Standards and Compliance) Regulations, December 14, 2018,
http://www.publications.gov.sk.ca/freelaw/documents/English/Regulations/Regulations/M2-01R3.pdf.
The Management and Reduction of Greenhouse Gases (General and Electricity Producer) Regulations, http://www.publications.gov.sk.ca/freelaw/documents/
English/Regulations/Regulations/M2-01R1.pdf
The Oil and Gas Emissions Management Regulations, http://www.publications.gov.sk.ca/freelaw/documents/English/Regulations/Regulations/O2R7.pdf
Source: Government of Canada, Pollution Pricing: Technical Briefing, November 14, 2018, https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/putting-price-on-carbon-pollution/technical-briefing.html.
Source: Government of Saskatchewan, Province Challenging Federal Government’s Ability to Impose a Carbon Tax, April 25, 2018, https://www.saskatchewan.ca/
government/news-and-media/2018/april/25/carbon-tax-case.
Source: Government of Yukon, Proposed Framework for Government of Yukon Carbon Price Rebate Announced, January 17, 2019, https://yukon.ca/en/news/
proposed-framework-government-yukon-carbon-price-rebate-announced.

2 / Regional, national, and subnational carbon pricing initiatives

China
China continues to work on the implementation of its
national ETS since its official launch in December 2017.
On March 29, 2019, the Chinese government released
the draft ETS regulation for public consultation.
The draft ETS regulation sets the legal basis for thenational ETS and contains the governance structureand ETS responsibilities of the national and local
government bodies, covered facilities and verifiers. It
also describes measures against market manipulationand enforcement mechanisms to ensure all parties
involved meet their obligations in a timely manner
against set standards. The development of the ETS
regulation is part of a first phase of the two-phased
roadmap consisting of infrastructure development
and simulated trading that was published at theofficial ETS launch.74 The roadmap also stated thatthe power sector will be the first sector to havecompliance obligations under the ETS with the
ETS gradually expanding to include another sevensectors, and that benchmarking will be the main
approach for free allocation. Other design detailsof the national ETS such as cap-setting, allowance
allocation, management of verification agencies, andtrading rules still have to be clarified. The long process
to develop the national ETS reflects the challenges
around designing a sound ETS with substantial
differences in knowledge and capacity between the
subnational regions and companies.
The release of the draft ETS regulations follows
the approval of the National People's Congress ofChina of the plan to restructure the State Council in
March 2018, including the establishment of a new
Ministry of Ecology and Environment to replace the
Ministry of Environmental Protection. In addition toenvironmental governance, the new ministry absorbs
the climate change responsibilities previously under
the National Development and Reform Commission
and takes charge of the development of the national
ETS. The governance transition at the national level is

74
75
76
77
78

reflected in the ETS pilot regions as well. In the past
year, the ETS-related responsibilities in all pilots weremoved from the provincial Development and Reform
Commission to the Ecology and Environment Bureau.
The consolidation of the environmental responsibilities
in one ministry could help the alignment of different
environmental strategies and policies including thenational ETS. For example, the 2018-2020 Three-year
Action Plan for Winning the Blue-Sky War aims totackle air pollution, but also recognizes GHG emission
reductions as a co-benefit.75 The 13th Five Year Plan for
Renewable Energy Development mentions a possible
link between a renewable certificate market andcarbon markets.76
In preparation for the launch of the national ETS,
several ETS pilots have introduced measures tostrengthen their ETS and align with known design
details of the national ETS. Measures included
decreasing free allocation shares in some pilots aswell as transitioning free allocation methods from
grandfathering to benchmarking. The Beijing pilot ETS
is transitioning its free allocation approach for existing
facilities in the power sector from using facilityspecific historical emission intensities to sectorwide benchmarking. According to its 2017 allocation
plan released in February 2018, the free allocation
shares in the Beijing pilot ETS decreased by up toten percentage points for existing facilities in various
sectors including cement and petrochemicals.77 In
addition, an adjustment mechanism was created to
avoid overallocation as a result of plant closures or
reductions in production beyond a certain threshold.
For the first time since its launch, the cap of the
Chongqing pilot ETS for 2017 was lower than what
entities reported that they expected they would needaccording to the allocation plan released in March
2018, which could indicate that some companies
would face a shortage.78 In the Guangdong 2018
allocation plan released in July 2018, five benchmark
values used to determine free allocation to power
generation were decreased.

Source: National Development and Reform Commission, National Development and Reform Commission Issues National Carbon Emissions Trading Market
Construction Plan, December 18, 2017, http://www.ndrc.gov.cn/gzdt/201712/t20171220_871134.html.
Source: Library of Congress, China: 2020 Air Pollution Action Plan Released, August 16, 2018, http://www.loc.gov/law/foreign-news/article/china-2020-airpollution-action-plan-released/.
Source: National Development and Reform Commission, Notice on the 13th Five-Year Plan for Renewable Energy Development, 2016, http://www.ndrc.gov.cn/
zcfb/zcfbghwb/201612/t20161216_830269.html.
Source: Beijing Municipal Commission of Development and Reform, Notice on the Approval of Key Quota Emission Units for 2017 Annual Quotas, February 12,
2018, http://www.bjpc.gov.cn/zwxx/tztg/201802/t12508458.htm.
Source: Chongqing Development and Reform Commission, About Grasping the 2017 Annual Carbon Emissions – Notice of Quota Payment, November 4, 2018,https://www.cqggzy.com/tzgg/001006/20181108/43c41839-85c3-4d86-ac09-09bff4165d4c.html.

35

36

Box 3 / Chinese ETS pilot market highlights for 2018

The carbon markets in most ETS pilots continue to be active in 2018, with levels of activity varying across regions.
Different price levels are the result of differences in cap stringency and market confidence. The government isstill investigating how to tackle this issue on price differences if allowances from ETS pilots are permitted in thenational ETS.
In most pilot regions, the majority of trading occurred in Q2 or Q3, which coincides with the compliance deadlines
in those pilots as shown in Figure 12. For Beijing and Hubei, this was accompanied with a price increase also
shown in Figure 12; in Hubei, Q3 accounted for 57 percent of the annual trade on the market and it reached thehighest traded value of all pilots in any quarter of 2018 with CNY¥177 million (US$26 million). In Shenzhen andGuangdong, the traded volume spiked in Q4, where it grew to more than twice that of the other three quarters
combined, with the underlying reason for this growth remaining unclear.
In contrast, prices and traded volume in Tianjin and Chongqing were relatively low. Overall, prices in most pilots
have changed little in 2018 compared to previous years. Most pilots started with significantly higher prices
when they were launched in 2013 and 2014. The initial high prices were affected by government guidance suchas the auction floor price. This was followed by a decline in prices after the first compliance year when market
participants gained better insight in the carbon market and the economy slowed down leading to lower-thanpredicted carbon emissions. Prices in most pilots have been fluctuating around the same level ever since. Only
Guangdong and Hubei have shown some structural price increases in the recent years due to measures toimprove market confidence with more detailed compliance timelines, yearly allocation plans, and offset rules.

200

16

180

14

160
12
140
10

120
100

8

80

6

60
4
40
2

20

0

0
Shenzhen

Shanghai

Beijing

Guangdong

Tianjin

Hubei

Chongqing

FujianQ1 – volume

Q2 – volume

Q3 – volume

Q4 – volume

Q1 – value

Q2 – value

Q3 – value

Q4 – value

Value of traded allowances (CNY¥ million)

Cumulative volume of traded allowances (MtCO2e)

Figure 12 / Cumulative trading volume and value of the Chinese ETS pilots in 2018

2 / Regional, national, and subnational carbon pricing initiatives

Several ETS pilots have also been aligning freeallocation to facilities with more recent activity levels.
In Shanghai, the base years for determining freeallocation has changed for the water supply sector
from 2016–2017 and for the other sectors from2014–2016 to 2015–2017 for the compliance year
2018.79 Furthermore, the base years to determine thehistorical intensity for free allocation in 2018 changed
from 2014–2016 to 2015–2017 in the Beijing pilot ETS.80
In March 2018, Taiwan, China, published the
GHG Reduction Action Plan. The plan proposes
to implement a cap-and-trade system, calculate
baseline emissions, and set up regulations—albeit
without a precise timeline. On this basis, the central
industry authorities in charge of the six major
sectors81 developed GHG Emissions Control Action
Programs to provide more detail on each sector’s
responsibilities to reduce their emissions. In addition,a series of subsidiary regulations has been formulated
in preparation for the cap-and-trade system. This
includes the 2018 Regulations Governing GHG Offset
Program Management, which provides an opportunity
for companies to acquire offsets credits.82

Colombia
On July 27, 2018, Colombia adopted its climate bill,which enables the government to establish an ETS.83
The ETS needs to be compatible with Colombia’s
national GHG emission reduction targets and would
provide more certainty in achieving these targets inaddition to its existing carbon tax. The climate law
also specifies that allowance distribution under an
ETS should primarily take place through auctions withrevenues directed towards the National Environment
Fund. To avoid double taxation, the climate billallows payments under the existing carbon tax to berecognized as an approach for emitters to meet theircompliance obligations under a potential future ETS.

79
80
81
82
83
84
85

European Union
In February 2018, European lawmakers formallyapproved the EU ETS phase 4 (2021–2030) reforms.
The process leading up to this moment reflect thechallenges in adapting and strengthening a wellestablished ETS, which is also affected by the EU’s
diverse and layered decision-making process withthree different legislative bodies representing theinterests of 28 Member States. From the start of phase
3 (2013–2020) until 2018, prices remained consistently
below €10/tCO2e (US$11/tCO2e) due to a large surplusof allowances resulting from the economic crisis andhigh import of international credits,84 and a lack ofmechanisms to address this surplus. Since 2014,
EU lawmakers have been introducing measures
to address this surplus—first through temporarily
back-loading allowances, followed by a permanentmarket stability reserve (MSR)—but the carbon prices
only started to markedly increase after the post2020 reforms had been adopted. Over the course of2018, EUA prices reached the level of €20–25/tCO2e(US$22-28/tCO2e) and have remained around thatlevel ever since.85 The reforms include increasing thelinear annual cap reduction from 1.74 percent to 2.2
percent, increasing the impact of MSR on the surplus
by withholding more allowances from the market andcancelling a portion of allowances in the MSR, andrevising rules related to free allocation of allowances.
Free allocation will be more aligned with recent
activity levels, the benchmark levels will be updated
every five years to take technological progress into
account, and the free allowances for sectors notdeemed at risk of carbon leakage will be phased out.
These measures will increase the carbon price signal
experienced by emitters. The EU is still working on
several specific regulations related to free allocation
including benchmarks and updating free allocationthat will be completed in the course of 2020.

Source: Shanghai Municipal Development and Reform Commission, Notice of the Shanghai Municipal Development and Reform Commission on Issuing andDistributing the Shanghai 2018 Carbon Emissions Quota Allocation Plan, March 19, 2019, http://www.shdrc.gov.cn/gk/xxgkml/zcwj/zgjjl/35150.htm.
Source: Beijing Municipal Commission of Development and Reform, Notice on the Approval of Key Quota Emission Units for 2017 Annual Quotas, February 12,
2018, http://www.bjpc.gov.cn/zwxx/tztg/201802/t12508458.htm.
Energy, manufacturing, transportation, residential and commercial, agriculture, and environment.
Source: Taiwan, China, Climate Change: Global Challenge Requiring Global Response, November 2, 2018, https://www.roc-taiwan.org/fj_en/post/709.html.
Source: Congress of Colombia, Guidelines for the Management of Climate Change, July 27, 2018, http://es.presidencia.gov.co/normativa/normativa/LEY%20
1931%20DEL%2027%20DE%20JULIO%20DE%202018.pdf.
Source: European Commission, Market Stability Reserve, accessed April 11, 2019, https://ec.europa.eu/clima/policies/ets/reform_en. 9
Source: European Energy Exchange, Market Data - Environmental Data, accessed April 11, 2019, https://www.eex.com/en/market-data/environmentalmarkets/spot-market/european-emission-allowances#!/2019/04/01.

37

38

In addition to measures strengthening the carbon
price signal, the reforms also introduced two lowcarbon funding mechanisms to support for lowcarbon investments: i) the Modernization Fund tosupport investments in energy efficiency and themodernization of the energy sector in lower-income
Member States, and ii) the Innovation Fund toprovide financial support for projects in the areas ofrenewable energy and carbon capture and storage/
utilization.86 This mix of policy instruments will help
the EU meet its NDC targets that have been set inline with a 2 °C pathway.87 This illustrates that further
changes will be needed to align policies with climate
targets and ultimately for the EU ETS to drive longterm decarbonization in line with the ambition of theParis Agreement for the global temperature to staywell below 2 °C.
The EU continues to seek out international
cooperation. In April 2018, the European Commission
held its first policy dialogue with China’s newly-created
Ministry of Ecology and Environment, reaffirming
continued bilateral cooperation in developing the
China national ETS.88 At the Global Climate Action
Summit held in September 2018, the EU and California
agreed that officials from the EU and California would
step up the frequency of exchanges, including on
principles for alignment and the role of carbon pricing
in sending near- and long-term investment signals fortransformative technologies, addressing economic
competitiveness, and maximizing public benefits foruse of program revenues.89

Finland
From January 1, 2019, Finland changed themethodology to determine the CO2 emission factor
associated with heating fuels and fuels for workmachines covered under the carbon tax component of
its energy tax. The emission factor of the full lifecycle

86
87
88
89
90
91
92
93

emissions of the fuels are now used instead of only
combustion emissions, which effectively means thatthe carbon tax component per volume fuel consumed
would increase.90 To limit the additional tax burden due
to this change, the carbon tax rate of these fuels was
lowered from €62/tCO2e (US$70/tCO2e) to €53/tCO2e(US$60/tCO2e). The carbon tax for transport fuelsremains at €62/tCO2e (US$70/tCO2e) as it already took
the full lifecycle emissions into account. In addition,
the partial carbon tax exemption for combined heatand power plants was turned into a partial energy
tax exemption, resulting in a small increase of the tax
burden on coal to support the transition away fromcoal use.91
These changes are reflective of the latest
developments in the long history of balancing
incentives to reduce GHG emissions with the cost ofliving and competitiveness of local businesses in thefirst country with a carbon tax. Following a seriesof reforms that saw the carbon tax rate increase incombination with lowering income taxes and social
security contributions, Finland is currently greening its
tax system to incentivize transitioning to a low-carbon
economy and abandoning coal by 2030.92 To this end,
the government has been gradually strengthening thecarbon tax component in the energy tax and shifting
the tax burden to higher carbon fuels.

FranceThe France carbon tax was set last year on an
increasing price trajectory towards €86.2/tCO2(US$97/tCO2) in 2022, but this plan has been modified
after social protests.93 Since November 2018, large
scale protests have been taking place, spurred by
opposition to the carbon tax rate in a period whenfuel prices are rising. Since its introduction in 2014,
the carbon tax has increased six-fold from €7/tCO2e(US$8/tCO2e) to €44.6/tCO2e (US$50/tCO2e) within

Source: European Commission, EU Emissions Trading System (EU ETS), accessed March 6, 2019, https://ec.europa.eu/clima/policies/ets_en.
Source: European Commission, EU and the Paris Climate Agreement: Taking Stock of Progress at Katowice COP, October 26, 2018, https://eur-lex.europa.eu/
legal-content/EN/TXT/?uri=COM:2018:716:FIN.
Source: European Commission, Emissions Trading: European Commission and China Hold First Policy Dialogue, April 26, 2018, https://ec.europa.eu/clima/
news/emissions-trading-european-commission-and-china-hold-first-policy-dialogue_en.
Source: European Commission, EU and California to Step up Cooperation on Carbon Markets, September 13, 2018, https://ec.europa.eu/clima/news/eu-andcalifornia-step-cooperation-carbon-markets_en.
Source: Parliament of Finland, Changes in Energy Taxation in 2019, January 11, 2019, https://www.vero.fi/tietoa-verohallinnosta/verohallinnon_esittely/
uutiset/uutiset/2019/energiaverotukseen-muutoksia-2019/.
Source: Parliament of Finland, The Government’s Bill to the Parliament with Proposals for Amending the Legislation on Energy Taxation, 2018,https://www.eduskunta.fi/SV/vaski/HallituksenEsitys/Sidor/RP_191+2018.aspx.
Source: Parliament of Finland, Government’s Proposal to the Parliament to Amend Chapter 1, Section 2 of the Act on the Prohibition of Coal Energy and on
Proceedings in the Market Court, accessed April 11, 2019, https://www.eduskunta.fi/FI/vaski/HallituksenEsitys/Sivut/HE_200+2018.aspx.
Source: French Government, Finances for 2019, December 28, 2018, https://www.legifrance.gouv.fr/affichTexte.
do?cidTexte=JORFTEXT000037882341&dateTexte=&categorieLien=id.

2 / Regional, national, and subnational carbon pricing initiatives

four years. Agriculture, taxis and trucks are exemptedfrom the carbon tax to protect their competitiveness.
In addition, the government is using part of carbon tax
revenues to cut labor and corporate taxes and provide
financial assistance for low-income households ontheir energy bill.94 Whilst in general France does not
earmark revenues, the reform was accompanied
by some support to the energy transition, including
support for alternatively-source vehicles and tax credit
to households improving energy efficiency of theirresidence. Originally, the French carbon tax would
have increased by 23 percent in 2019 and as much as
19 percent by 2020. However, the tax rate in 2019 now
remains at the 2018 rate of €44.6/tCO2 (US$50/tCO2),
and following nation-wide consultations, it is not likely
to increase in the near-term.

Kazakhstan

Iceland

cap is set to reduce by 5 percent by 2020 compared to1990. These developments in Kazakhstan underline
the importance of including flexibility mechanisms
in the design of a carbon pricing initiative in case of
unexpected circumstances.

The Iceland carbon tax rate increased by 10 percent
to approximately ISK3850/tCO2 (US$36/tCO2) on
January 1, 2019. The higher tax rate will generate
ISK550 million (US$39 million) in additional carbon
tax revenue including additional revenues related to
the value added tax (VAT).95 The carbon tax rate willgrow with a further 10 percent on January 1, 2020,96
increasing the carbon tax to about 15 percent of
the total excise tax rate on transport fuels.97 These
increases are part of the Climate Action Plan 2018–
2030 to bolster Iceland’s efforts in reaching its NDC andto help meet their goal of carbon neutrality by 2040.98
The focus of the carbon tax increases is to phase out
fossil fuels in the transport sector. Iceland has alreadybeen making headway in greening its transportation
with the electric vehicle purchases having more thantripled in 2018 compared to 2016. The abolishmentof excise taxes and VAT for electric vehicles played asignificant role in this surge. The Climate Action Plan
will be subject to public consultation with an updated
strategy published in 2019.

94
95
96
97
98
99
100
101
102

Kazakhstan relaunched its ETS on January 1, 2018
after it suspended it on April 8, 2016. The suspension
was due to the impact of a drop in global oil prices
on Kazakhstan’s economy and accompanying
industry protests.99 During the suspension period,
Kazakhstan—in response to the economic downturn—made several amendments to the ETS demonstrating
redesign of the original ETS by introducing more
flexibility measures. Changes include allowing
installations to choose between two approaches forreceiving free allowances; about a third of the covered
installations chose free allocation based on historicalemissions and two-thirds chose product-based
benchmarks with the possibility of updating their freeallocation with capacity changes.100 In addition, theKorea, Republic of
The Korea ETS has entered its second phase as ofJanuary 1, 2018, which will be in effect until 2020.101
Key changes in the new phase include the introductionof auctioning up to three percent of the required
allowances in certain sectors, new banking rules, andallowing the restricted use of international credits. In
addition, benchmarking will be more widely applied
for the distribution of free allowances and allocatedbased on facility efficiency. Thus, the power, waste,
and industry sectors will be added to the group of
sectors were already receiving free allocation via
benchmarks such as the oil refining, cement, andaviation industry.102 These changes are the result ofconsultations with associated government bodies

Source: Ibid.
Source: Icelandic government, Budget Bill 2019, 2018, https://www.stjornarradid.is/lisalib/getfile.aspx?itemid=d5ab9587-b5df-11e8-942c-005056bc4d74.
Source: Icelandic Parliament, Act on Amendments to Various Laws Relating to the Budget for 2019, December 21, 2018, https://www.althingi.is/altext/
stjt/2018.138.html.
Authors’ calculations based on Source: OECD, Taxing Energy Use 2018 - Iceland, 2018, https://www.oecd-ilibrary.org/taxation/taxing-energy-use2018_9789264289635-en.
Source: Government of Iceland, Iceland Launches New Climate Strategy, Boosting Efforts to Reach Paris Goals, September 10, 2018, https://www.government.
is/news/article/?newsid=c7ab2ec0-b515-11e8-942c-005056bc4d74.
Source: German Emissions Trading Authority, Emissions Trading in Kazakhstan Recommendations for Cap Setting, accessed April 11, 2019, https://www.dehst.de/SharedDocs/downloads/EN/publications/country-study-kazakhstan.pdf?__blob=publicationFile&v=2.
Source: Ministry of Energy of the Republic of Kazakhstan, Official Web Site, accessed March 6, 2019, http://kz.energo.gov.kz/index.php?id=2.
Source: Korean Ministry of Environment, Greenhouse Gas Emissions Trading Scheme, December 12, 2017, http://eng.me.go.kr/eng/web/index.
do?menuId=450.
Source: Korean Ministry of Environment, The Total Emission Permits Allocated Set at 1,777,130,000 Tons for the next Three Years, July 2, 2018, http://
eng.me.go.kr/eng/­web/board/read.do?pagerOffset=­0&maxPageItems=­10&maxIndexPages=­10&searchKey=­content&searchValue=­ETS&menuId=­
21&orgCd=&boardId=­903010&boardMasterId=­522&boardCategoryId=&decorator=.

39

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to boost liquidity in the Korean carbon market anddistribute the allowances more proportionally toactual emissions while strengthening the price signal
to reduce emissions.

MexicoOn October 19, 2018, the Mexican government
released the draft regulation for establishing a pilot
ETS for public consultation. In December 2018, a newadministration took office and decided to review thedraft to strengthen capacities in the government andstart a series of consultations among civil society
and government. The start of the pilot is plannedfor 2020 and would last two years in addition to one
year for transition to the next phase. The pilot ETS
intends to cover the power, oil and gas, and industrial
sectors. Entities with annual emissions greater than
100 ktCO2e during 2016–2018, or in any year from thelaunch of the pilot, will be covered under the pilot ETS.

104

105
106

Dutch government is currently working out thedetails of the carbon tax, a process that involves bothindustry and civil society organizations.

The draft regulation follows the adopted amendments
to the General Law on Climate Change by the Mexican
Senate in April 2018, which included a mandate forthe government to establish an ETS to incentivize
cost-effective emission reductions measures while
maintaining the competitiveness of its industry in
the international market. The ETS would be part ofa suite of measures—including its existing carbon
tax—to enable Mexico to reach its NDC targets. The
government continues to work on the development ofrules and guidelines for the pilot phase, with the final
draft due to be published in 2019.

New Zealand

Netherlands

The Government will decide on further policy reforms
in mid-2019. Reforms under consideration include
simplified forestry-sector accounting options, apotential price floor mechanism, and options forthe phase-down of free allocation to emissionsintensive and trade-exposed industries. Options
for strengthening the ETS market governance

On December 21, 2018, a draft for a National
Climate Agreement was published, maintaining
earlier intentions from the Dutch government tointroduce a carbon floor price for the electricity
sector to strengthen market certainty for renewable103

investments.103 Under this draft National Climate
Agreement, the carbon floor price would be set
at €12.3/tCO2 (US$15/tCO2e) in 2020, rising to€31.9/tCO2 (US$39/tCO2e) in 2030. This islower than the original trajectory of €18/tCO2(US$22/tCO2e) in 2020 to €43/tCO2 (US$53/tCO2e)in 2030. In addition, on March 13, 2019, the Dutch
government announced its intention to explore
introducing a carbon tax for industry. The carbon tax
would incorporate the use of EU ETS benchmarks toensure the least efficient facilities face the highest
carbon costs. Revenues from the industry carbon
tax would be earmarked to finance green industrial
activities.104 The announcement of a carbon tax on
industry is the result of a government-commissioned
research report that the current plans are insufficient
to meet the country’s climate goals for 2030.105 The

On December 12, 2018, the government announced
decisions to strengthen the New Zealand ETS, which
will support New Zealand to meet its climate changetargets, including its NDC targets. The decisions
include implementing a cap, introducing auctioning
in the ETS, replacing the current price ceiling of­
NZ$25/tCO2e (US$18/tCO2e) with a cost containment
reserve, strengthening market governance, limiting
the potential use of international credits, andinvestigating a price floor.106

Source: Dutch climate council, Design of the Climate Agreement, December 21, 2018, https://www.klimaatakkoord.nl/documenten­/publicaties/2018/12/21/­
ontwerp-klimaatakkoord.
Source: Dutch Ministry of Economic Affairs and Climate, The Government’s Reaction on the Draft Climate Agreement, March 13, 2019, https://www.
rijksoverheid.nl/binaries/rijksoverheid/documenten/kamerstukken/2019/03/13/kamerbrief-met-eerste-reactie-kabinet-op-de-doorrekening-van-hetontwerp-klimaatakkoord/kamerbrief-met-eerste-reactie-kabinet-op-de-doorrekening-van-het-ontwerp-klimaatakkoord.pdf.
Source: Reuters, Dutch to Introduce “reasonable” Corporate Tax on Carbon Dioxide, March 13, 2019, https://uk.reuters.com/article/us-climatechangenetherlands-tax/dutch-to-introduce-reasonable-corporate-tax-on-carbon-dioxide-idUKKBN1QU215.
Source: New Zealand Ministry for the Environment, Proposed improvements to the NZ ETS, accessed May 10, 2019, https://www.mfe.govt.nz/climate-change/
proposed-improvements-nz-ets.

2 / Regional, national, and subnational carbon pricing initiatives

framework and improving the penalties andcompliance regime are also under consideration.
These policy reforms will feed into a single Bill
to amend the Climate Change Response Act. It is
expected that this Bill will be introduced in thesecond half of 2019. In addition, the Government is
actively considering bringing agriculture into the ETS
as a fully covered sector.107
In parallel to the reforms to the New Zealand ETS,New Zealand and the EU announced plans tostrengthen their bilateral cooperation on emissions
trading on December 17, 2018. New Zealand and theEU will hold regular technical and policy meetings to
discuss the key design features and implementationof their ETSs, respective developments and possible
implementation challenges, with a view to exploring
options towards enhanced cooperation between thetwo systems.108

Portugal
The Portugal carbon tax rate almost doubled
from €6.85/tCO2e (US$8/tCO2e) to €12.74/tCO2e(US$14/tCO2e) on January 1, 2019.109 This is the resultof the tightening EU ETS market, because the carbon
tax rate is tied to the average EU ETS allowance pricein the preceding year. In anticipation of this increase in
the tax burden for the general public, the government
reduced the tax on gasoline by more than double theamount of the carbon tax increase.110 In addition, thecarbon tax rate for coal-fired electricity generationand co-generation facilities that also participate
in the EU ETS was increased from €0.685/tCO2e(US$0.8/tCO2e) to €1.25/tCO2e (US$1.4/tCO2e) to moveaway from coal. These facilities will gradually face thefull tax rate in 2022.111

107
108
109
110
111

112
113
114
115

SenegalSenegal is exploring carbon pricing as part of thepolicy options to reach the objectives of its NDC.112
In 2018, the government organized consultations
with stakeholders in the public and private sector toassess initial design options for the carbon pricing
policy applicable to its economy. In 2018, a study
on the opportunity to introduce carbon pricing at
the domestic level was carried out. The government
identified the need for additional analyses to explore
the main elements to design a potential carbon tax indetail.

Singapore
On January 1, 2019, Singapore implemented its
carbon tax. The carbon tax is set at S$5/tCO2e(US$4/tCO2e) from 2019 to 2023. Singapore will
review the carbon tax rate by 2023, with plans toincrease the rate to S$10–$15/tCO2e (US$8/tCO2e to
US$11/tCO2e) by 2030.113 The carbon tax applies to all
facilities with annual GHG emissions over 25 ktCO2e
and is expected to raise revenue of nearly S$1 billion(US$760 million) in the first five years, which will help
support initiatives to address climate change such as
incentives for energy efficiency improvements in theindustrial sector.114

South Africa
South Africa became the first African nation to launcha carbon tax after Parliament passed the Carbon Tax
Bill on February 19, 2019.115 The launch date of the
carbon tax is June 1, 2019 and starts at R120/tCO2e(US$8/tCO2e). This accomplishment was proceededby a lengthy process that saw the implementation

Source: New Zealand Interim Climate Change Committee, Agriculture, accessed May 11, 2019, https://www.iccc.mfe.govt.nz/what-we-do/agriculture.
Source: Government of New Zealand, EU and New Zealand to strengthen cooperation on emissions trading systems, December 18, 2018, https://www.beehive.
govt.nz/release/eu-and-new-zealand-strengthen-cooperation-emissions-trading-systems.
Source: Government of Portugal, Government Gazette: Finances, January 4, 2019, https://dre.pt/application/file/a/117620377.
Source: Government of Portugal, Special Taxes on Consumption, accessed April 11, 2019, https://dre.pt/web/guest/legislacao-consolidada/-/lc/34478675/
diploma?p_p_state=maximized&rp=diploma&eid=73363080.
Source: Government of Portugal, Section 4 of the Government Gazette: Vehicle Tax, December 31, 2018, http://app.parlamento.pt/webutils/docs/­doc.
pdf?path=6148523063446f­764c324679595842774f­6a63334e­7a637664326c­75644756346447397a­58324677636d­393259575276637938794d­
4445344c3078664e­7a46664d6a­41784f4335775a­47593d&fich=L_71_2018.pdf&Inline=true.
Source: CI-ACA, Validation workshop of the opportunity study on the implementation of a carbon pricing instrument in Senegal, December 20, 2018.
Source: National Environment Agency Singapore, Carbon Tax, January 1, 2019, https://www.nea.gov.sg/our-services/climate-change-energy-efficiency/climate-change/carbon-tax.
Source: Ibid.
Source: South African Government, Parliament Passes Bills, February 19, 2019, https://www.gov.za/speeches/national-assembly-passes-several-bills%C2%A0-19-feb-2019-0000.

41

42

of the carbon tax delayed three times since its
implementation was first proposed in 2013 with an
initial start date of January 2015. Multiple roundsof consultations and discussions were needed
to reach this stage due to its unpopularity withbusinesses and heavy reliance of the South African
economy on coal. Since then, wind and solar power
have increased in competitiveness and utilities
have undergone restructuring. In addition, several
changes were made compared to the initial billfollowing stakeholder input, including scaling down
the growth of the carbon tax rate increase frominitially 10 percent. The increase of the carbon tax rateuntil 2022 is now stated as the amount of consumer
price inflation plus two percent annually. After 2022,
only inflationary adjustments are envisioned. The
South Africa carbon tax is one of its key instruments
to meet its NDC pledge.

a precedent for future linking negotiations withother jurisdictions, such as California-Québec, China,
Korea and New Zealand. Linking can bring certain
advantages to an ETS by creating a level-playing field
between companies in different countries, increasing
market liquidity, and lowering abatement costs.
The Switzerland carbon tax increased on January 1,
toCHF96/tCO2e
2018
from
CHF84/tCO2e(US$87/tCO2e to US$99/tCO2e). In the context of
the revision of Swiss climate policy for 2021–2030,
the Swiss government put forward a proposal toincrease the maximum possible carbon tax rate from
CHF120/tCO2e to CHF210/tCO2e (US$126/tCO2e to
US$220/tCO2e). However, the revision of the climate
policy was rejected in the National Council of the Swiss
Parliament on December 12, 2018.117 The revision iscurrently being debated by the Council of States, theother chamber of the Swiss Parliament.118, 119

Switzerland
UkraineOn March 22, 2019, the Swiss Parliament approved
the agreement to link the Swiss and EU ETS andadopted the necessary amendments to the Swiss
CO2 Act to implement the agreement.116 After thenecessary amendments to the Swiss CO2 Ordinanceare also made, and Switzerland and the EU ratify theagreement, the link could become operational as ofJanuary 1, 2020.
The linking process took longer than originally
anticipated when negotiations started in 2011. It
suffered various setbacks, including a major delay
when the relationship between Switzerland andthe EU was strained following a Swiss referendum
on immigration that conflicted with an existing
agreement with the EU on free movement of persons.
Another point of discussion was the inclusion ofaviation, which Switzerland must add to its ETS aspart of the linking agreement. This link could form

116
117
118
119
120
121

Ukraine is in the process of adopting its framework
law on monitoring, reporting and verification (MRV)
in legislation. After the MRV system has been put inplace, Ukraine plans to develop separate legislation
based on at least three years of data from the MRV
system to transpose other relevant EU directives into
its laws and establish an ETS.120 These developments
are born out of Ukraine’s commitments under the
Ukraine-EU Association Agreement of 2017, whichaims to converge economic policy, legislation, andregulation across broad areas including trade andclimate change in Ukraine with the EU.
Ukraine has increased its carbon tax from
UAH0.41/tCO2e (US$0.02/tCO2e) to UAH10/tCO2e(US$0.4/tCO2e) as of January 1, 2019.121 Under the
new provisions, entities with emissions exceeding
500 tCO2 per annum are liable to pay tax. Companies

Government of Switzerland, Agreement between Switzerland and the EU on linking emissions trading systems. Approval and implementation (amendment of the
CO2 Act), 6 May 2019, https://www.parlament.ch/de/ratsbetrieb/suche-curia-vista/geschaeft?AffairId=20170073
Government of Switzerland, Total revision of the CO2 Act after 2020, 6 May 2019,https://www.parlament.ch/de/ratsbetrieb/suche-curia-vista/geschaeft?AffairId=20170071
Source: Swiss Parliament, Second Chance for the Total Revision of the CO2 Law, January 11, 2019, https://www.parlament.ch/press-releases/Pages/2019/mmurek-s-2019-01-11.aspx?lang=1031.
Source: Swiss Federal office for the environment, CO2 Levy, September 28, 2018, https://www.bafu.admin.ch/bafu/en/home/topics/climate/info-specialists/climate-policy/co2-levy.html.
Source: Supreme Council of Ukraine, Draft Law on the Basis of Monitoring, Reporting and Verification of Greenhouse Gas Emissions, January 1, 2018,
http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=64881.
Source: Legislation of Ukraine, On Amendments to the Tax Code of Ukraine and Some Other Legislative Acts of Ukraine on Improving the Administration andRevision of the Rates of Certain Taxes, November 23, 2018, https://zakon.rada.gov.ua/laws/show/2628-viii.

2 / Regional, national, and subnational carbon pricing initiatives

with emissions below 500 tCO2 per annum are tax
exempt, and 500 tCO2 are subtracted from the total
amount of taxed emissions from 2019.122

United Kingdom
Currently, the UK participates in the EU ETS andthe carbon price floor applies to the power sector.
In October 2018, the UK government indicated inits 2018 Budget that in a “no deal” scenario—in
which no mutually satisfactory agreement can bereached between the EU and the UK, and the UK
must subsequently leave the EU—it will apply atemporary carbon tax to all UK stationary installations
currently participating in the EU ETS, except for theaviation sector. During the initial tax period, a rate of£16/tCO2e (US$21/tCO2e) would be applied to eachtCO2e emitted over an installation’s emissions
allowance, which would be based on the installation’s
free allocation under the current EU ETS. The carbon
tax would be introduced to help meet the UK’s legallybinding carbon reduction commitments under the
Climate Change Act. The government continues toplan for all scenarios as it prepares for Brexit and isdeveloping options for long term carbon pricing. The
UK government’s preferred option is to establish a UK
ETS and link it to the EU ETS. However, the UK is also
considering fallback options such as a standalone UK
ETS, remaining in the EU ETS and a long-term carbon
tax.123

United States
At the federal level, lawmakers presented separate
bills for an ETS and a carbon tax with both bills
focusing on returning carbon pricing revenues tocitizens. The Energy Innovation and Carbon Dividend
Act of 2019,124 introduced on January 24, 2019,
proposes a carbon tax on the GHG emissions of
all fossil fuels with revenues deposited in a Carbon

122
123
124
125
126
127
128
129
130

Dividend Trust Fund for distribution to US citizens.
The Healthy Climate and Family Security Act of 2019,
introduced on March 28, 2019, proposes a cap-andtrade program for fossil fuel producers, distributors
and importers based on the carbon content of thefuels they sell and distribute carbon pricing revenues
to US citizens through a fund and dividend payout.125 Both bills include improvements to their 2018
version,126, 127 and are currently being discussed incommittees. Several measures that directly apply
or implicitly raise the price on carbon were also
on the ballot during the US Midterm elections on
November 6, 2018 but were all defeated. Notably,
Washington state’s Initiative No. 1631—also known
as the Washington Carbon Emissions Fee andRevenue Allocation Initiative—proposed levying a feeof US$15/tCO2e on GHG emissions generated within
the state as of 2020.128 Revenues generated from thelevy were intended to support various energy andenvironmental projects. While carbon pricing-related
measures were defeated, it is interesting to notethat in many parts of the country, such as California,
Colorado, Nevada, New Mexico, Oregon, andWashington, voters supported other forms of climate
action. For example, in Nevada, voters expressed apreference for having electricity utilities purchase a
growing share of electricity from renewable energy
sources.129
Overall, at the US subnational level, states, cities
and companies continue to enhance cooperation
on carbon pricing. For example, the Carbon Cost
Coalition—an initiative bringing state legislators
together to take action on climate and reducecarbon emissions through putting a price on
carbon—has grown to include representation from12 states.130 Similarly, the Transportation and Climate
Initiative (TCI) issued a statement in December 2018reflecting plans to develop a carbon pricing initiativein the transportation sector for nine US states andSource: Prime Minister of Ukraine, On Amendments to the Tax Code of Ukraine and Certain Other Legislative Acts of Ukraine on Improving the Administration andRevision of Rates for Certain Taxes and Duties, n.d., http://w1.c1.rada.gov.ua/pls/zweb2/webproc34?id=&pf3511=64888&pf35401=467992.
Source: Government of United Kingdom, Meeting Climate Change Requirements If There’s No Brexit Deal, February 28, 2019, https://www.gov.uk/government/
publications/meeting-climate-change-requirements-if-theres-no-brexit-deal/meeting-climate-change-requirements-if-theres-no-brexit-deal.
Source: United States Congress, H.R.763 - Energy Innovation and Carbon Dividend Act of 2019, January 24, 2019, https://www.congress.gov/bill/116thcongress/house-bill/763.
Source: United States Congress, S.940 - Healthy Climate and Family Security Act of 2019, March 28, 2019, https://www.congress.gov/bill/116th-congress/
senate-bill/940.
Source: United States Congress, S.3791 - Energy Innovation and Carbon Dividend Act of 2018, December 19, 2018, https://www.congress.gov/bill/115thcongress/senate-bill/3791.
Source: United States Congress, S.2352 - Healthy Climate and Family Security Act of 2018, January 29, 2018, https://www.congress.gov/bill/115th-congress/
senate-bill/2352.
Source: Washington Secretary of State, Initiative Measure No. 1631, March 13, 2018, https://www.sos.wa.gov/_assets/elections/initiatives/finaltext_1482.pdf.
Source: BallotPedia, Nevada Question 6, Renewable Energy Standards Initiative (2018), accessed April 12, 2019, https://ballotpedia.org/Nevada_Question_6,_
Renewable_Energy_Standards_Initiative_(2018).
Connecticut, Hawaii, Maine, Maryland, Massachusetts, New Hampshire, New York, Oregon, Rhode Island, Utah, Vermont, and Washington.

43

44

Washington DC.131 Specific elements of the TCI design
process include determining the cap level, establishing
MRV guidelines, identifying covered entities andfuels, developing cost containment mechanisms andcompliance flexibility, and specifying revenue usage.
The participating TCI jurisdictions aim to complete thepolicy development process in the course of 2019.
The implementation of the initiative would be similar
to the Regional Greenhouse Gas Initiative (RGGI)
where member states jointly commit to implement

the carbon pricing initiative and transpose it to state
laws.132 The existing RGGI program also continues to
evolve, with the states on track to adopt post-2020
cap-and-trade regulations in 2019,133 and the potential
addition of two new states in 2020.134
Various US states also continue to develop their own
carbon pricing initiative or strengthen their existingone. Table 2 provides an overview of key carbon
pricing developments in individual US states.

Table 2 / Key carbon pricing developments in individual US states135
Jurisdiction Type and status
California

ETS implemented

Key developments−− In December 2018, the California Air Resources Board (CARB) approved a set ofreforms for the post-2020 period. Key reforms include an addition of a price ceiling,
the two allowance price containment reserve tiers below the price ceiling, nosustained free allocation, and reduced use of offsets. These reforms came into force
in April 2019.136 These changes were the result of legislative direction for AB 398
which clarified the role of the program in achieving the state’s 2030 GHG emissions
reductions goals.
−− The reforms were adopted following a 45-day pubic consultation period from
September to October 2018, which included the publication of an initial statementof reason, environmental analysis and impact assessment of the reforms. CARB also
held four public workshop in 2017 and 2018 that have shaped the reforms.137

Massachusetts

ETS implemented(own ETS andparticipation in
RGGI)−− The Massachusetts ETS started operation in 2018 and covers the power sector.
It complements RGGI to help ensure that Massachusetts achieves its mandatory
mitigation targets of achieving 25% reduction of emissions in the state as compared
to 1990 levels and 80% reduction of emissions by 2050 as compared to 1990 levels.
−− In 2019, the auctioning of allowances has been introduced. The share of auctioned
allowances is set to increase annually with the rest given away for free. 25% of thetotal allowances are auctioned in 2019, 50% in 2020, and 100% from 2021 onwards.

New Jersey

ETS under
consideration (torejoin RGGI)−− On January 29, 2018, New Jersey’s Governor signed an Executive Order to take allnecessary regulatory and administrative measures to ensure New Jersey’s timely
return to full participation in RGGI after it left in 2011.138−− After working with the other RGGI states to determine how best to re-engage in the
program, rules were made consistent with the 2017 RGGI Model Rule on December
17, 2018.139 New Jersey aims to have the legislation in place by May 2019 and toparticipate in the first RGGI auction of 2020.

131
132
133
134
135
136

137
138
139

Connecticut, Delaware, Maryland, Massachusetts, New Jersey, Pennsylvania, Rhode Island, Vermont, and Virginia.
Source: TCI, Transportation & Climate Initiative Statement, December 18, 2018, https://www.georgetownclimate.org/files/Final_TCI-statement_20181218_
formatted.pdf.
Source: RGGI, State Statutes & Regulations, accessed March 19, 2019, https://www.rggi.org/program-overview-and-design/state-regulations.
Source: State of New Jersey, Regional Greenhouse Gas Initiative (RGGI), accessed May 4, 2019, https://www.state.nj.us/dep/aqes/rggi.html; RGGI, RGGI States
Applaud Key Step for Virginia Emissions Trading Regulation, April 19, 2019.
For further details on each carbon pricing initiative, please refer to: World Bank, Carbon Pricing Dashboard, accessed March 14, 2019, https://carbonpricingdashboard.worldbank.org/.
Source: California Air Resources Board, Proposed Amendments to the California Cap on Greenhouse Gas Emissions and Market- Based Compliance Mechanisms
Regulation, February 14, 2019, https://ww2.arb.ca.gov/rulemaking/2018/california-cap-greenhouse-gas-emissions-and-market-based-compliancemechanisms.
Source: Government of California, Proposed Amendments to the California Cap on Greenhouse Gas Emissions and Market- Based Compliance Mechanisms
Regulation, March 29, 2019, https://ww2.arb.ca.gov/rulemaking/2018/california-cap-greenhouse-gas-emissions-and-market-based-compliance-mechanisms.
Source: Government of New Jersey, Executive Order NO. 7, January 29, 2018, https://nj.gov/infobank/eo/056murphy/pdf/EO-7.pdf.
Source: New Jersey Department of Environmental Protection, Murphy Administration Proposes Rules For State’s Re-Entry Into Regional Greenhouse Gas
Initiative, December 17, 2018, https://nj.gov/governor/news/news/562018/approved/20181217b.shtml.

2 / Regional, national, and subnational carbon pricing initiatives

Jurisdiction Type and status

Key developments

New Mexico

Carbon pricing
being explored−− On January 29, 2019, New Mexico instantiated an executive order to provide strategic
direction for 2030 emission reduction targets by exploring a wide range of measures
to reduce the state’s GHG emissions. Measures that will be explored include acomprehensive market-based program that sets emission limits across New Mexico.140

OregonETS under
consideration−− On January 31, 2019, the Joint Committee on Carbon Reduction introduced House
Bill 2020, which proposes the establishment of a statewide cap-and-trade program(Oregon Climate Action Program) in line with the agenda of the Oregon government.141−− The program would start in 2021, covering about 80% of the GHG emissions inOregon. The cap would be in line with a proposed target of a 45% reduction in
GHG emissions below 1990 levels by 2035 and at least 80% reduction by 2050.
The program's design is closely modeled on the California and Quebec ETSs. The
possibility of linking with other market-based compliance mechanisms in otherjurisdictions is also mentioned in the proposed legislation.
−− On March 25, 2019, the Joint Committee on Carbon Reduction proposed amendments
to the proposal on the distribution of allowances to energy-intensive and tradeexposed sectors and the use of auction revenues following stakeholder fears forthe impact on the cost of living and jobs.142 The committee continues to refine theproposal before the 2019 legislative session ends on June 30, 2019.

Virginia

ETS under
consideration−− Virginia is in the process of establishing an ETS and linking it to the RGGI program.
In September 2018, the DEQ released a revised draft regulation following commentsfrom RGGI states to ensure consistency with the RGGI 2017 Model Rule andharmonize key design elements.143−− Virginia is holding a public consultation early 2019 on the revised draft regulations.144
If there are no further delays, the Virginia ETS could be operational and linked to
RGGI by 2020.

Washington
State

ETS implemented(compliancesuspended)−− The state suspended compliance requirements under the Clean Air Rule (CAR) after
a court ruling on December 15, 2017 found that the Department of Ecology did nothave the authority to cover suppliers of natural gas and petroleum products under its
ETS as they are not direct emitters of GHGs.
−− The Department of Ecology filed an appeal against the court ruling with the
Washington State Supreme Court on May 14, 2018.145 The first hearing took place inMarch 2019, where both parties presented their arguments. The Supreme Court did
not indicate when they will issue a ruling, so the compliance requirements under CAR
remain suspended for the time being.

VietnamVietnam is analyzing options for carbon pricing
approaches applicable to the county and developing
pilot crediting programs for the steel and waste
sectors, which could start after 2020. A decree on a

140
141
142
143
144
145
146

roadmap for GHG emission reduction is planned forapproval in 2019, which references the use of carbon
credits and a carbon policy initiative.146
Selected changes in regional, national and subnational
carbon pricing initiatives are summarized in Box 4.

Source: Governor of New Mexico, Gov. Lujan Grisham Signs Executive Order Committing New Mexico to Essential Climate Change Action, January 29, 2019,https://www.governor.state.nm.us/2019/01/29/gov-lujan-grisham-signs-executive-order-committing-new-mexico-to-essential-climate-change-action/.
Source: Oregon State Legislature, Bill for Greenhouse Gas Emissions, January 31, 2019, https://olis.leg.state.or.us/liz/2019R1/Downloads/
CommitteeMeetingDocument/155934.
Source: Joint Committee on Carbon Reduction, Proposed Amendments to House Bill 2020, March 25, 2019, https://olis.leg.state.or.us/liz/2019R1/Downloads/
ProposedAmendment/14526.
Source: RGGI, RGGI States Submit Comments on Proposed Virginia Regulation for Emissions Trading, April 9, 2018, https://www.rggi.org/sites/default/files/
Uploads/Press-Releases/2018_04_09_Virginia_Comments_Release.pdf.
Source: Virginia Department of Environmental Quality, Greenhouse Gases, accessed March 19, 2019, https://www.deq.virginia.gov/Programs/Air/
GreenhouseGasPlan.aspx.
Source: Department of Ecology State of Washington, Ecology Statement on Appeal Filed with Washington State Supreme Court, May 14, 2018, https://ecology.
wa.gov/Air-Climate/Climate-change/Clean-Air-Rule.
Source: PMR, Project Implementation Status Report (ISR), April 3, 2018, https://www.thepmr.org/system/files/documents/Vietnam_PMR%20Project%20
Implementation%20Status%20Report_April%202018.pdf.

45

46

Box 4 / Summary of selected changes in regional, national and subnational
carbon pricing initiatives

Initiatives implemented in 2018:
Argentina (carbon tax) and Massachusetts (ETS)
Initiatives implemented in 2019:
Canada (federal backstop—fuel charge and OBPS), Nova Scotia (ETS), Newfoundland and Labrador(ETS and carbon tax), Prince Edward Island (carbon tax), Saskatchewan (ETS), Singapore (carbon tax),
and South Africa (carbon tax)
New initiatives under consideration:
New Brunswick (Canada), Ontario (Canada), and Senegal
Initiatives under consideration that experienced new developments in the past year:
Colombia, Mexico, Netherlands, Oregon (US), Ukraine, Virginia (US), and Vietnam
Price rate changes (carbon tax only):
2018/2019: The Iceland carbon tax rate increased with 10 percent to approximately ISK3850/tCO2(US$31/tCO2e). From January 1, 2018, the Finland carbon tax rate for heating fuels decreased from€62/tCO2e (US$77/tCO2e) to €53/tCO2e (US$60/tCO2e) to compensate for a new GHG calculation
method. The Portugal carbon tax rate almost doubled from €6.85/tCO2e (US$8/tCO2e) to€12.74/tCO2e (US$14/tCO2e). The Switzerland carbon tax increased on January 1, 2018 from
CHF84/tCO2e (US$85/tCO2e) to CHF96/tCO2e (US$97/tCO2e). The Ukraine carbon tax increased to
HR0.41/tCO2e (US$0.02/tCO2e) to HR10/tCO2e (US$0.4/tCO2e).
Price/market stabilization mechanisms (ETS only):
2018/2019: In the EU ETS, the MSR entered into force on January 1, 2019.
Future developments: Dutch government introduced plans for a carbon price floor for electricity
generators of €12.3/tCO2e (US$14/tCO2e) in 2020, rising to €31.9/tCO2e (US$36/tCO2e) in 2030. New
Zealand has proposed plans to introduce a cost containment reserve in place of the current priceceiling. The California cap-and-trade program reforms for post-2020 include an allowance pricecontainment reserve and a price ceiling that provides the upper bound of the price containment
mechanism and increases each year with an estimated 2030 value of US$94 (real 2018).
Offsets:
Future developments: A series of subsidiary regulations supporting proposals has been formulated
in preparation for the Taiwan ETS, including the 2018 Regulations Governing GHG Offset Program
Management to enable companies to acquire carbon offsets credits.
California is reducing the maximum amount of offset usage for compliance under its cap-and-trade
program from 8% to 4% from 2021 through 2025, with an increase to 6% from 2026 through 2030.
Linking and/or cooperation:
2018/2019: New Jersey intends to join RGGI in 2019. Nine states and Washington DC are working
together to develop a carbon pricing initiative under the Transportation and Climate Initiative
Future developments: The EU and Switzerland ETS link could become operational as of January 1,
2020. Oregon published draft ETS legislation in January 2019 with intentions of linking ETS to otherNorth American ETSs in the future. The Virginia ETS could be operational and linked to RGGI by 2020.

2 / Regional, national, and subnational carbon pricing initiatives

2.3
Recent developments,
emerging and future
trendsThe detailed analysis of the recent developments
in carbon pricing initiatives highlights some key
trends on how carbon pricing has evolved in thepast years, which are summarized below.
New carbon pricing initiatives are emerging
mostly at the subnational level and in developed
countries. Several developing countries are
implementing readiness activities, and assistanceprovided by international organizations and national
development agencies remains crucial to build
the needed technical assistance147, 148 to further
advance carbon pricing in developing countries.
The North American region has experienced many
developments at the subnational level, with 9 of
the 11 newly implemented carbon pricing initiatives
between 2018–2019 so far originating in this region—mostly in the Canadian provinces. These initiatives
were driven by Canada’s Pan-Canadian Approach to
Pricing Carbon Pollution which include the initiationof a federal backstop system consisting of an ETS
and a fuel charge similar to a carbon tax that would
be implemented in absence of sufficiently ambitious
carbon pricing action at the subnational level. In theUS, carbon pricing initiatives continue to grow at the
subnational level, with a new ETS being implemented
in Massachusetts and New Mexico starting to explore
carbon pricing.

147

148

Europe has continued to strengthen and adjust
its carbon pricing initiatives, particularly the EU
ETS. Ukraine is making steps to set up its own ETS.
Governments are also looking to reinforce theirinitiatives, with Iceland and Ukraine increasing theircarbon tax rates and the Netherlands looking to
introduce a new carbon tax to incentivize stronger
emission reductions. Some governments are also
facing setbacks trying to increase their carbon
tax rates, with the Swiss parliament rejecting an
increase in the maximum carbon tax rate and France
facing societal pressure to alter its rising carbon tax
trajectory.
In Asia, the Singapore carbon tax entered into
force on January 1, 2019. China is still working tooperationalize its national ETS, while its subnational
ETS pilots are gradually transitioning their systems
to align with the national one. Existing initiatives in
Asia continue to develop, including the Republic ofKorea ETS, which entered its second phase, and the
Kazakhstan ETS, which is relaunching after a twoyear suspension.
Australia and New Zealand have recently gone
through a review of their initiatives and are currently
working on implementing the required changes. Thechanges to the baseline levels for facilities underthe Australia ERF Safeguard Mechanism came into
effect in March 2019. New Zealand is in the processof reforming its ETS with new price stabilization
measures and market governance structures being
in place as of December 2018, and further reform
decisions to be made by mid-2019 regarding freeallocation, compliance and forestry accounting.

A number of jurisdictions have benefited from external support in developing carbon pricing instruments under the Partnership for Market Readiness (PMR).
The PMR, established in 2011, is a partnership of 42 jurisdictions that are at the forefront of developing carbon markets. To date, the PMR has supported
23 developing countries to prepare for and implement carbon pricing instruments. For example, the PMR supported Chile to implement its carbon tax, andsupported China to develop its provincial and national emissions trading schemes. More information on the PMR is available at: www.thepmr.org
The Carbon Pricing Leadership Coalition (CPLC) represents a coalition of 34 national and subnational government partners, 160+ private sector partners
from a range of regions and sectors, and 80+ strategic partners representing NGOs, business organizations, and universities that work together topromote efforts to price carbon by sharing experiences and to expanding the evidence base on how to effectively plan design and implement carbon
pricing systems and policies.

47

48

In other regions, such Latin America, Argentina
launched its carbon tax, and Mexico continues towork on the start of its pilot ETS. Africa is seeing its
first carbon pricing initiative enter into force in 2019.
The South Africa carbon tax started on June 1, 2019.
Senegal and Côte d’Ivoire are exploring carbon pricing
as part of the policy options to achieve their NDCs.
Many jurisdictions are deepening their carbon
pricing ambition to better align with theirclimate goals, and many ETSs are being reformed.
Governments are increasingly recognizing carbon
pricing as a key policy instrument to deliver on
climate mitigation targets and are looking to raisecarbon pricing ambition—either through priceincreases, removing exemptions or increased
stringency. For example, Iceland increased its carbon
tax rate by 10 percent in 2019 to bolster its effort
to reach its NDC and Portugal is gradually reducing
its carbon tax exemptions to transition away fromcoal. The European Union and New Zealand havealso significantly reformed and strengthened theirrespective ETSs to align with their NDC. In the
US, more states have opted to join the RGGI and
California has planned for significant reforms intheir ETS.
Increased cooperation continues across several
carbon pricing initiatives around the world.
Nine US states and Washington DC are working
together under the TCI to develop a carbon pricing
initiative for the transportation sector. RGGI is also
set to grow, with New Jersey and Virginia looking

149
150

to join RGGI. Oregon continues to design its own
ETS with the possibility of linking to other carbon
pricing initiatives and has modelled its ETS after the
California and Québec cap-and-trade programs. In
2019, Switzerland and the EU made strides towards
ratifying the Linking Agreement, which could see
their markets linked from January 1, 2020. This
cooperation also serves to exchange knowledge
and strengthen capacity. The EU and California
agreed at the Global Climate Action Summit held in
September 2018 on more frequent knowledge
exchanges. The EU also reaffirmed its continued
bilateral cooperation with China in developing
the China national ETS. At the 24th Conferenceof the Parties (COP 24), the New Zealand and the
EU announced plans to strengthen their bilateral
cooperation on emissions trading. To support
jurisdictions in their efforts to explore cooperationand linking of their carbon pricing systems, theInternational Carbon Action Partnership (ICAP)
published a new guide to linking ETSs.149
Cooperation is taking place also via the newly
established Coalition of Finance Ministers for
Climate Action, which includes more than 20 Finance
Ministries that signed the Helsinki Principles, which
promote national climate action, especially throughfiscal policy and the use of public finance.150 Anotherexample of cooperation is the Carbon Pricing in theAmericas (CPA) declaration, launched at the One
Planet Summit held in December 2017, that calls
for the establishment of a regional cooperation
platform exclusively on carbon pricing, aimed at

Source: Santikarn, M., L. Li, S. La Hoz Theuer, & C. Haug. A Guide to Linking Emissions Trading Systems. ICAP: Berlin, 2018.
Peer-exchange to share experience and expertise on climate mitigation and adaptation as well work towards measures that result in effective carbon
pricing are two of the principles endorsed by this Coalition. Source: https://www.cape4financeministry.org/coalition_of_finance_ministers. Countries partof this initiative are: Austria, Chile, Colombia, Costa Rica, Côte D’Ivoire, Denmark, Dominican Republic, Ecuador, Finland, Fiji, France, Germany, Guatemala,Iceland, Ireland, Kenya, Luxembourg, Marshall Islands, Mexico, Netherlands, Nigeria, Norway, Paraguay, Philippines, Poland, Spain, Sweden, Uganda,
United Kingdom.

2 / Regional, national, and subnational carbon pricing initiatives

facilitating knowledge sharing, brokering peer-to-peer
exchanges and overall strengthening regional andinternational collaboration.151 Under the leadership of
the CPA Co-chairs, Mexico and Canada, this initiative
made progress in 2018 by developing and adopting
a platform and delivering a series of governance andadvocacy events.152
Developments in the past year also serve as areminder of the need to ensure public support for
the adoption and the long-term survival of carbon
pricing policies, as briefly discussed in Box 5. Carbon
pricing is vulnerable to social unrest and public ballots,
as shown with the rejection of the Washington carbon

tax and many other instances when social protests,
such as the Yellow Vests movement, or political shifts
have brought implemented and planned carbon
pricing initiatives to an end. Building and maintaining
broad, multi-partisan, public support for carbon pricing
helps to make it less vulnerable to political changes.
British Columbia, for example, manage to maintainand even increase public support for its carbon tax
over time. The share of its population opposing carbon
pricing decreased from about 60 percent to less than
45 percent between 2009 and 2015.153 Learning fromthese experiences and sharing good practices is key
to support jurisdictions in adopting new or reforming
existing instruments.

Box 5 / Catalyzing public support for carbon pricing

For many years, the State and Trends of Carbon Pricing reports have described the developmentsof carbon pricing initiatives across the globe and clearly shown that initiatives can follow very
different designs, also depending on circumstances prevailing in each economy. Accounting for
local circumstances is crucial for catalyzing public support of carbon pricing, and there might not
be “one-size-fits-all“ approach on how to gain and maintain public acceptability. There is, however,a growing strand of research that analyzes public support for carbon pricing and can offer insights
on how to build and maintain this support, for instance, via the strategic use of revenues; a gradualintroduction of carbon pricing, through piloting or phasing in; and carefully crafted communication
strategies. Reviewing this research would go beyond the scope of the present report, but interested
readers are referred to these sources.154

151
152
153
154

Countries part of this initiative are: Canada, Chile, Colombia, Costa Rica, Mexico, the Governors of California and Washington, and the Premiers of Alberta,
British Columbia, Nova Scotia, Ontario and Québec.
Source: CPLC, Declaration on Carbon Pricing in the Americas: Building Momentum Among Continents, September 25, 2018, https://www.carbon­pricing­leadership.org/blogs/2018/9/24/declaration-on-carbon-pricing-in-the-americas-building-momentum-among-continents.
Source: Murray, B. and Rivers, N., 2015. British Columbia’s revenue-neutral carbon tax: A review of the latest “grand experiment” in environmental policy.
Energy Policy, 86, pp. 674-683.
Relevant research includes: Baranzini, Andrea, et al., 2017. Carbon Pricing in Climate Policy: Seven Reasons, Complementary Instruments, and Political Economy
Considerations. Wiley Interdisciplinary Reviews: Climate Change, 8(4), p. 462; Carattini, Stefano, Maria Carvalho, and Sam Fankhauser., 2018. Overcoming
Public Resistance to Carbon Taxes. Wiley Interdisciplinary Reviews: Climate Change, 9(5), p. 531; Dominioni Goran and Heine Dirk, Behavioural Economics andPublic Support for Carbon Pricing: A Revenue Recycling Scheme to Address the Political Economy of Carbon Taxation, European Journal of Risk Regulation, 2019.;
Klenert, David, et al., 2018. Making Carbon Pricing Work for Citizens. Nature Climate Change, 8(8), pp.669-77; Pigato Miria, A., Editor. 2019. Fiscal Policies
for Development and Climate Action. International Development in Focus. Washington, DC: World Bank; Barry Rabe, Can We Price Carbon?, Cambridge: MIT
Press, 2018.

49

50

Figure 13 / Sectoral coverage and GHG emissions covered by carbon pricing initiatives implemented orscheduled for implementation, with sectoral coverage and GHG emissions covered
WASHINGTONMASSACHUSETTS

39%
67%

20%

EU**
18%

KAZAKHSTAN
41%

33%

SWITZERLAND

RGGI

CANADA****

50%

71%

11%

41%

2%

65%

REPUBLIC OFKOREAUKRAINE

7%

70%JAPAN***

4%

MEXICO85%

CALIFORNIA

46%

CHILE

24%

33%

SOUTH AFRICA
20%

39%
80%

COLOMBIANEWZEALANDSINGAPORE

80%

ARGENTINAETS implemented or scheduled for implementation
Carbon tax implemented or scheduled for implementation
ETS and carbon tax implemented or scheduled
40% Estimated coverage

CHINA*

Industry
PowerTransport
Aviation50%

AUSTRALIA

Buildings
Waste
Forestry
Agriculture

All fossil fuels (tax only)
Solid fossil fuels
Liquid fossil fuels
Shipping

Note: The size of the circles reflects the volume of GHG emissions in each jurisdiction. Symbols show the sectors and/or fuels covered under the r­ espective carbon pricing
initiatives. The largest circle (China) is equivalent to 12.4 GtCO2e and the smallest circle (Switzerland) to 0.05 GtCO2e. The carbon pricing initiatives have been classified in
ETSs and carbon taxes according to how they operate technically. ETS does not only refer to cap-and-trade systems, but also baseline-and-credit systems such as British
Columbia and baseline-and-offset systems such as in Australia. Carbon pricing has evolved over the years and they do not necessarily follow the two categories in a strict
sense. The authors recognize that other classifications are possible.
* The coverage includes the China national ETS and eight ETS pilots. The coverage represents early unofficial estimates based on the announcement of China’s National
Development and Reform Commission on the launch of the national ETS of December 2017 and takes into account the GHG emissions that will be covered under thenational ETS and are already covered under the ETS pilots. The sector symbol refers to the covered sectors in the national ETS or (one of the) ETS pilots. The national ETS
will initially cover the power sector only. The covered sectors vary per ETS pilot.
** Also includes Norway, Iceland and Liechtenstein. Carbon tax emissions are the emissions covered under various national carbon taxes; the scope varies per tax.
*** ETS emissions are the emissions covered under the Tokyo CaT and Saitama ETS.
**** The coverage includes both components of the Canada federal backstop system and the subnational carbon pricing initiatives.

51%

2 / Regional, national, and subnational carbon pricing initiatives

Box 6 / Carbon pricing in numbers

51

3International carbon
pricing initiatives

53

3

International carbon
pricing initiatives

Implementation of the Paris
Agreement and NDCs
Two years after the Paris Agreement entered into
force,155 an important milestone was reached at
COP 24 in Katowice, Poland. Government leadersagreed to the Katowice Climate Package, which sets
out the implementation guidelines for the Paris
Agreement.156 The package includes operational
guidance on the information for governments
to provide in their NDCs and rules for how theTransparency Framework should function. The
framework aims to build trust and confidence that
all countries are contributing their fair share to
the global effort against climate change.157 Under
the framework, countries will submit biennial
transparency reports to the UNFCCC. These reports
must contain the national inventory of GHG emissions
and information for tracking the progress countries
have made on implementing and achieving their
NDC.158 Developed countries must also report thefinancial support and technology transfer andcapacity building for climate change mitigation and

155
156
157
158
159

160

161

adaptation they provide for developing countries.
Simultaneously, developing countries should reporton the support they have received and still need.
Countries are further encouraged to report on theimpacts of climate change and adaptation actions
they have taken. The first transparency report is due
by December 31, 2024.159
As of April 1, 2019, 195 Parties have signed theParis Agreement and 185, representing 87 percent
of global GHG emissions, have deposited theirinstruments of ratification, as shown in Figure 14.
The Paris Agreement requires all ratifying Parties
to communicate an NDC.160 One country, theMarshall Islands, has submitted a second NDC toenhance its level of ambition. 96 Parties mention
carbon pricing in their NDC, indicating that they areplanning or considering the use of climate markets
and/or domestic carbon pricing to meet their NDC
commitments. These 96 Parties represent 55 percent
of global GHG emissions; compared to a year ago,161
this is an increase of eight Parties. The Parties

The Paris Agreement entered into force on November 4, 2016.
Source: UNFCCC, The Katowice Climate Package: Making The Paris Agreement Work For All, accessed March 5, 2019, https://unfccc.int/process-andmeetings/the-paris-agreement/katowice-climate-package.
Source: Ibid.
The national inventory can be submitted as part of the biennial transparency report or as a stand-alone report. Least Developed Countries and Small
Island Developing States have less stringent reporting requirements.
Both Syria and Nicaragua have deposited their instruments of ratification but have not yet formally signed the Paris Agreement. However, both thesecountries have submitted their first NDCs to the NDC registry. Source: UNFCCC, NCD Registry, accessed March 5, 2019, https://www4.unfccc.int/sites/
NDCStaging/Pages/All.aspx.
For most Parties, the first NDC is their originally submitted INDC. Only 11 Parties have an NDC that differs from their INDC, and 6 have submitted an
entirely new NDC. In most cases, modifications to NDCs were minor, although some countries increased their ambitions. Furthermore, four Parties that
did not submit an INDC submitted an NDC following ratification of the Paris Agreement, and six parties have submitted their instruments for ratification
but have not yet submitted an NDC. Source: UNFCCC, NCD Registry, accessed March 5, 2019, https://www4.unfccc.int/sites/NDCStaging/Pages/All.aspx.
Comparing April 1, 2019 with April 1, 2018. Note that in the 2018 edition of the State and Trends of Carbon Pricing report, coverage of the NDCs
mentioning carbon pricing was 57% of global emissions. Coverage increased with the additional NDCs, but an updated dataset of the underlying EDGAR
database was used for the global GHG emissions in this year’s report that includes emissions from biomass, resulting in a lower overall coverage inglobal GHG emissions.

54

Figure 14 / Status of NDC submissions

Parties to the UNFCCC

197

Parties that have signed
the Paris Agreement

195

Parties that have ratified
the Paris Agreement

185
1
180

Parties that have submitted an NDCParties that mention
carbon pricing in their NDC

84 5 70Parties that submitted
a second NDC

50

Parties that mention
international carbon
pricing in their NDC

96
100

Parties that mention
domestic carbon pricing
in their NDC

150

The way in which carbon pricing is included acrossthe submitted NDCs differs:164−− Five Parties that represent almost a quarter ofglobal GHG emissions mention the intention touse a domestic carbon pricing initiative.165

162
163

164

165
166

200

Parties that mention
international and domestic
carbon pricing in their NDC

Note: As the modalities and procedures for the NDC registry are not yet in place, there is currently no basis to enforce a timeline on the submission of
the NDC even though the Parties are technically in breach of the provisions of the Agreement. The EU is included as a separate Party in the tally above.

mentioning carbon pricing in their NDC include three
Parties that did not mention carbon pricing in theirintended NDCs (INDCs): Uruguay, Argentina andMali.162, 163

181−− Seven Parties responsible for four percent
of global GHG emissions mention that bothinternational and domestic carbon pricing
initiatives are under consideration.166−− 84 Parties that account for about 27 percent of
global GHG emissions state intentions to useinternational carbon pricing initiatives.
For a detailed overview of the NDCs please refer toAnnex II.

Uruguay states that although it does not rule out taking part in international GHG emissions trading markets, priority is given to the fulfillment of
the commitments in its NDC.
Developing countries have actively been seeking focused and prioritized support from the international community on carbon pricing-related issues
in order to implement their NDCs. One way in which countries have been requesting support is through the NDC Partnership, a continuously growing
coalition of 124 countries and institutions working to mobilize support and achieve ambitious climate goals while enhancing sustainable development.
From its members, 7 countries have requested support on market mechanisms, across the world focusing on feasibility studies for emission trading
schemes, payment for ecosystem services, participation in international carbon markets and on the forestry sector.
This analysis is based on the number of NDCs that make a reference to forms of domestic or international carbon pricing. However, the authors
recognize that there are different interpretations possible for the text in NDCs and the mention of carbon pricing in a domestic context may notnecessarily mean that a domestic carbon pricing initiative is formally under consideration. Also, not all Parties that already have a carbon pricing
initiative implemented, scheduled or under consideration have reported this in their NDC. The number of Parties planning or considering the useof carbon pricing in their NDC is therefore not comparable with the jurisdictions with carbon pricing initiatives implemented, scheduled or underconsideration.
China, Gabon, Iceland, Norway and South Africa.
Canada, Costa Rica, Egypt, Korea, Panama, St. Lucia and Trinidad & Tobago.

3 / International carbon pricing initiatives

International carbon pricing
mechanisms under the Paris Agreement
International cooperation and climate markets canplay an important role in reducing mitigation costs,
increasing ambition for mitigation actions, as wellas increasing resource mobilization by crowding inpublic and private capital. The analysis in the 2016
edition of the State and Trends of Carbon Pricing
suggests that an international carbon market could
reduce the annual cost of limiting global warming
to 2°C by the middle of the century, potentiallysignificantly, compared to countries acting alone.167
This result indicates that for the same cost, aninternational carbon market would allow to achieve
additional mitigation action compared to a state of
the world without it. Article 6 of the Paris Agreement
provides for voluntary cooperation among countries
for the implementation of NDCs to allow for higher
climate ambition, promote sustainable development,
and promote environmental integrity:−− Article 6.2 covers cooperative approaches,
where Parties could opt to meet their NDCs
by using internationally transferred mitigation
outcomes (ITMOs). ITMOs aim to provide a basis
for facilitating international recognition of crossborder applications of subnational, national,
regional and international carbon pricing
initiatives.
−− Article 6.4 establishes a mechanism for countries
to contribute to GHG emissions mitigation andsustainable development. The emission reductions

167
168

can be used to meet the NDC of either the hostcountry or another country. The mechanism isintended to incentivize mitigation activities by bothpublic and private entities.
Demand for the mitigation outcomes (i.e., resulting
emission reductions) from international carbon
pricing mechanisms have traditionally come fromthree major groups: compliance markets, voluntary
markets, and more indirectly, through RBCF. In thecontext of the carbon pricing mechanisms under theParis Agreement, one major source of demand fromcompliance markets will come from nations seeking
to use the outcomes, such as ITMOs and potential
credits from the Article 6.4 mechanism, to help meettheir NDCs, summarized in Table 3.
Some NDCs mention the use of international market
mechanisms, which could include credits from a newmechanism established by Article 6.4 of the Paris
Agreement, while others refer to carbon markets,
which could also include the use ITMOs mentioned in
Article 6.2. Among the 96 NDCs that reference the useof international carbon pricing initiatives, currently,
only eight—Canada, Japan, Liechtenstein, Monaco,
New Zealand, Norway, South Korea and Switzerland—mention that they intend to use international
credits to meet their NDCs under the Paris Agreement,
while several major emitters explicitly rule out theuse of international credits. However, a number ofcountries have adopted or are working on climate
targets that go beyond their NDC, and some—such as
Sweden168—indicated that international credits could
be used to meet these more ambitious targets.

For further information, please refer to World Bank, Ecofys and Vivid Economics, State and Trends of Carbon Pricing 2016, October 2016. In principle,
the cost savings could be as large as 50 percent with a fully global, friction-free carbon market.
Swedish Climate Policy Council, Climate Policy Framework, accessed April 29, 2019, https://www.klimatpolitiskaradet.se/det-klimatpolitiska-ramverket/.

55

56

Table 3 / Overview of countries seeking to use the outcomes such as ITMOs andpotential credits from the Article 6.4 mechanism to help meet their NDCs
Country

NDC statement

CanadaCanada may use international mechanisms to achieve its target, subject to robust systems that deliver
real and verified emissions reductions. Canada is also looking to reduce its emissions through the North
American marketplace.

Japan

Japan aims at reducing 50-100 MtCO2e/year through the Joint Crediting Mechanism.

Liechtenstein

In putting forward its commitment, Liechtenstein assumes to achieve emission reductions abroad which
may be accounted towards its reduction target in 2030. However, primary focus will be given on domestic
emission reductions.

MonacoMonaco plans to use international emission reductions, because domestic emission reductions are‘insufficient’ to meet the end goal.

New Zealand

New Zealand’s NDC will remain provisional pending confirmation of access to carbon markets. New
Zealand calls for unrestricted access to global carbon markets that enable trading and use of a wide
variety of units that meet reasonable standards and guidelines to:−− ensure the environmental integrity of units/credits generated or purchased−− guard against double-claiming/double-counting, and−− ensure transparency in accounting.

NorwayNorway participates in the EU ETS and for non-ETS sectors, Norway assumes access to flexibility inimplementation in line with what EU member states have. In this situation, there will be no use ofinternational market credits towards the target. Norway plans to use international credits only if it cannot
secure a collective agreement with the EU.

Republic of
Korea

Korea will partly use carbon credits from international market mechanisms to achieve its 2030 mitigation
target, in accordance with relevant rules and standards. Credit types are not defined in the NDC.

Switzerland

Switzerland will realize its NDC mainly domestically and will partly use carbon credits from international
mechanisms. Switzerland will use carbon credits from international mechanisms that deliver real,
permanent, additional and verified mitigation outcomes and meet high environmental standards.

However, there is still a lack of clarity on key
issues related to Article 6. Critical issues under
Article 6 remain under negotiation, including:−− Metrics: Parties have different views on whether
ITMOs should be denominated in CO2e metrics
only or should allow for non-CO2e metric activities.
While denomination of all ITMOs in a single metricmay simplify accounting, exploring the inclusionof different metrics may offer some flexibility toconsider a wider set of cooperative approaches.

−− Single-year versus multiyear NDCs: One of thefundamental issues is comparability across NDCs
that use multiyear budgets and those that use asingle-year target. While the accounting system
under the Kyoto Protocol was designed to ensurecompliance with multiyear carbon budgets, most
NDCs are currently defined as single-year targets.
It is not clear how countries with single andmultiyear targets would account for their NDCs,
and whether a common basis for the use of ITMOs
would emerge.

3 / International carbon pricing initiatives−− Corresponding adjustments: It is unclear
how countries would undertake corresponding
adjustments against the transfer of ITMOs,
when the adjustment would be made, and theapplication of a corresponding adjustment for
mitigation outcomes generated outside or beyond
the issuing country’s NDC.
−− Inside/outside NDC: The eligibility of mitigation
outcomes generated inside and outside the NDC
for transfer under Articles 6.2 and 6.4 remains to
be clarified.
−− Governance: The governance framework for
Article 6 is yet to be determined. The role andfunctions of the Supervisory Body, as well as thedifferent governance arrangements for Article 6.2
and 6.4 are yet to be finalized.
In addition to above, there are issues related toapplication of share of proceeds for 6.2 activities
and transition of existing CDM projects andassociated methodologies. A lack of regulatory
certainty makes it difficult for market players toinitiate early action. Piloting new tools, approaches,and frameworks for Article 6 is critical to ensuringthat Article 6 discussions are informed by practicalexamples and experience. Research and piloting
have already been initiated to build capacity, test,
and experiment new concepts without waiting forthe finalization of all the detailed rules.169 Such pilots
give countries and stakeholders an opportunity
to discuss and analyze various scenarios to assess
how their climate targets can be optimally achieved.
They can also enhance international cooperation todevelop solutions that address specific issues, suchas double counting. Some of the piloting activities
that are being conducted at the domestic andinternational level are described below.

169

170
171
172
173

At the international level, the International ITMO
Purchase Program of the KliK Foundation is working
to establish procedures for the purchase of ITMOs
from 2021. It targets public and private organizations
and aims to purchase 54 MtCO2e in emission
reduction certificates that comply with Article 6 tooffset emissions from the Swiss transport sector, as
determined by the Swiss CO2 law.170
The Pilot Activities of the Climate Cent Foundation(CCF), a Swiss foundation funded through a fuel levythat aims to invest in mitigation projects abroad andtransfer the emission reduction certificates to the
Swiss government. CCF is financed via proceeds from aformer fuel tax.171 The initiative aims to provide useful
insights on transactional set-ups in governmentto-government negotiations, which it specifies in a
Mitigation Outcomes Purchase Agreement.
The Joint Crediting Mechanism (JCM) is a bilateralmechanism initiated by the Government of Japan tosupport mitigation actions in developing countries.
Japan’s Ministry of Environment is exploring how theJCM can help operationalize ITMOs under Article 6.2
and seek opportunities to build on the experience andinsights from the implementation of JCM rules andaccounting procedures.
Multilateral Development Banks (MDBs) jointly
established a Working Group in October 2017 to help
position Article 6 as a high strategic priority in climate
negotiations and find opportunities to collaboratively
pilot Article 6 transactions.172
The Article 6 Support Facility was establishedby the Asian Development Bank (ADB) to provide
capacity building, technical and policy support for
its developing member countries to develop andpilot Article 6 activities.173 This initiative illustrates
how MDBs can function as an influential platform
preparing countries for the Paris Agreement.

Research can be extremely valuable to support efforts to evaluate approaches, test methods, and facilitate transactions. Research analyzing alternative
institutional designs can define the potential role and value of international carbon pricing, identifying opportunities, uncertainties, and risks, andfacilitating design discussion. Among other things, new research is needed to explore the potential for international carbon pricing in futures beyond
the NDCs. This research should include evaluation of specific potential contexts over time, in addition to assessing how carbon pricing might facilitate
increasing ambition and the pursuit of international goals.
Source: Swiss Federal Office for the Environment, Total revision of the CO2 Act, accessed May 10, 2019, https://www.bafu.admin.ch/bafu/de/home/themen/klima/recht/totalrevision-co2-gesetz.html.
Source: Climate Finance Innovators, Moving towards next generation carbon markets: observations from Article 6 pilots, March 2019.
Current members of the Working Group are ADB, AfDB, EBRD, EIB, IDB, IsDB, and WBG. Further information can be found here: http://www.worldbank.org/
en/topic/climatechange/brief/mdb-working-group-on-article-6-of-the-paris-agreement
Source: Asian Development Bank, Establishing a Support Facility for Article 6 of the Paris Agreement, accessed May 14, 2019, https://www.adb.org/
projects/50404-001/main#project-pds.

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58

The European Bank for Reconstruction andDevelopment (EBRD) is working to leverage
its Integrated Carbon Programs to test new
methodologies for operationalizing Article 6.
The World Bank Group (WBG) has also
initiated several piloting activities to kickstart theoperationalization of Article 6 through learning-bydoing. For instance:−− The Climate Warehouse seeks to establish
common infrastructure for post-2020 markets
that would function as a database of mitigation
outcomes. The WBG is working to create an
initial supply of mitigation outcomes from its
own portfolio of lending operations on a pilot
basis, and developing risk mitigation products tofacilitate early demand. This initiative is yet to be
operational.
−− The Carbon Initiative for Development (CiDev) is piloting the use of new methodologicalframeworks, such as the Standardized Crediting
Framework (SCF), to direct climate finance to client
countries in preparation for the post-2020 markets
under the Paris Agreement. Senegal and Rwanda
so far adopted the SCF for the Ci-Dev supported
programs and currently exploring to expand toother technologies and project types.
−− The Carbon Partnership Facility is currently
piloting sectoral and policy based crediting
approaches under the Article 6 of the Paris
Agreement in client countries and developed
methodologies, validation protocol and validation
guidance documents.
−− The Transformative Carbon Asset Facility(TCAF) seeks to inform international negotiations
on Article 6 by testing various methods to

174
175

transparently transfer mitigation outcomes
between parties and provide robust accounting
and transparency, ensuring the environmental
integrity of assets.

Clean Development Mechanismand Joint Implementation
Similar to the lack of an agreement on the
Article 6 guidelines, no decision was made on the
future of the Kyoto Mechanisms—the CDM (Clean
Development Mechanism) and Joint Implementation(JI)—under the Paris Agreement at the Katowice
COP. The two mechanisms have issued around
2.8 GtCO2e of mitigation outcome credits in theform of Certified Emission Reductions (CERs) andEmission Reduction Units (ERUs) respectively, as
of December 31, 2018 174 and have a significant
number of existing projects which will run for many
years after 2020. Currently, there is considerable
uncertainty over whether and how these projects willcontinue to issue credits, and how they will interact
with NDCs under the Paris Agreement. According
to the UNFCCC, the CDM is in principle able to issue
4.6 billion CERs to the end of 2020.175 This potential
to generate mitigation outcomes could mean thatproject developers and project host countries are
keen to see some role for these projects in future
mechanisms under the Paris Agreement. However,other countries and stakeholders are concerned thatsuch actions could oversupply the market under theParis Agreement, and have voiced concerns over
the robustness of the CDM’s rules with respect tothe quality of the CERs issued. Discussions on how,or whether to, carry forward the issued credits andapproved methodologies drawn up under the CDM,
and if limitations should be placed on their use formeeting pledges under the Paris Agreement, wereinconclusive at COP 24 and the decisions were
postponed along with other Article 6 items to COP 25.

Issuance volume from Source: UNFCCC, Joint Implementation & Clean Development Mechanism, accessed April 12, 2019, http://ji.unfccc.int/index.html;
http://cdm.unfccc.int/.
Source: UNFCCC, CDM Insights, Project activities, March 31, 2019, https://cdm.unfccc.int/Statistics/Public/CDMinsights/index.html.

3 / International carbon pricing initiatives

59

2,000

25

1,800
1,600

20

1,400
1,200

15

1,000
800

10

600
400

5

200
0

0
2004

2005

2006

2007

2008

2009

2010

177
178
179

2012

CER issuance

Cumulative CER issuance

ERU issuance

Cumulative ERU issuance

Currently the CDM has just under 8,000 projects
registered. Despite its achievements in incentivizing
mitigation activities, lack of demand for thesemitigation outcomes has meant that prices for CERs
continue to remain very low. CERs are currently
traded at around US$0.3/tCO2e.177 Such low prices
and future uncertainty has led to declining CDM
activities, as shown in Figure 15. 2018 saw issuancesof CERs continuing to decline with approximately
73 million CERs issued compared to 119 million CERs
in 2017. This makes 2018 the first time since 2007 thatannual issuances have dropped below 100 million
CERs.178 Furthermore, the trading volume of CERs

176

2011

2013

2014

2015

2016

2017

2018

Annual average secondary CER prices

have continued the decreasing trend of the past
years, dropping to 15 million in 2018 compared to
21 million in 2017.179
In efforts to increase demand for CERs, the
UNFCCC has promoted the use of CERs on thevoluntary market. Voluntary cancellations of CERs
in 2018 stood at around 11.5 million, of which the
majority were cancellations for the CERs to be used as
offsets in other carbon pricing mechanisms. Around
3.5 million CERs from Korean projects were cancelled
for use in the Korea ETS. New this year was thatroughly 3.5 million additional CERs were cancelled

Issuance volume from Source: UNFCCC, Joint Implementation & Clean Development Mechanism, accessed April 12, 2019, http://ji.unfccc.int/index.html;
http://cdm.unfccc.int/. CER prices are annual unweighted average prices from Intercontinental Exchange
Source: Intercontinental Exchange, CER Daily Futures, accessed April 8, 2019, https://www.theice.com/products/26238355/CER-Daily-Futures.
Source: UNFCCC, CDM-Insights, accessed March 5, 2019, https://cdm.unfccc.int/Statistics/Public/CDMinsights/index.html#iss.
Refinitiv, Carbon Market Year in Review, January 2019.

Unit price (US$/CO2e)

Volume (MtCO2e)

Figure 15 / Historic CDM and JI issuances and CER prices176

60of the total demand of 1.6 GtCO2e fulfilled.182 No useof international credits is foreseen in the EU ETS post2020. The other 25 carbon pricing initiatives that haveoffset provisions only allow domestic offset credits or
are still developing their offset provisions.183

Voluntary carbon market
The voluntary market is another important sourceof demand (and supply) of mitigation outcomesfrom international carbon pricing mechanisms.
Voluntary market carbon pricing initiatives are also
important testing grounds for piloting new ideas,such as the buffer system approach to address

180
181
182
183

184
185

60

50

40

30

20

10

VCS VCUs

20
18

20
17

20
16

20
15

20
14

20
13

20
12

20
11

20
10

0

20
09

Other sources of demand remain limited. Some
RBCF mechanisms still purchase limited volumes of
CERs, often with additional eligibility criteria (see section
RBCF mechanisms), but currently the Carbon Offset andReduction Scheme for International Aviation (CORSIA)
is considered to be the most likely source of demandin the near term, though large uncertainties exist(see section International aviation). The prospect for
demand of CERs and international credits as offsets
in mandatory regional, national and subnational
carbon pricing initiatives is limited; of the 57 carbon
pricing initiatives implemented and scheduled for
implementation, only the Colombia carbon tax, EU ETS,
Mexico carbon tax, Korea ETS, Slovenia carbon tax,
and Switzerland ETS and carbon tax have provisions
to enable the possible use of international credits.
International credits need to meet certain qualitative
criteria and quantitative restrictions for usage apply.
In addition, the EU ETS, historically the largest sourceof demand for international credits has almost alreadyfully exhausted its demand up to 2020 with 1.5 GtCO2e

Figure 16 / Historic annual issuance of VCS andGold Standard credits185

Issuances (MtCO2e)from Colombian projects, most likely for use in the
Colombia carbon tax. Offsets from Colombian CDM
projects are eligible to be used in the Colombia
carbon tax from the end of 2017.180 Cancellations
by the general public using the UNFCCC’s online
Voluntary Cancellation Platform was just under
350,000 CERs.181

Gold Standard VERs

permanence risks for land use carbon. Overall, thesize of the voluntary market is much smaller thanthe compliance market; as of the first quarter of
2018, more than 2,000 projects have issued over430 MtCO2e of voluntary credits since 2005.184 Morethan 75 percent of the issuances came from thetwo largest voluntary standards—Verra’s Voluntary
Carbon Standard (VCS) and the Gold Standard.

Despite its smaller size, activities within thevoluntary market have been increasing, which
could be indicative of a growing confidence in the
projects issuing voluntary credits. A closer look at theissuance trends of the two largest voluntary standards
reveal that after a dip in 2014, annual issuances ofvoluntary credits has picked up again since 2017 asshown in Figure 16.

Source: World Bank, Carbon Pricing Dashboard, accessed March 5, 2019, https://carbonpricingdashboard.worldbank.org/map_data.
Source: UNFCCC, CDM Registry, accessed March 5, 2019, https://cdm.unfccc.int/Registry/index.html.
Source: European Commission, Report on the functioning of the European carbon market 2018, COM/2018/842 final, December 17, 2018.
Alberta Carbon Competitive Incentive Regulation (CCIR), Australia ERF Safeguard Mechanism, Beijing pilot ETS, British Colombia Greenhouse Gas Industrial
Reporting and Control Act (GGIRCA), California cap-and-trade program (CaT), Canada federal OBPS, China national ETS, Chongqing pilot ETS, Fujian pilot
ETS, Guangdong pilot ETS, Hubei pilot ETS, Kazakhstan ETS, Liechtenstein carbon tax, Newfoundland and Labrador PSS, Nova Scotia CaT, Québec CaT, RGGI,
Saitama ETS, Saskatchewan OBPS, Shanghai pilot ETS, Shenzhen pilot ETS, South Africa carbon tax, Tianjin pilot ETS, Tokyo CaT, and Washington CAR.
Source: Ecosystem Marketplace, Voluntary Carbon Markets Insights: 2018 Outlook and First-Quarter Trends, July 27, 2018.
Data provided by the Gold Standard and the Verra’s VCS database.

3 / International carbon pricing initiatives

In terms of pricing, voluntary credit prices canchange dramatically due to the various preferencesof voluntary credit buyers. The transacted pricesof voluntary credits during the first quarter of2018 ranged from under US$0.1/tCO2e to just over
US$70/tCO2e, but roughly half of the voluntary credits
were transacted at under 1 US$/tCO2e.
With the increasing number of carbon pricing
initiatives around the world including even moredomestic carbon pricing initiatives, and the Paris
Agreement requiring all participating countries toreduce emissions, avoiding double counting will bean ever-increasing issue for the voluntary market. A
survey by Ecosystem Marketplace of voluntary market
stakeholders revealed that despite the uncertainties
surrounding the future of the voluntary market
under the Paris Agreement,186 more than half ofthe respondents viewed the Paris Agreement andincreasing domestic/regional compliance markets
as positive new opportunities. Specifically, many
expected these developments to result in both a
new source of demand for voluntary market projects
which could transition to selling offsets in domestic
compliance markets such as in Colombia andCalifornia.

RBCF mechanisms
RBCF is a form of climate finance where funds are
disbursed by the provider of climate finance to therecipient upon achievement of a pre-agreed set ofclimate-related results. These results are typicallydefined at the output or outcome level, which meansthat RBCF can support the development of specificlow-emission technologies or the underlying climate
outcomes, such as emission reductions. Some RBCF
programs purchase compliance emission reduction
units, including CERs, which is helping to bridge
the current lack of demand for these units. Other

186
187
188

189

programs not specifically designed for compliancemarkets use RBCF as a direct funding mechanism,
although they incorporate elements of the existing
carbon market infrastructure, such as the CDM MRV
requirements, to help determine mitigation outcomes.
Analysis from the 2017 edition of the State and Trendsof Carbon Pricing showed that RBCF could serve as a
stepping stone in the transition to an international
carbon market and help to mobilize resources forinvestments in the low-carbon economy. Various
RBCF initiatives are already in place to support thistransition.
By mid-2018, the Green Climate Fund (GCF) raised
the equivalent of US$10.3 billion in pledges from43 state governments.187 On February 27, 2019, thefirst ever Reducing Emissions from Deforestation andForest Degradation (REDD+) project was approved
to receive results-based payments under the GCF’s
REDD+ pilot program. The GCF Board approved theBrazilian project, which was backed by the United
Nations Development Programme (UNDP), for the
US$96.5 million it sought for 18.8 million tCO2e ofemission removals sequestered in the Amazon
between 2014–2015. The pilot program allows for the
retroactive crediting of results from 2013–2018.188
Further milestones indicating the emerging trendof more RBCF REDD+ activities, the World Bank’s
Forest Carbon Partnership Facility (FCPF) has signed
two emissions reduction purchasing agreements(ERPAs) with the Countries of the Democratic Republicof Congo (DRC) and Mozambique for mitigation
results from REDD+ activities in February 2019.189
These are the first two countries out of 19 thatare part of the FCPF Carbon Fund to have signed
ERPAs. The total value of the ERPA for the DRC is
US$55 million, while the value for the ERPA in
Mozambique is US$50 million, with a goal to mitigate
10 MtCO2e of emission by 2024.

Source: Ecosystem Marketplace, Voluntary Carbon Markets Insights: 2018 Outlook and First-Quarter Trends, July 27, 2018.
Source: GCF, GCF in Brief: The Replenishment Process, October 2018, https://www.greenclimate.fund/documents/20182/194568/GCF_in_Brief__The_
Replenishment_Process.pdf/0fc018ad-1082-d11f-f72a-b1a07e02c9d4.
Source: GCF, Meeting Reports, accessed March 5, 2019, https://www.greenclimate.fund/boardroom/board-meetings/documents?p_p_id=122_
INSTANCE_8e72dTqCP5qa&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_p_col_id=_118_INSTANCE_jUGwSITWV8c5__column-2&p_p_col_count=1&p_r_p_564233524_resetCur=true&p_r_p_564233524_categoryId=24003#nav-category.
Source: World Bank, Mozambique and Democratic Republic of Congo Sign Landmark Deals with World Bank to Cut Carbon Emissions and Reduce
Deforestation, February 12, 2019, http://www.worldbank.org/en/news/press-release/2019/02/12/mozambique-and-democratic-republic-of-congo-signlandmark-deals-with-world-bank-to-cut-carbon-emissions-and-reduce-deforestation?CID=CCG_TT_climatechange_EN_EXT.

61

62

The depressed prices of CERs and declining
interest in the CDM are resulting in declining
mitigation activities from existing projects. RBCF
can offer a useful solution to maintain capacity andchannel targeted finance to develop support for
specific types of emission mitigation activities. For
example, building on the work by the Pilot Auction
Facility, the Nitric Acid Climate Auctions Program(NACAP) works in collaboration with the Nitric Acid
Climate Action Group (NACAG) to support projects
that reduce emissions of nitrous oxide (N2O).190
Currently, the World Bank expects that the NACAP will
support price guarantees for eligible N2O emission
reductions generated from nitric acid plants in the
CDM or VCS after January 1, 2018. The projects mustalso be hosted in countries that have signed NACAG’s
statement of undertaking lasting abatement from thenitric acid sector after 2020. To date, only Tunisia hassigned this commitment.191 NACAP will host at least
one reverse auction, with a starting price of between
US$8 and US$15. Auction winners will have to pay an
option premium of US$0.06 per carbon credit upfront
to purchase the put options.192

International Aviation
International aviation is emerging as an important
potential demand source for international carbon
pricing mitigation outcomes. The International
Civil Aviation Organization (ICAO) has been working
toward the start of CORSIA since it was adopted byits Member States in October 2016. CORSIA is the

190
191
192
193
194
195
196

global carbon offsetting initiative, which aims tostabilize net emissions from international aviation at2020 level.193 CORSIA is expected to create demand
for around 3 GtCO2 in the period between 2020
and 2035, making it plausible that the aviation
sector will become the largest source of demandfor international credits.194 In June 2018, the ICAO’s
Council approved the Standards and Recommended
Practices (SARPs) for its CORSIA program. The SARPs
are essentially the guidelines for CORSIA, but theapproved version in June 2018 did not contain any
rules on the eligibility of offset credits for CORSIA. At
the time, ICAO’s Council mentioned that it was hoping
for additional clarity around the subject of Article 6
from the COP 24 negotiations. Despite the lack of
a decision on Article 6 at COP 24, which threatened
to delay the issue further, ICAO’s Council approved
the proposed text in the SARP to set broad eligibility
criteria for CORSIA offsets on March 6, 2019.195
The SARP does not specify details on the types ofactivities, standards or vintages for offsets that would
be allowed under CORSIA, though it has made clear
intentions to allow for participation by activities under
Article 6. These decisions are to be made at a later date,with the assistance of a yet to be established TechnicalAdvisory Body. However, approval of the proposed
text in the SARP on the emissions unit criteria meansthat offset programs seeking participation in CORSIA
would have to meet widely accepted requirements,
including additionality, avoiding double counting, andpermanence.196

Source: World Bank, Climate Auctions Program, accessed March 5, 2019, http://www.worldbank.org/en/programs/climate-auctions-program#1.
Source: NACAG, NACAG’s Partner Countries, accessed March 5, 2019, http://nitricacidaction.org/partners/eligible-countries/.
Source: World Bank, Climate Auctions Program, accessed March 5, 2019, http://www.worldbank.org/en/programs/climate-auctions-program#1.
Any additional emissions above 2020 levels must be offset, taking into account special circumstances and respective capabilities of Member States.
Source: German Society for International Cooperation (GIZ), Crediting Forest-Related Mitigation under International Carbon Market Mechanisms,
September 7, 2018, https://newclimate.org/wp-content/uploads/2018/09/Studie_2018_REDD_and_carbon_markets.pdf.
Source: ICAO, Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), accessed March 5, 2019, https://www.icao.int/environmentalprotection/CORSIA/Pages/default.aspx.
Source: ICAO, Standards and Recommended Practices Relating to the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA),
December 5, 2017, https://icsa-aviation.org/wp-content/uploads/2018/01/ICAO_CORSIA_draft_-SARP.pdf.

3 / International carbon pricing initiatives

At the same time, there is currently continued
disagreement amongst the ICAO council memberson the type of offset credits to include, such as
CERs and credits from domestic programs, andwhether to introduce a cut-off date based onwhen the offset credits were generated.197 This has
generated uncertainty as to the number of countries
participating in CORSIA’s pilot phase (2021–2023),
most notably, China, which represents 12 percent
of global aviation activity. Many believe that China
will be participating in the pilot phase, though thecountry has indicated that its participation is still
to be determined.198 Currently, 76 ICAO states
representing 76 percent of international aviation
activity intend to voluntarily participate in CORSIA
from its outset, but this does not include the major
emitters: China, India and Russia.
2019 is the start of the CORSIA baseline period, when
all airlines are required to start monitoring theiremissions. The end of February 2019 was also thedeadline for airlines to submit their plans to monitor
their emissions.199

International Maritime Transport
The international maritime transport sector isstill exploring the use of carbon pricing. At its 73rd
meeting in October 2018, the International Maritime
Organization’s (IMO) Marine Environment Protection

197
198
199
200
201

Committee (MEPC) decided on a program of followup actions to plan the forthcoming discussions on
short- (2018–2023), mid- (2023–2030), and long-term(post­-2030) candidate measures. The main objectiveof IMO is to meet the targets of its initial GHG strategy,
including cutting shipping emissions by at least
50 percent of 2008 levels by 2050, while pursuingefforts to achieve full decarbonization as soon as
possible in this century. A package of measures will
be utilized, but countries have yet to agree upona potential future market-based mechanism (i.e.
carbon pricing) to use in the shipping sector.200 Initial
discussions on a potential carbon pricing scheme arelikely to take place at the MEPC 74 in May 2019, withmore substantial conversations at MEPC 75 in April
2020. In parallel, the EU has required large ships
calling at EU ports to collect verified CO2 emissions
data since 2018. This mandatory MRV system
was adopted by the EU in 2015 as the first step toprogressively integrate maritime emissions into
the EU's policy for reducing GHG emissions. Data
from this system will provide robust information
to support future policy-making decisions at
EU level and the implementation of policy tools. From
this perspective, it is worth noting that the recent
EU Directive 2018/410 on the EU ETS mentions that''action from the IMO or the Union should start from2023, including preparatory work on adoption andimplementation and due consideration being given
by all stakeholders”.201

Source: Carbon Pulse, COP24: ICAO Dodges CORSIA Offset Decisions as EU Aims to Keep Options Open, December 4, 2018, https://carbon-pulse.com/64637/.
Source: Ibid.
Source: ICAO, CORSIA - Carbon Offsetting and Reduction Scheme for International Aviation - Implementation Plan, June 2018, https://www.icao.int/
environmental-protection/Documents/CorsiaBrochure_8Panels-ENG-Web.pdf.
Source: MEPC, Meeting Summaries, October 26, 2018, http://www.imo.org/en/MediaCentre/MeetingSummaries/MEPC/Pages/MEPC-73rd-session.aspx.
Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 amending Directive 2003/87/EC to enhance cost-effective
emission reductions and low-carbon investments, and Decision (EU) 2015/1814.

63

4Internal
carbon pricing

65

4Internal
carbon pricing

The private sector is increasingly integratingclimate risks and opportunities into their longterm strategies and corporate governanceframeworks, driven by concerns from investors
to better understand companies’ exposure to longterm climate risks. So far, about 1,300 companies,
including more than 100 Fortune Global
500 companies with collective annual revenuesof about US$7 trillion, have disclosed the use ofinternal carbon pricing, or plans to implement
internal carbon pricing within two years.202, 203, 204 The
reported corporate carbon prices in use are diverse,
ranging from US$0.3/tCO2e to US$906/tCO2e. Somecompanies adopt a range of carbon prices to take
into account different prices across jurisdictions
and/or to factor in future increases in mandatory
carbon prices. In total, about half of the companies
that have disclosed their internal carbon prices areusing values that are higher than the mandatory
prices of the jurisdictions they are headquarteredin. Traditionally, companies use internal carbon
pricing in their investment decisions to evaluate
risks from mandatory carbon pricing initiatives.205
However, businesses are exploring new ways ofusing internal carbon pricing to manage long-termclimate risks.206

202
203

204
205
206
207
208
209

Following the Financial Stability Board-Task Forceon Climate-related Financial Disclosures (FSB-TCFD)
recommendation to use internal carbon pricing as
one of the potential metrics for disclosure on climaterelated risks, internal carbon pricing is increasingly
being implemented and endorsed in various forms
across the financial sector as described below and inBox 7.
−− The IFC mainstreamed the use of internalcarbon pricing in its projects in May 2018, and on
October 2, 2018, it became the first multilateraldevelopment institution to disclose climate-relatedrisks under TFCD guidelines.207 Alongside theWorld Bank and the Multilateral Investment
Guarantee Agency, the IFC will now apply acarbon price in line with the 2016 Report of
the High-Level Commission on Carbon Prices
to project finance transactions of more than
25 ktCO2 in thermal power generation, cement,
and chemicals.208−− S&P Dow Jones Indices, a leading index provider,launched the S&P Carbon Price Risk Adjusted IndexSeries in July 2018, which measures performancebased on a weighted scheme on estimated market
valuation at risk from predicted 2030 carbon
prices.209

Source: CDP Disclosure 2018
The CDP questionnaire, including the internal carbon pricing question, experienced modifications between 2017 and 2018 in efforts to minimize reporting
burden for companies and improve data precision. Therefore, no comparison is possible in terms of total numbers of companies using or planning to useinternal carbon pricing. For more information, please see CDP's 2018 carbon pricing report.
Source: CDP, Putting a Price on Carbon- Integrating Climate Risk into Business Planning, October 2017.
Ibid.
This is implied in disclosure responses to CDP’s 2018 climate change questionnaire, in which top objectives for internal carbon pricing included driving
low-carbon investment, driving energy efficiency, and changing internal behavior.
Source: IFC, IFC Becomes First Development Institution to Make TCFD Disclosure on Climate Risk, October 2, 2018, https://ifcextapps.ifc.org/IFCExt/Pressroom/
IFCPressRoom.nsf/0/C8A15502C84CCC698525831A00642BDC.
Source: IFC, Redefining Development Finance, 2018.
Source: Sustainable Brands, New S&P Dow Jones Index Series First to Incorporate Future Carbon Price Risks, September 2018, https://sustainablebrands.com/
read/finance-investment/new-s-p-dow-jones-index-series-first-to-incorporate-future-carbon-price-risks.

66−− The Technical Expert Group on Sustainable
Finance was set up by the European Commission
to examine the integration of sustainability
considerations into its financial policy framework
to mobilize finance for sustainable growth. The
Group has included internal carbon pricing in areport released in January 2019 that addresses a
mandate for developing climate-related metrics
on improving disclosure.210−− The Informal Supplementary Document on
Sustainable Taxonomy from January 2018, which
was released by the High-Level Expert Group on
Sustainable Finance, mentions an internal carbon
price as a potential screening criterion.211−− The European Commission has launched atargeted consultation as part of its Sustainable
Finance Action Plan, with the objective of finalizing
new guidance to companies on the disclosureof climate-related information. Internal carbon
pricing applied in business planning is mentioned
as one of the key performance indicators
companies may consider disclosing. The existing
guidelines on non-financial reporting, which thecommission had previously published in 2017, will
be supplemented by the new guidelines once they
are finalized in June 2019.212−− The EBRD will integrate prices from the 2016 Reportof the High-Level Commission on Carbon Prices inproject financial assessments.213 The assessments
will include costs, country-specific conditions, oran international benchmark. Emissions of local
air pollutants will also be taken into consideration
attributing prices per ton on sulphur dioxide,

210
211
212
213
214
215
216
217
218
219
220
221

nitrogen oxides, and large particulate matter basedon the 2011 European Environment Agency study
on costs impacts of such emissions.214
As climate policies, including carbon pricing,
continue to strengthen around the world,
investments in fossil fuels become financiallyless attractive and, in some cases, even a liability.
Implementing internal carbon pricing assessments
in potential investments enables regulatory risks
to be included in business decisions and may evenmotivate fossil fuel divestment as a form of stranded
asset risk mitigation. The divestment from fossil fuels
is becoming a mainstream financial movement, andcommitments to divest continue to grow rapidly. As of
September 2018, nearly 1,000 institutional investors
with US$6.24 trillion in assets have committed todivest from fossil fuels. In 2015 institutional investors
that had committed to divest from fossil fuelsaccounted for a significantly lower assets value, i.e.
US$52 billion.215, 216
The divestment movement is set to grow.
Major cities around the world have made pledges
to abandon millions of dollars’ worth of fossil fuelstocks and bonds, reducing their exposure to climate
policy risks. As part of this commitment, C40 Cities,
in partnership with London and New York City, havelaunched the C40 Divest/Invest Forum, which is a
first-of-its-kind initiative that helps urban leaders
effectively and efficiently divest from fossil fuels andaccelerate green investments.217, 218, 219 There are arange of universities that have also started divestingfrom fossil fuels.220, 221 If implemented at a sufficiently
large scale, divestments in fossil fuel stocks and bonds
could reduce the value of the assets.
215

215

Source: TEG on Sustainable Finance, Report on Climate-Related Disclosures, January 2019, https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/190110-sustainable-finance-teg-report-climate-related-disclosures_en.pdf.
Source: European Commission, Informal Supplementary Document on Sustainable Taxonomy, accessed March 6, 2019, https://ec.europa.eu/info/sites/info/
files/180131-sustainable-finance-final-report-annex-3_en.pdf.
Source: European Commission, Technical Expert Group on Sustainable Finance: Report on Climate-Related Disclosures, January 10, 2019, https://ec.europa.eu/
info/publications/190110-sustainable-finance-teg-report-climate-related-disclosures_en.
Source: European Bank, Methodology for the Economic Assessment of EBRD Projects with High Greenhouse Gas Emissions, January 2019.
Source: European Environment Agency, Revealing the Costs of Air Pollution from Industrial Facilities in Europe, November 23, 2011.
Source: Arabella Advisors, The Global Fossil Fuel Divestment and Clean Energy Investment Movement, September 2018.
Source: The Guardian, Fossil Fuel Divestment Funds Rise to $6tn, September 10, 2018, https://www.theguardian.com/environment/2018/sep/10/fossil-fueldivestment-funds-rise-to-6tn.
Source: C40.Org, accessed March 5, 2019, https://www.c40.org/.
Source: The Guardian, As New York and London Mayors, We Call on All Cities to Divest from Fossil Fuels, September 10, 2018, https://www.theguardian.com/
commentisfree/2018/sep/10/london-new-york-cities-divest-fossil-fuels-bill-de-blasio-sadiq-khan.
Source: World Economic Forum, New York, London Mayors Encourage Disinvestment from Fossil Fuel Industry, October 9, 2018, https://www.weforum.org/
agenda/2018/10/new-york-london-mayors-cities-divest-carbon-fossil-fuels/.
Source: The Guardian, Edinburgh University Divests from All Fossil Fuels, February 6, 2018, https://www.theguardian.com/environment/2018/feb/06/
edinburgh-university-divests-from-all-fossil-fuels.
Source: DESMOGUK, Mapped: The UK Universities That Have Pledged to Divest from Fossil Fuels, April 13, 2018, https://www.desmog.co.uk/2018/04/13/
mapped-uk-universities-have-pledged-divest-fossil-fuels.

4 / Internal carbon pricing

Box 7 / Case studies on private sector finance−− BNP Paribas has decided to factor climate change considerations related to the energy transition
into its rating methodology for the projects and companies it finances. Financing decisions will
gradually include an internal carbon audit that accounts for changes in the transitioning energy
industry and related risks. In 2016, a methodology was developed based on an assumed carbon
price between US$25/tCO2e and US$40/tCO2e. The first tests were conducted in two of the six
industrial sectors which generate the most emissions: oil and transport.222−− Crédit Agricole has steadily begun analyzing climate change issues when reviewing credit
applications. The Sustainable Development Chair of the Paris Dauphine University has developed
a specific methodology which counts financed emissions. It classifies industry macro-sectors andgeographical zones according to the carbon intensity of their financing, which is measured in
tCO2/€. Their goal is to cover 80% of their financial portfolio and to define sectors that represent
the largest portion of their footprint. This analysis is being introduced as an initial step for themain clients of the Bank, whose structured transactions are tenured beyond 2020.223−− Garanti Bank uses three carbon pricing approaches for prioritizing low-carbon investments:
sensitivity analysis, which diminishes the profitability of fossil fuel investments by increasing
the cost of natural gas and coal in the mid- and long-term; an Environmental and Social Risk
Management System, which evaluates the non-financial risks of carbon-intensive projects; anda carbon shadow price, which applies to all fossil fuel based projects and renewable energy
investments in its project finance activities. Currently, Garanti applies a price of US$5/tCO2e to
US$10/tCO2e and has established future prices of US$22/tCO2e from 2020, US$48/tCO2e from2025, and US$74/tCO2e from 2030. It determined these price levels by benchmarking industry
peers, monitoring the EU ETS, and integrating social costs of carbon. The bank builds flexibility
into these prices based on Turkey’s regulatory situation and adjusts the price in jurisdictions
where a regulation already exists.224

Internal carbon pricing is one of the components
to meet the TCFD recommendations, and financial
institutions are also looking at other measures suchas green bonds.225 Annual green bond issuance hasrisen to more than US$155 billion globally since its
inception in 2008.226 In 2018, the IFC and Amundi
launched the largest green bond fund to date raising
US$1.5 billion for the Amundi Planet Emerging
Green One fund.227 Green bonds are issued in many
developed countries. However, emerging markets
222
223
224
225

226
227
228

are seeing increasing activity, particularly China
and India as well as in Latin America. The Brazilian
development bank, BNDES, raised US$1 billion in oneof the largest green bond offerings in Latin America.
Green bonds continue to gain public acceptance,
investor confidence, and establish standards in
new markets that impact reporting and eligibility.
Ultimately, hurdles will be overcome so that investors
see green bonds as a valuable asset class for the
future.228

Source: CPLC, Carbon Pricing and the Task Force on Climate-Related Financial Disclosures (TCFD), May 2018, https://static1.squarespace.com/
static/54ff9c5ce4b0a53decccfb4c/t/5b1af63a70a6ad394e707122/1528493626398/33368-TCFD+and+Carbon+Pricing+Executive+Brief-final.pdf.
Source: Ibid.
Source: Yale, Internal Carbon Pricing at Garanti Bank, October 1, 2018, https://cbey.yale.edu/our-stories/internal-carbon-pricing-at-garanti-bank.
Bonds serve as an agreement between borrowers and investors. Issuers borrow funds from investors and are financially obligated to repay investors at an agreed
rate after a specified amount of time. Green bonds follow this logic, but add the climate dimension by demonstrating the potential for investors to support climate
solutions through safe investments without giving up financial returns. Green bonds typically finance projects in renewable energy, energy efficiency, sustainablehousing, and industry. As demonstrated in its early years, green bonds can tap into financial pools such as pension funds, insurance, and sovereign wealth funds.
Source: IFC, Green Bonds - Perspectives, accessed April 11, 2019, https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/
news+and+events/news/perspectives/perspectives-i1c2.
Source: Ibid.
Source: Ibid.

67

5

Looking beyond
explicit carbon pricing

69

5

Looking beyond
explicit carbon pricing

5.1
Explicit and implicit
carbon pricing
This chapter discusses measures that put animplicit price on carbon, going beyond the
traditional scope of the State and Trends of Carbon
Pricing report. Previous editions have focused onreporting global developments on the implementationof measures that impose an explicit price on GHG
emissions, including carbon taxes and ETSs. While
this chapter does not intend to be a comprehensive
description of the state and trends of implicit carbon
pricing, it does describe policies that put an implicit
price on carbon and their relevance for the policy
debate on carbon taxes and ETSs.
While various policies can be seen as imposing
an implicit price on carbon, this chapter focuseson carbon prices set by fuel taxes and fossil
fuel subsidies. Estimating implicit carbon prices
requires an evaluation methodology to calculate theequivalent monetary value per ton of carbon that

229
230
231
232
233

can be associated with a given policy instrument. The
term implicit carbon price is used in a variety of ways
in policy and academic debate. Implicit carbon pricing
can refer to policies that impose compliance costs(i.e., an implicit price) on activities that emit carbon.229
A wide range of policies fall within this definition, suchas performance standards for cars, buildings,230 or
power generation, and regulations that mandate theuse of particular abatement technologies.231 Implicit
carbon pricing can refer to the sum of the carbon priceimposed by an ETS and the net cost of renewable energy
incentives divided by emission reductions.232 It can also
refer to carbon prices imposed by energy taxes, which
are often imposed for non-climate reasons, and fossil
fuel subsidies.233 Acknowledging the existence of otherpolicies that can be seen as putting a price on carbon,
this chapter focuses on the implicit carbon prices
imposed by fuel taxes (i.e., a positive carbon price)and fossil fuel subsidies reforms, which decrease anegative carbon price imposed by fossil fuel subsidies.
The focus is on these two types of measures because
they directly impact the price of fossil fuels and canoffer useful lessons for the implementation of carbon
taxes and ETSs, as further discussed in this chapter.

Source: OECD, Effective Carbon Rates - Pricing CO2 through Taxes and Emissions Trading Systems, September 26, 2016; CPLC, Report of the High-Level
Commission on Carbon Prices, May 29, 2017, Australian Government and Productivity Commission, Carbon Emission Policies in Key Economies, 2011.
Source: Ibid.
Source: OECD, Climate and Carbon: Aligning Prices and Policies, October 9, 2013.
Source: Marcantonini, Claudio, and A. Denny Ellerman, A.D., 2015. The Implicit Carbon Price of Renewable Energy Incentives in Germany. The Energy Journal,
pp. 205-239.
Sources: OECD, Climate and Carbon: Aligning Prices and Policies, October 9, 2013; World Bank, Report of the High-Level Commission on Carbon Prices, May 29, 2017.

70

Hereafter, carbon prices imposed via a carbon tax
or an ETS are referred to as explicit carbon prices todistinguish them from implicit carbon prices.
Reviewing policies that put an implicit priceon carbon can help bring forward explicit
carbon pricing action. Accounting for thesepolicies in the debate on explicit carbon pricing
can help policymakers and analysts obtain a morecomprehensive and transparent view of the priceapplied to GHG emissions in various jurisdictions overtime; communicate about carbon pricing with relevant
stakeholders; and learn from countries’ experience
with implicit carbon pricing policies, as explicit andimplicit carbon pricing policies often present similar
implementation challenges.
The remainder of this chapter unfolds asfollows. Section 5.2 discusses fossil fuel subsidies,with the aim of providing a sense of the size andthe geographical distribution of these policies
and the actions that have been undertaken to
reduce them. This section then presents work that
integrates implicit carbon prices from fuel taxes with
explicit carbon prices to illustrate the magnitudeof these prices in different countries and sectors.
Section 5.3 discusses the relevance of the trends
illustrated in Section 5.2 to inform the policy debate
on explicit carbon pricing and possible next steps tomove this agenda forward.

5.2
Fossil fuel subsidies
and fuel taxes as implicit
carbon pricing
Fossil fuel subsidies can act as a negative price on
carbon by reducing the costs of using fossil fuels
for businesses and individuals. For example, by

234

235
236
237
238
239

lowering the costs of driving diesel and gasoline cars
or combusting fossil fuels for heating or generating
electricity, fossil fuel subsidies impose a negative
price on carbon. In this way, they can incentivize
inefficient use of carbon-intensive energy andundermine the effectiveness of any climate change
mitigation efforts.
There are several types of fuel subsidies, which are
tracked by IEA, OECD, and IMF. These institutions
take different approaches to estimate fossil fuelsubsidies. These approaches and the different typesof fossil fuel subsidies are discussed in Box 8.234
Some types of fuel subsidies have decreased inrecent years, while others have increased, making
it difficult to describe an overall trend. Joint IEAOECD estimates show that subsidies decreased
from US$547 billion in 2014 to US$340 billion
in 2017.235 IEA estimates show that between
2013 and 2017 fossil fuel subsidies decreased byapproximately 50 percent, from US$500 billion
to US$270 billion in 2016, before increasing to
US$300 billion in 2017. A similar trend is highlighted
by IMF pre-tax subsidies, which decreased from
US$530 billion in 2013 to US$270 billion in 2016, andthen increased to US$296 billion 2017, as shownin Figure 18. While year-over-year variations canbe attributed to reforms in various countries as
discussed below, they are largely due to changes in
global oil prices. These oil market fluctuations are
particularly impactful because subsidies for oil are alarge share of subsidy estimates in many countries,
and natural gas prices are, to a large extent, indexedto oil prices. For example, 72 percent of subsidies
in the joint IEA-OECD estimates are for petroleum
products.236 A different trend is identified by IMF
estimates for post-tax subsidies, which increased
from US$4.9 trillion in 2013 to US$5.2 trillion in 2017,as shown in Figure 18.237, 238 A key reason for thistrend is the increase in environmental damage.239

There are ways in which governments can support the production of fossil fuel subsidies which are not necessarily captured by the estimates
discussed above. For instance, when fossil fuel producers pay only partially for losses caused by oil spills. While these subsidies might be large in somecircumstances, a full discussion would go well beyond the scope of the present report.
Source: IEA and OECD, Update on recent progress in reform of inefficient fossil fuel subsidies that encourage wasteful consumption, forthcoming.
Source: Ibid.
Source: Coady, David; Parry, Ian; Sears, Louis; Shang, Baoping, How Large Are Global Energy Subsidies? IMF Working Paper No. 19/89, 2015.
Source: David Coady, Ian Parry, Nghia-Piotr Le, and Baoping Shang, Global Fossil Fuel Subsidies Remain Large: An Update Based on Country-Level Estimates,
IMF, Working Paper No. 19/89, 2019.
Source: Ibid.

5 / Looking beyond explicit carbon pricing

Box 8 / Types of fossil fuel subsidies and estimates by IEA, IMF, and OECD

Different types of fossil fuel subsidies exist. There is one main distinction between consumer and producer
subsidies. Institutions broadly agree that a consumer fuel subsidy exists when there is a positive gap between
the domestic fuel price and a reference price. Thus, the subsidy can be identified via a “price-gap analysis,”which estimates consumer pre-tax subsidies and consumer post-tax subsidies. Pre-tax subsidies are definedas the difference between the supply costs of fuels and the consumer price. Post-tax subsidies include pretax subsidies but add tax expenditures. Tax expenditures are an indirect form of subsidies, as they include
public revenue losses that a government incurs by failing to collect a tax which would otherwise be due, which
provides special treatments to taxpayers. Governments can also support producers of fossil fuels and increase
their profitability through budgetary transfers and tax expenditures. Subsidies to fossil fuel producers are lessprone to function as negative implicit carbon prices, especially when their effect on the market price of fossil
fuels is minimal and the subsidy benefit flows entirely to the recipient companies.
Estimates of fossil fuel subsidies proposed by IEA, IMF, and OECD vary significantly. Some factors that explainthese variations include: countries covered, choice of reference price in the price gap analysis, whether subsidies
are pre-tax or post-tax, and the inclusion of subsidies that may not necessarily change consumer prices (e.g.
producer subsidies in the form of direct budgetary transfers). Figure 17 shows an illustrative example of preand post-tax subsidies. Subjective judgement plays a role in determining what is included in fossil fuel subsidy
estimates.240 The approaches taken by these institutions and the latest available estimates are briefly presented
below.
IEA compares observed domestic fuel prices in 41 countries, primarily in emerging markets and developing
countries, with a reference price (e.g., import parity prices). This price gap is multiplied by the total quantity offuel consumption to estimate national amounts of subsidies provided to end-users, or for consumption as an
input for electricity generation. The IEA estimate of fossil fuel subsidies across these 41 countries for 2017 is
US$300 billion.241
IMF tracks pre-tax and post-tax subsidies for the consumption of fossil fuels and electricity in 191 countries. To
quantify the pre-tax subsidies, it uses a similar methodology as the IEA. For post-tax subsidies, the IMF sums
pre-tax subsidies and tax expenditures, which include the external cost of consuming fuels (such as externalities
from global warming, local air pollution, and traffic congestion and accidents for fuels used in road transport)242
and exemptions of fuels from general consumption taxes applicable to other goods (e.g. VAT) as shown in
Figure 18. The IMF also estimates producers’ subsidies by building on OECD estimates (which are described
below). IMF pre-tax and post-tax subsidies were respectively US$296 billion and US$5.2 trillion in 2017, withhigher post-tax subsidies due to the inclusion of the tax expenditures, especially the external costs of fuelconsumption.243

240
241
242

243

Source: Kojima, Masami. 2017. Energy Subsidies: Identifying and Quantifying Energy Subsidies. World Bank, Washington, DC.
IEA, World Energy Outlook 2018.
The IMF defines tax expenditures on the basis of the fiscal principle that goods which impose “external costs” on third parties should be taxed at higher
rates than other goods where all costs associated with the consumption and production of the good are paid for by those economic agents taking theconsumption and production decisions. These external costs include the health costs of air pollution: the IMF holds that forcing third parties to pay
for such health costs associated with the consumption of fuels is a form of subsidy. Those paying for the health costs pollution implicitly subsidize theconsumers and producers of the fuel.
Source: David Coady, Ian Parry, Nghia-Piotr Le, and Baoping Shang, (2019) Global Fossil Fuel Subsidies Remain Large: An Update Based on Country-Level
Estimates, IMF, Working Paper No. 19/89. After excluding the cost of externalities, the subsidies are estimated at about US$634 billion in 2015 and about
US$626 billion in 2017 (own calculations using IMF data - IMF Country-level Subsidy Estimates Database, 2018).

71

72

Figure 17 / Illustrative example of pre- and post-tax subsidies on gasoline$1.50
Socially
optimalprice

Classification(economic)
$1.00

$0.50

Private costs

Social costs (externalities)$0.10 $0.10

$0.30

$0.20

$0.10

(1)

(2)

(3)

(4)

(5)

(6)

Monetized
cost typePrice at pump

Globalwarming
costs

$0.80

Congestion
costs

Price

SOCIETY

Local
healthcosts

GOVERNMENT

ForgoneVAT (2)

CONSUMER

Pretaxsubsidy

Cost toClassification(fiscal)

$0.80

$0.70

Subsidized price

Post-tax subsidy

Corrective
policies

Energy price reform,
fossil fuel subsidy reformoror

Environmental taxation,
carbon taxationoror

Source: Pigato, Miria, A., Editor, Fiscal Policies for Development and Climate Action. International Development in Focus, Washington,
DC: World Bank, 2019.
Note: Figures show potential divergence between private costs for 1 liter of gasoline and socially optimal prices due to negative externalities.
All estimates are fictional. $ = US dollar. VAT = value added tax.

OECD compiles governments' direct budgetary support and tax expenditures for fuel consumption andproduction in the 36 OECD countries and 8 partner economies (Argentina, Brazil, Colombia, China, Indonesia,
India, Russia and South Africa). OECD does not identify subsidies via a price-gap analysis. Instead it relies on
an inventory of measures that support fossil fuels. Contrary to IMF, OECD does not include externalities in tax
expenditures when estimating fossil fuel subsidies. According to OECD, subsidies in 2017 are estimated at about
US$140 billion, with partner economies accounting for US$59 billion.244
OECD and IEA also provide joint-estimates of fossil fuel subsidies. These estimates cover 76 countries andaccount for subsidies provided via price transfers, tax expenditures (not including the external cost of fuelconsumption), and budgetary transfers. The latest available OECD-IEA estimates are for 2017 and show thatsubsidies were US$340 billion.245

244
245

Source: OECD, OECD Companion to the Inventory of Support Measures for Fossil Fuels 2018, February 21, 2018.
Source: IEA and OECD, Update on recent progress in reform of inefficient fossil fuel subsidies that encourage wasteful consumption, forthcoming.

3 / Headline section lorem Ipsum

6,000

7

6

5,000

5
4,000

Percetnt of Global GDP

US$ billions (nominal)

Figure 18 / Global energy subsidies, 2011–15

4
3,000
2
2,000
2
1,000

1

0

0
2010

2011

2012

2013

249
250

2015

Pre-tax subsidies, US$ billion, (lhs)

Post-tax subsidies, US$ billion, (lhs)

Pre-tax subsidies, % global GDP, (rhs)Post-tax subsidies, % global GDP, (rhs)Fossil fuel subsidies vary substantially acrosscountries, and in some countries, they account fora large share of gross domestic product (GDP), and,if reformed, could generate significant savings.
Fossil fuel subsidies estimated by IEA and IMF (pre-tax
subsidies) are substantially higher in countires suchas China, of which IEA estimates total US$38.3 billion
and IMF estimates total US$29.7 billion, and Iran, of
which IEA estimates total US$45.1 billion and IMF
estimates total US$36.8billion.246 IEA also estimatesthat in 2017, in the 41 countries covered by its analysis,
fossil fuel subsidies averaged 2.9 percent of GDP andaccounted for a much larger share of GDP (between

246
247
248

2014

2016

2017

Source: Coardy et al. 201910–14 percent) in Iran, Libya, and Turkmenistan.247
IMF’s estimates for 2017 show that post-tax subsidies
account for 6.5 percent of GDP globally. In 2015,
these subsidies accounted for a much larger shareof GDP in the Middle East, Afghanistan and Pakistan(13 percent), several former Soviet Union countries(36 percent),248 and developing countries in Asia
(12 percent).249 While post-tax subsidies represent alarger percentage of GDP in these regions, in absoluteterms they are highly concentrated in G20 economies.
IMF data shows that in 2017, 81 percent of posttax subsidies were accrued by G20 countries.250
If reformed, fossil fuel subsidies could generate

Sources: for IEA see https://www.iea.org/weo/energysubsidies/, for IMF the data comes from- IMF Country-level Subsidy Estimates Database, 2018.
Source: IEA, World Energy Outlook - Fossil-Fuel Subsidies, accessed April 15, 2019, https://www.iea.org/weo/energysubsidies/.
In particular, for former URSS countries the estimate refers to the Commonwealth of Independent States, i.e., Azerbaijan, Armenia, Belarus, Georgia,
Kazakhstan, Kyrgyz Republic, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan and Ukraine.
Source: David Coady, Ian Parry, Nghia-Piotr Le, and Baoping Shang, (2019) Global Fossil Fuel Subsidies Remain Large: An Update Based on Country-Level
Estimates, IMF, Working Paper No. 19/89.
Authors' calculations using IMF data - IMF Country-level Subsidy Estimates Database, 2018.

73

74

significant savings and enable higher expenditureson key development priorities. IMF estimates indicatethat projected revenues saved from phasing out
post-tax fossil fuel subsidies would have amounted
to approximately US$3.2 trillion in 2017, equating to
4 percent of global GDP.251
Phasing out fossil fuel subsidies has been a statedpolicy objective of many countries for at least a
decade. If implemented, it would reduce negative
implicit carbon prices. In 2009, G20 and APEC
countries pledged to rationalize and phase out fossil
fuel subsidies that incentivize wasteful consumption
in the medium-term.252 This commitment has beensubsequently reaffirmed on several occasions. In
2010, a group of countries formed the coalition Friendsof Fossil Fuel Subsidies Reforms to support G20 and
APEC countries in phasing out fossil fuel subsidies assoon as possible.253 In 2017, V20 countries called forthe elimination of fossil fuel subsidies and urged theG20 to set a clear timeframe for their elimination.254
In the same year, investors and insurers with morethan US$2.8 trillion in assets under management
asked G20 countries to phase out fossil fuelsubsidies.255 Following these commitments, several
G20 economies started, or even concluded, voluntarypeer-review processes of fossil fuel subsidies.
These include Argentina, Canada, China, Germany,
Indonesia, Italy, Mexico, and the US under the G20,256
as well as Taiwan, China,257 New Zealand, Peru, and

251

252
253
254
255
256
257
258
259
260
261
262
263

the Philippines under APEC. Finland and Sweden havealso completed self-reviews of their subsidies.258 In
2019, the Coalition of Finance Ministers for Climate
Action signed the Helsinki Principles, which includes
the intention to work towards increasing carbon
prices, partially through the reduction or eliminationof fossil fuel subsidies.259
Despite efforts from countries to reform fossil
fuel subsidies in recent years, global progresshas been slow. As discussed above, IMF post-tax
subsidies have increased in recent years, and mostof the observed reductions in IMF’s estimated pretax subsidies, as well as in OECD and IEA’s estimatesof subsidies, can be attributed to reduced oil prices.
However, some countries have reduced fossil
fuel subsidies through reforms, allowing them toincrease spending on public priorities. Indonesia
has recently reformed energy subsidies, reducing
them from 3.3 percent of GDP on average from2012-2014, to an average of 0.9 percent of GDP from2015-2018.260, 261 This decline was partially due todecreasing international oil prices, though it is also
the result of the government eliminating subsidies
on gasoline and reducing subsidies on diesel andkerosene.262 Savings from these reforms increased
the share of spending on health, infrastructure andsocial services.264 In Egypt, fossil fuel subsidies werereduced from 7 percent of GDP in 2014 to 2.7 percent
in 2017. Egypt aims to further reduce subsidies

Please note that savings from fossil fuel subsidies as a percentage of GDP remain significantly larger than carbon revenues. For instance, carbon revenues
from the Finland carbon tax on transport fuels account for about 1 percent of the national GDP, which is one of the largest shares among countries thathave implemented explicit carbon pricing. Source: David Coady, Ian Parry, Nghia-Piotr Le, and Baoping Shang, Global Fossil Fuel Subsidies Remain Large: An
Update Based on Country-Level Estimates, IMF, Working Paper No. 19/89, 2019.
Source: APEC, 2009 Leaders’ Declaration, November 14, 2009, https://www.apec.org/Meeting-Papers/Leaders-Declarations/2009/2009_aelm.aspx; G20,
G20 Leaders Statement: The Pittsburgh Summit, September 24, 2009, http://www.g20.utoronto.ca/2009/2009communique0925.html.
Source: FFFsR, FFFsR Statements, accessed April 15, 2019, http://fffsr.org/statements/. Countries part of this group are Costa Rica, Denmark, Ethiopia,
Finland, New Zealand, Norway, Sweden, Switzerland, Uruguay.
Source: V-20, Ministerial Dialogue IV of the Vulnerable Twenty (V20) Group, April 23, 2017, https://www.v-20.org/v20-ministerial-communique-ministerialdialogue-iv/.
Source: UNFCCC, G20 Must Phase Out Fossil Fuel Subsidies by 2020, February 15, 2017, 20, https://unfccc.int/news/g20-must-phase-out-fossil-fuel-subsidiesby-2020.
The peer reviews of China, Germany, Mexico, and the US are available at Source: OECD, G20 Voluntary Peer Reviews of the Reform of Inefficient Fossil Fuel
Subsidies, 2017, http://www.oecd.org/site/tadffss/publication/.
Source: APEC, Peer Review on Fossil Fuel Subsidy Reforms in Chinese Taipei, July 2017, https://www.apec.org/Publications/2017/07/Peer-Review-on-Fossil-FuelSubsidy-Reforms-in-Chinese-Taipei.
Source: Ivetta Gerasimchuk, Peter Wooders, Laura Merrill, Lourdes Sanchez, Lucy Kitson, A Guidebook to Reviews of Fossil Fuel Subsidies: From Self-Reports toPeer Learning, IISD, 2017.
Source: World Bank, Finance Ministers Join Forces to Raise Climate Ambition, accessed 10 May, 2019, http://www.worldbank.org/en/news/pressrelease/2019/04/13/coalition-of-finance-ministers-for-climate-action?cid=CCG_TT_climatechange_EN_EXT.
Source: World Bank, Indonesia 3rd Fiscal Reform Development Policy Financing (P167297): World Bank (Pipeline Project), March 29, 2019, http://documents.
worldbank.org/curated/en/772961539355813625/pdf/Concept-Program-Information-Document-PID-Indonesia-Fiscal-Reform-DPL-3-P167297.pdf.
Source: IEA, Fossil Fuel Subsidy Reform in Mexico and Indonesia, 2016.
Source: Sudarshan Gooptu, World Bank, and ESMAP, Assessing the Fiscal Cost of Subsidies and Fiscal Impact of Reform, n.d., http://documents.worldbank.org/
curated/en/958771530881102150/pdf/ESRAF-note-2-Assessing-the-Fiscal-Cost-of-Subsidies-and-Fiscal-Impact-of-Reform.pdf.
Source: World Bank, Indonesia 3rd Fiscal Reform Development Policy Financing (P167297): World Bank (Pipeline Project), March 29, 2019, http://documents.
worldbank.org/curated/en/772961539355813625/pdf/Concept-Program-Information-Document-PID-Indonesia-Fiscal-Reform-DPL-3-P167297.pdf.

5 / Looking beyond explicit carbon pricing

to 0.5 percent of GDP in 2019. These reductions
created fiscal space that enabled the government toincrease spending on social protection, health andeducation.264 Additionally, in 2018, the governmentof Tunisia committed to improving the existing fiscal
deficit in the medium-term through measures suchas reducing energy subsidies. Energy subsidies wereoriginally 2.8 percent of GDP, of which fuel subsidies
accounted for the largest share at 1.8 percent.
Following the 2018 commitment, electricity and gas
tariffs were progressively increased. Once all planned
increases are completed, savings are expected toequal 0.2 percent of GDP.265
Raising the cost of carbon-emitting activities canbe done through specific taxes on fossil fuels.
IMF and OECD’s work integrates implicit carbon
prices imposed via fuel taxes with ETSs andcarbon taxes. Countries apply taxes to fossil fuels forvarious purposes, and those taxes have the effect ofalso implicitly pricing carbon.266 Examples include coaltaxes, such as the 2017 Philippine excise tax of US$2
per ton of coal267 and the India Goods and Services
Tax, which also applies to coal and substitutes the
Clean Energy Cess,268 as well as more common
gasoline taxes,269 such as the Kenyan gasoline tax,
which was recently increased to US$0.2 per liter.270
OECD converts specific taxes on fuels into carbon tax
equivalents by dividing taxes per unit of fuel or per
unit of energy by the carbon content.271 The carbon
tax equivalents are then integrated with carbon taxes
and tradable emission permit prices, and the results—
referred to by OECD as “Effective Carbon Rates”—are

264
265
266

267
268
269
270
271
272
273
274
275
276

expressed in €/tCO2.272 IMF “Effective Carbon Prices”
are estimated using a similar methodology, which
however accounts for the effectiveness of each policy
instrument (e.g., fuel taxes, ETSs, and carbon taxes)
to drive abatements compared to an economy-wide
carbon tax.273 The resulting Effective Carbon Price isthe equivalent economy-wide carbon price that, if
implemented, would yield the same abatements as
the combined effect of the carbon taxes, ETSs, andfuel taxes existing in a country.274
Even when implicit carbon prices from fuel taxes
are integrated with explicit carbon prices, theresulting carbon prices are too low compared to
relevant benchmark levels. The State and Trends ofCarbon Pricing report series has shown that explicit
carbon prices are too low to deliver on the Paris
Agreement, according to estimates put forward by
the High-level Commission on Carbon Prices of atleast US$40/tCO2 to US$80/tCO2 by 2020.275 Using a
different benchmark, i.e., the social cost of carbon,
the OECD demonstates that even when accounting forcarbon prices set by fuel taxes, aggregate carbon prices(i.e. implicit and explicit) remain too low. OECD tracks
progress on Effective Carbon Rates by measuring a“carbon pricing gap,” which is measured by comparing
the OECD’s effective carbon rates across a country’s
carbon emissions base to a reference price of€30 (US$34) and €60 (US$67). Based on a literature
review, OECD considers the €30 (US$34) benchmark
a low-end estimate of the social costs of carbon in
2015276 and the €60 (US$67) benchmark a midpoint
estimate of these costs in 2020 and a low-end

Source: Sudarshan Gooptu, World Bank, and ESMAP, Assessing the Fiscal Cost of Subsidies and Fiscal Impact of Reform, n.d., http://documents.worldbank.org/
curated/en/958771530881102150/pdf/ESRAF-note-2-Assessing-the-Fiscal-Cost-of-Subsidies-and-Fiscal-Impact-of-Reform.pdf.
Source: World Bank, Tunisia Investment, Competitiveness and Inclusion, June 27, 2018, http://projects.worldbank.org/P161483?lang=en.
While fuel taxes can be seen as imposing an implicit price on carbon, their use for mitigation call for careful consideration because a fuel tax increase cansometimes result in higher emissions. This could occur, for instance, when the increase of a tax on one fuel induces higher consumption of another fuelthat has a higher carbon content per unit of useful energy.
Source: Government of the Philippines, Congress Act No. 10963, July 24, 2017, https://www.senate.gov.ph/republic_acts/ra%2010963.pdf. For more details
on specific taxes on energy use see also OECD, Taxing Energy Use 2018: Companion to the Taxing Energy Use Database, OECD Publishing, Paris, 2018.
For a recent analysis of the impacts of the Goods and Services Tax on the cost of energy production see Soman et al., India’s Energy Transition: The Impact of
the Goods and Services Tax on Solar Photovoltaic and Coal Power Costs, IISD, 2019.
Gasoline taxes are common fiscal instruments in many countries, see Ross, M.L., Hazlett, C. and Mahdavi, P., Global progress and backsliding on gasoline
taxes and subsidies, Nature Energy, 2(1), p.16201, 2017.
Source: EY, Kenya Adjusts Excise Duty Rates, accessed December 11, 2018, https://taxinsights.ey.com/archive/archive-news/kenya-adjusts-excise-duty-rates.aspx.
Source: OECD, Effective Carbon Rates 2018 - Pricing Carbon Emissions Through Taxes and Emissions Trading, September 18, 2018.
Source: Ibid.
Source: IMF, Fiscal Policies for Paris Climate Strategies—From Principle to Practice, IMF Policy Paper, 2019.
Source: Ibid.
Source: High-Level Commission on Carbon Prices. Report of the High-Level Commission on Carbon Prices, Washington, DC: World Bank, 2017. The report also
acknowledge that low income countries may apply lower carbon prices, for instance, to account for historical emissions in different regions of the world.
Global efficient prices are sensitive to diverging views on discounting and on how to account for extreme risks, as discussed in Stern, Nicholas, The
Economics of Climate Change: The Stern Review Cambridge: Cambridge University Press, 2007; Weitzman, Martin L., Fat-Tailed Uncertainty in the Economics ofCatastrophic Climate Change, Review of Environmental Economics and Policy Vol. 5, pp. 275-92, 2011. Also, some countries use domestic estimates of thesocial cost of carbon, which may diverge from global estimates. Thus, there is not necessarily consensus among academics and policymakers on the use ofa particular global efficient price as a benchmark to track progress on climate change mitigation.

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76

estimate of these costs in 2030.277 According to theOECD analysis, under the €30 (US$34) benchmark theoverall gap is slowly narrowing, but remains high, as
it decreased from 83 percent in 2012 to 79.5 percent
in 2015, and has been estimated to further decrease
to 76.5 percent in 2018.278 In 2015, this carbon pricing
gap ranged between 27 and 100 percent acrosscountries, with the lowest gaps prevailing in Norway
and Switzerland.279 There are also large differencesin the carbon pricing gap across sectors, with roadtransport having the lowest gap by far (21 percent),
and electricity generation, commercial, residential andindustry sectors having a gap above 80 percent.280, 281
The carbon pricing gap could be significantly larger inmany countries if fuel taxes that address non-climate
externalities, such as those that address the healthconsequences of local pollution and the deteriorationof roads, were not considered when pricing carbon.
Besides failing to internalize the social cost of carbon,
these price levels are also below the Paris-compatible
price levels identified by the High-Level Commission
on Carbon Prices. In this respect, it is important
to stress that these Paris-compatible carbon priceranges refer exclusively to explicit carbon prices andnot to implicit carbon prices imposed by fuel taxes
and fossil fuel subsidies reforms.
IMF Effective Carbon Prices also show that evenwhen accounting for both implicit and explicit carbon
prices, in most jurisdictions the combined estimatesremain too low to deliver on the Paris-agreement.
IMF estimates of Effective Carbon Prices in 2030
show that most prices range between US$0/tCO2 to

US$30/tCO2,282 which is significantly below the Pariscompatible carbon price levels identified by theHigh-Level Commission on Carbon Prices for 2030
(US$50/tCO2 to US$100/tCO2). Some countries havesignificantly higher Effective Carbon Prices, such as

277
278
279
280
281

282
283
284
285
286

Benin (US$96.7/tCO2), Democratic Republic of theCongo (US$148.5/tCO2), Paraguay (US$180.5/tCO2),
Togo (US$100/tCO2), and Uruguay, (US$98.8/tCO2).283
Note that none of these countries have an explicit
carbon pricing instrument in place. Thus, if we
considered only these instruments, the resulting
carbon price level applied in these jurisdictions would
be zero. At a regional level, IMF Effective Carbon Prices
tend to be higher in Africa, than in other regions.284
IMF Effective Carbon Prices also vary significantly pertype of fuel. They are highly concentrated on diesel
and gasoline, and in many countries the Effective
Carbon Price applied to coal and natural gas is, oris close to, US$0/tCO2.285 Please note that there canbe large differences in aggregated (i.e. implicit andexplicit) carbon prices as measured by OECD and
IMF methodologies. For instance, the OECD Effective
Carbon Rate for the US is US$22/tCO2, against the IMF
Effective Carbon Price of US$6/tCO2 in 2030.286

5.3
The relevance of implicit
carbon pricing for explicit
carbon pricing policies
This section discusses why implicit carbon prices set
by fossil fuel subsidies and fuel taxes are relevant forthe policy debate on explicit carbon pricing and theefforts that are needed to move forward.
Considering fuel taxes and fossil fuel subsidies
together with explicit carbon prices provides amore comprehensive view of countries’ progresson explicit carbon pricing. It is widely recognizedin academic research and policy circles, including

Source: OECD, Effective Carbon Rates 2018 - Pricing Carbon Emissions Through Taxes and Emissions Trading, September 18, 2018.
Source: Ibid.
Source: Ibid.
Source: Ibid.
While the gap is overall decreasing, recent evidence also indicates that taxes on some type of fuel actually decreased globally on average. For example,
between 2003-2015 the global mean gasoline tax decreased by more than 13 percent. This is because while gasoline taxes increased in some countries,
gasoline consumption grew more in countries with lower tax rates. Source: Ross, Michael L., Chad Hazlett, and Paasha Mahdavi., P., 2017. Global progressand backsliding on gasoline taxes and subsidies. Nature Energy, 2(1), p.16201.
Source: IMF, Fiscal Policies for Paris Climate Strategies—From Principle to Practice, IMF Policy Paper, 2019.
Source: Ibid.
Source: Ibid.
Source: Ibid.
Source: Ibid.

5 / Looking beyond explicit carbon pricing

in the recent IPCC 1.5°C Report, that explicit carbon
pricing is a pillar of cost-effective mitigation policy.287
However, the level of explicit carbon prices needed
to deliver on the Paris Agreement depends on the
climate policy environment, as recognized by theHigh-level Commission on Carbon Prices report288(see also Box 2). Carbon prices will need to be evenhigher if sufficient action is not taken.289 Thus, themetrics used in the State and Trends of Carbon Pricing
report series to measure progress of explicit carbon
pricing policies, such as the number of initiatives,
scope of coverage, and level of explicit price, capture
an important, but incomplete picture of the progress
made by different jurisdictions towards implementing
Paris-compatible carbon prices. For instance, as
discussed above, IEA and IMF (pre-tax and post-tax
subsidies) have increased globally in 2017, which is arelevant factor when discussing aggregate trends of
implicit and explicit carbon prices. Therefore, looking
beyond explicit carbon prices by integrating analysesof implicit carbon pricing policy is a key step toward
providing a more comprehensive view of the progressthat countries are making to cost-effectively meet theobjectives of the Paris Agreement.290
Discussing fossil fuel subsidies and fuel taxes
together with explicit carbon pricing can help
reach policy alignment. As discussed in 2016 editionof the State and Trends of Carbon Pricing, strengthening
the abatement effectiveness of explicit carbon
pricing may require implementing instruments thatcomplement carbon taxes and ETSs, such as subsidies
for research and development to address knowledge

287

288
289
290
291

292

293
294

externalities, and reduce policies that counteract
and distort the price signal from explicit carbon
pricing, such as fossil fuel subsidies.291 Highlighting
the countervailing effects of fossil fuel subsidies on
explicit carbon pricing can help make the case forpolicy alignment, which is an important condition for
the effectiveness of explicit carbon pricing policies.292
Discussing implicit carbon pricing policies can bea good entry point for starting to explore explicit
carbon pricing policies, especially if the debate
highlights the co-benefits of these policies. This
year’s developments, as described in Chapter 2,
demonstrate that explicit carbon pricing is subject topush back from various interest groups and the public.
There are many reasons for this, including difficulty incommunicating the climate and non-climate benefits
of explicit carbon pricing.293 The climate benefits ofcarbon pricing tend to be diffuse, difficult to measureand observe, and are concentrated in the mediumto long-term, while the costs are concentrated andshort-term. Efforts have been taken to address theseconcerns effectively,294 but progress on explicit carbon
pricing is still far from the levels needed to deliveron the Paris Agreement. Looking at implicit carbon
pricing can help jurisdictions realize that they may
already implicitly price carbon in some way, even if it isdone negatively. Thus, explicit carbon pricing is largely
an extension of, and not a radical departure from,policies that are already in place. Discussing fossil fuelsubsidies and fuel taxes in terms of implicit carbon
pricing may help businesses and individuals become
familiar with the idea of putting an explicit price on

Source: IPCC, Global Warming of 1.5°C, 2018. The cost effectiveness of carbon pricing depends also on the use of revenues. In particular, cost-effectivenesstends to be higher when revenues are devoted to increase economic efficiency, such as when they are used to cut distortionary taxes or fund productive
investments, see: IMF, Fiscal Policies for Paris Climate Strategies - from Principle to Practice, IMF Policy Paper, 2019.
Source: CPLC, Report of the High-Level Commission on Carbon Prices, May 29, 2017.
Please note that the cost of emitting carbon depends also on fossil fuel prices, which can vary substantially over time.
It is important to acknowledge that an even more comprehensive view could be attained by considering also the abatement incentives of other policies,
such as regulation. However, these are often unavailable.
While being a key instrument for cost-effective climate change mitigation, carbon pricing is generally more effective when included in a carefully crafted
policy package for climate mitigation. For further information, please refer to World Bank, Ecofys, and Vivid Economics, State and Trends of Carbon Pricing 2016,
October 2016.
For a comprehensive discussion on how to combine implicit and explicit carbon pricing instruments effectively and efficiently see Partnership for Market
Readiness (PMR), Reconciling Carbon Pricing and Energy Policies in Developing Countries – Integrating Policies for a Clean Energy Transition, World Bank, Washington,
DC, 2019. Please also note that explicit carbon pricing might not be a viable in some countries, for instance, because of resistance from vested interests. In
these situations, policymakers could start implementing other policies that implicitly price carbon, such as feebate schemes that do not increase the price ofenergy. For a discussion of these policies see IMF, Fiscal Policies for Paris Climate Strategies—From Principle to Practice, IMF Policy Paper, 2019.
Source: David Klenert, Linus Mattauch, Emmanuel Combet, Ottmar Edenhofer, Cameron Hepburn, Ryan Rafaty, Nicholas Stern, Making carbon pricing workfor citizens, Nature Climate Change, 8(8), pp. 669-77, 2018.
Source: Partnership for Market Readiness; Carbon Pricing Leadership Coalition, Guide to Communicating Carbon Pricing. World Bank, Washington, DC, 2018;
Dirk Heine, and Simon Black, Benefits Beyond Climate: Environmental Tax Reform, 2019. Miria Pigato, Fiscal Policies for Development and Climate Action, World
Bank: Washington DC.

77

78

carbon. Additionally, communicating the existenceof negative carbon prices can help build public
support for explicit carbon pricing by highlighting
discrepancies in how various sectors of the economy
are paying for their emissions. Highlighting economic
and fiscal co-benefits of implicit carbon pricing
can also expand interest in explicit carbon pricing,
especially in developing and low-emissions countries,
where carbon mitigation is often a low priority.
Lessons learned from implementing implicit
carbon pricing policies can help increase ambition
on explicit carbon pricing. The political economy
of explicit carbon pricing sometimes resembles thepolitical economy of fossil fuel subsidy reform. For
example, both measures tend to yield energy priceincreases, which impacts households and industries;
they also yield co-benefits, such as reducing local
pollution, and revenues that could be spent to
mitigate the potential regressive impacts of thesemeasures or finance development priorities.295 Many
countries that do not have an explicit carbon pricing
initiative in place have experience with introducing
higher fuel taxes and reducing fossil fuel subsidies.
Countries that have reformed, or are in the processof reforming, fossil fuel subsidies could build on theseexperiences to implement explicit carbon pricing. For
instance, Indonesia (2005), Iran (2010), and Jordan(2012) were able to reform fossil fuel subsidies also
because of extensive stakeholder engagement and

295

296
297

298

299
300
301
302
303
304

carefully crafted communication strategies,296 which
are important elements for catalyzing public support
for carbon pricing.297 Countries like Iran (2010)
and Jordan (2012) have also gained experience inaddressing the poverty effects of fossil fuel subsidy
reforms via direct cash transfers or other direct
benefit programs.298 For example, the government of
Jordan (2012) used various social safety net measures
to protect vulnerable groups, including cash transfers
to low income households, a targeted food subsidy
program, and increasing the public sector wages
for lower income households.299 Iran implemented
electronic cash transfers that accounted for 50
percent of projected savings from fossil fuel subsidies
reforms.300 This use of savings had a positive effect on
reducing inequality in the country.301 The remaining
savings were used to mitigate the impact of thereform on businesses and the public sector.302 Similar
schemes can be implemented to reduce the potential
impacts of explicit carbon pricing. Technologies, suchas mobile money, may allow for the distribution ofcarbon revenues to large segments of the populationin the rural areas of developing countries, such as
Kenya and Ivory Coast.303 The Energy Subsidy Reform
Assessment Framework (ESRAF) and its guidancenotes developed by the Energy Sector Management
Assistance Program of the World Bank present
country experiences with reforming energy subsidies
and offer a useful toolkit for exploring these issues ingreater detail.304

Source: Adrien Vogt Schilb, and Stephane Hallegatte, 2017. Climate Policies and Nationally Determined Contributions: Reconciling the Needed Ambition with The
Political Economy. Wiley Interdisciplinary Reviews: Energy and Environment, 6(6), p. 256. For an extensive discussion of the distributional impacts of thesemeasures see Partnership for Market Readiness (PMR), Reconciling Carbon Pricing and Energy Policies in Developing Countries – Integrating Policies for a Clean
Energy Transition, World Bank, Washington, DC, 2019.
Source: Inchauste, Gabriela, and David G. Victor, Editors, The Political Economy of Energy Subsidy Reform. Directions in Development, Washington, DC: World
Bank, 2017.
Source: Carattini, Stefano, Maria Carvalho, and Sam Fankhauser, Overcoming Public Resistance to Carbon Taxes, Wiley Interdisciplinary Reviews: Climate
Change, 9(5), p. 531, 2018; Partnership for Market Readiness; Carbon Pricing Leadership Coalition, Guide to Communicating Carbon Pricing, World Bank,
Washington, DC, 2018.
Sources: Pigato, Miria A., Fiscal Policies for Development and Climate Action (English), Washington, D.C. : World Bank Group, 2019; Ruslan Yemtsov and Amr
Moubarak, Good Practice Note 5, Assessing the readiness of Social Safety Nets to Mitigate the Impact of Reforms, ESMAP, 2018; Guillaume, Dominique M.,
Roman Zytek, and Mohammad Reza Farzin, Iran: The Chronicles of the Subsidy Reform, Washington DC, 2011; Salehi-Isfahani, Djavad, Iran: Subsidy Reform
amid Regional Turmoil, Brookings, Washington, DC, March 3, 2011.
Sources: Pigato, Miria A., Fiscal Policies for Development and Climate Action (English). Washington, D.C.: World Bank Group, 2019; Ruslan Yemtsov and Amr
Moubarak, Good Practice Note 5, Assessing the Readiness of Social Safety Nets to Mitigate the Impact of Reforms, ESMAP, 2018.
Source: Guillaume, Dominique M., Roman Zytek, and Mohammad Reza Farzin (2011). Iran: The Chronicles of the Subsidy Reform. Washington DC.
Inequality measured via the Gini coefficient was reduced from 0.42 to 0.34, Salehi-Isfahani, Djavad, Iran: Subsidy Reform amid Regional Turmoil. Brookings,
Washington, DC, March 3, 2011.
Source: Guillaume, Dominique M., Roman Zytek, and Mohammad Reza Farzin, Iran: The Chronicles of the Subsidy Reform, Washington DC, 2011.
Source: Dominioni Goran and Heine Dirk, Behavioural Economics and Public Support for Carbon Pricing: A Revenue Recycling Scheme to Address the Political
Economy of Carbon Taxation, European Journal of Risk Regulation, 2019.
The Energy Subsidy Reform Assessment Framework is available online: https://esmap.org/esraf.

5 / Looking beyond explicit carbon pricing

Obtaining more comprehensive estimates of the
carbon prices applied within a country increases
transparency of climate action, potentiallyenabling greater ambition over time. Countries do
not internalize all of the benefits of their abatements
and are generally incentivized to underinvest in
climate mitigation. Explicit carbon pricing, fuel taxes,
and fossil fuel subsidies are an important componentof the mitigation incentives that could prevail in
different jurisdictions, especially when considered
together.305 Reaching comparable estimates of the
combined (i.e. implicit and explicit) carbon priceset by these policies would increase transparency
in and allow comparisons of the overall mitigation
action undertaken in different countries. Increasedtransparency can help building trust across countries
and increase the scale of climate ambition.
Moving forward, valuable work could be done toimprove data availability on these policies andexpand analyses that account for both implicit andexplicit carbon pricing to reach more comprehensive
estimates. It is widely recognized that data availability
and comparability are a hurdle to reaching consistentcross-country estimates of fossil fuel subsidies,
especially in developing countries.306 For example, alarge proportion of subsidies for fossil fuels are grantedin the form of tax expenditures, such as deductions,
exemptions, or delayed tax liabilities,307 which are often
subject to lower levels of scrutiny in parliamentary

305

306
307
308
309
310
311
312
313

discussions than direct budgetary expenditures.308
Additionally, coal supply costs, which are useful for
identifying potential price gaps, are not always easily
determined, as there is no single international price.309
Efforts are underway to harmonize international andnational level data on fossil fuel subsidies under the
Sustainable Development Goals 12.C.1 indicator.310
From 2020 to 2030, the United Nations Environment
Programme (UNEP) is expected to collect national dataof fossil fuel subsidies from 193 member countries,
though submissions are voluntary.311 UNEP is also
responsible for developing an internationally agreed
upon method to monitor fossil fuel subsidies at the
global, regional and national level.312 A second aspectthat requires further work involves the integration of
positive and negative carbon prices in single estimates.
This could also potentially include marginal pricesignals from policies other than fossil fuel subsidies,
fuel taxes, and explicit carbon pricing, such as tradeable
performance standards.313 Looking forward, work thatcombines positive and negative carbon prices could
be very helpful for advancing the policy debate oncarbon pricing. Expanding analyses to policies beyond
fossil fuel subsidies and fuel taxes could also informdiscussions in the context of Article 6 mechanisms.
Further editions of this report could discuss how suchpolicies, and the mitigation outcomes they generate,
can be considered in carbon markets, building on the
results from on-going “policy based” pilots described in
Chapter 3.

Note that the climate mitigation effects of fossil fuel subsidy removal alone can be large but depend on the type of fossil fuel subsidies removed. Recent
research shows that subsidies removal (estimates closer to IEA, OECD, and IMF pre-tax subsidies than to IMF post-tax subsidies) would reduce carbon
emissions by 1-4 percent by 2030. Since coal, the fossil fuel that emits more carbon per unit of energy receives a small share of these subsidies, subsidies
removal yields limited global abatements. The sharp decline in fossil fuel subsidies in the period 2013-2015 can also account for this result. Earlier studies
had indicated that carbon abatements from phasing out fossil fuel subsidies would have been larger, i.e., between 3.5-5 percent by 2020; 5-6 percent by2035; and between 6-9 percent by 2050, see Jewell, Jessica, et al., Limited Emission Reductions from Fuel Subsidy Removal except in Energy-Exporting Regions,
Nature, February 8, 2018. Abatements would be substantially larger, about 28 percent in 2015, if post-tax subsidies were phased out, see David Coady,Ian Parry, Nghia-Piotr Le, and Baoping Shang, Global Fossil Fuel Subsidies Remain Large: An Update Based on Country-Level Estimates, IMF, Working Paper No.
19/89, 2019. Another study indicates that reforming fossil fuel subsidies in 20 countries could reduce national carbon emission by 11 percent on averageby 2020, see Merrill, Laura, Bassi, Andrea M., Bridle, Richard, Christensen, Lasse T., Tackling Fossil Fuel Subsidies and Climate Change: Levelling the Energy
Playing Field, Nordic Council of Ministers, 2015.
Source: Kojima, Masami, Energy Subsidies: Identifying and Quantifying Energy Subsidies, World Bank, Washington, DC, 2017.
For instance, tax expenditure account for 64 percent of the value of subsidies in the OECD inventory, OECD, OECD Companion to the Inventory of Support
Measures for Fossil Fuels 2018, OECD Publishing, Paris, 2018.
Source: World Bank Group, Climate Change Public Expenditure and Institutional Review Sourcebook, World Bank Group, 2014.
Source: Ross, Michael L., Chad Hazlett, and Paasha Mahdavi, Global Progress and Backsliding on Gasoline Taxes And Subsidies, Nature Energy, 2(1), p. 16201, 2017.
Source: UN, Sustainable Development Goal 12: Ensure sustainable consumption and production patterns, accessed May 13, 2019,https://sustainabledevelopment.un.org/sdg12.
GIZ and UNEP, Measuring fossil fuel subsidies in the context of the Sustainable Development Goals, accessed May 12, 2019, http://www.greenfiscalpolicy.org/
policy-insights/energy/measuring-fossil-fuel-subsidies-in-the-context-of-the-sustainable-development-goals/.
See on this UNEP, OECD and IISD, Measuring Fossil Fuel Subsidies in the Context of the Sustainable Development Goals, UN Environment, Nairobi, Kenya, 2019.
An illustration of an effort that goes in this direction is the recently proposed Price Approach, which tries to identify the net tax burden at the sectorial
and jurisdiction-wide level, accounting for carbon taxes and ETS prices, specific energy taxes, subsidies that reduce end-user fuel prices, and other energy
policies which raise prices. ODI and Vivid Economics, Estimating Effective Carbon Prices: Accounting for Fossil Fuel Subsidies, Report for the Carbon Pricing
Leadership Coalition, 2019.

79

80

Annex I
Exchange rates

Table 4 / Currency conversion rates, as of April 1, 2019
Currency

Symbol

US$ equivalent

Argentinian Peso

ARS

0.0233Australian Dollar

A$

0.7120British Pound£

1.3104

Canadian Dollar

CAN$

0.7497

Colombian Peso

COP

0.0003

Chilean Peso

CLP

0.0015Chinese Yuan

CNY

0.1489Danish Krona

DKR

0.1505Euro€

1.1235

Icelandic Krona

ISK

0.0081

Japanese Yen

JPY

0.0090

Kazakhstan Tenge

KZT

0.0026

Korean Won

KRW

0.0008Mexican Peso

MXN

0.0520

New Zealand Dollar

NZD

0.6822

Norwegian Krone

NOK

0.1165Polish Zloty

PLZ

0.2613Singapore Dollar

S$

0.7387

South African Rand

R

0.0704

Swedish Krona

SEK

0.1080Swiss Franc

CHF

1.0048

Ukrainian Hryvnia

UAH

0.0368

81

Annex II
Detailed overview of carbon
pricing initiatives in the Canadianprovinces and territories
Jurisdiction Type and status
Alberta

ETS and carbon
tax implemented

Coverage
90% (own
initiatives)

Federalbenchmark met

Revenue use
Use of carbon pricing revenues include:−− Mitigation and adaptation projects−− Rebates to low- and middle-income
households, which account for about
60% of the Alberta households(CAN$300/US$337 first adult,
CAN$150/US$169 second adult,
CAN$45/US$51 each child, full rebate
for individuals and families withincome below certain treshold for2019)314

Exemptions
Exemptions and/or competitivenessmeasures include:−− Carbon tax: various exemptions asrebates including gasoline and diesel
used in the farming sector, fuel soldfor export, fuels used as feedstock, andfuels used by CCIR facilities315−− CCIR: covered facilities only facecompliance costs for the emissions
above their baseline and facilities
experiencing economic challenges dueto the compliance costs can receive
support from the Compliance Cost
Containment Program316−− From November 2018, oil and gas
producers are exempted from paying
the carbon tax until 2023 for fuel usedtheir production. The amendment to
the Regulation was made retroactive toJanuary 1, 2017.317 The rebate comes asa response to competitive pressure on
the oil and gas industry in Alberta.318

BritishColumbia

ETS and carbon
tax implemented
Federalbenchmark met

70% (own
initiatives)

Use of carbon pricing revenues include:319−− Tax credits for households to protect
affordability (CAN$135/US$152 peradult, CAN$40/US$45 per child for2018)320−− The CleanBC Program for Industry,
which provides an industrial incentive
to reduce carbon tax costs forindustrial operations meeting world
leading emissions benchmarks, anda clean industry fund that invests
a portion of industrial carbon tax
revenues into emissions reduction
projects. According to the Provincial
Inventory, the covered facilities which
qualify for the CleanBC Program for
Industry account for about 28% of the
carbon-taxable emissions.

314
315
316
317
318

Exemptions and/or competitivenessmeasures include:−− Carbon tax: various exemptions asrebates including exported fuels, fuelconsumption by aviation and shipping
travelling outside British Columbia, andcolored gasoline and colored diesel
purchased by farmers.321−− GGIRCA: covered facilities only facecompliance costs under the GGIRCA forthe emissions above their baseline, butmust pay revenue neutral carbon tax
for their full CO2 emissions. Coveredfacilities are eligible for the CleanBC
Program for Industry to reduce carbon
tax costs.

Source: Ibid.
Source: Ibid.
Source: Government of Alberta, Carbon Competitiveness Incentive Regulation, accessed March 5, 2019, https://www.alberta.ca/carbon-competitiveness-incentive-regulation.aspx.
Source: Government of Alberta, Tax and Revenue Administration Special Notices, February 12, 2019, https://open.alberta.ca/publications/climate-leadership-act-specialnotice-vol-11-no-13-mobile-service-rigs-rebate-carbon-levy-clear-fuel#detailed.
Source: Calgary Herald, Premier Rachel Notley Unveils Carbon Tax Break for Drilling Companies, November 22, 2018, https://calgaryherald.com/business/energy/premierrachel-notley-unveils-carbon-tax-break-for-drilling-companies.

82

Jurisdiction Type and status
Manitoba

Federal backstop
system fully
imposedCoverage
56% (federal
backstop)322

Revenue use

Exemptions

Carbon pricing revenues from thefederal backstop system are returned tothe province’s population as describedabove and do not go to the provincial
government.

No additional exemptions and/or
competitiveness measures to the federal
backstop system have been introduced forthe province.

Tax returns to individuals(CAN$170/US$191 single/first adult;
CAN$85/US$96 for second adult in
couple or first child for single parents;
CAN$42/US$47 per child other thanfirst for single parent in 2019) 323
New
BrunswickFederal backstop
system fully
imposed91% (federal
backstop)324

Carbon pricing revenues from thefederal backstop system are returned tothe province’s population as describedabove and do not go to the provincial
government.

No additional exemptions and/or
competitiveness measures to the federal
backstop system have been introduced forthe province.

Tax returns to individuals(CAN$128/US$144 single/first adult;
CAN$64/US$72 for second adult in
couple or first child for single parents;
CAN$32/US$36 per child other thanfirst for single parent in 2019) 325
Newfound­land andLabrador

ETS and carbon
tax implemented

91% (own
initiatives)

Federalbenchmark met

Use of carbon pricing revenues include:326−− General budget−− GHG reduction project

Exemptions and/or competitivenessmeasures include:327−− Carbon tax: various exemptions including
home heating fuels, gasoline forelectricity generation, farming, forestry,
fishing, equipment manufacturing, andmineral exploration, fuels as feedstock,and fuels used by PSS facilities.
−− To minimize the impact on consumers,
taxes on gasoline and diesel werereduced.328−− PSS: covered facilities only facecompliance costs under the PSS for theemissions above their baseline, with
exemptions for methane emissions fromventing and fugitives in the oil and gas
sectorNorthwest
Territories

Carbon tax underconsideration329
Federalbenchmark met

79% (own
initiative)

Use of carbon pricing revenues include:330−− Energy projects that will reduce GHG
emissions as part of the 2030 NWT
Energy Plan−− GHG reduction projects as identified
in the NWT Climate Change Strategic
Framework−− Enhanced benefit programs tooffset the impact of carbon pricing
on the cost of living of NWT families(CAN$260/US$292 annually forresident adult; CAN$300/US$337 perchild, when the system will be fully
implemented).331

319
320
321
322
323

Exemptions and/or competitivenessmeasures include:332−− Exemption of aviation fuel, 75 percent
rebate to large industrial emitters for tax
paid on non-motive diesel and heatingfuel−− 100 percent rebate on heating fuel for
most residents, businesses (non-large
industrial emitters) and governments−− Rebate of carbon tax paid on nonmotive diesel purchased for generating
electricity for distribution

Source: Government of British Columbia, British Columbia’s Carbon Tax, April 11, 2019, https://www2.gov.bc.ca/gov/content/environment/climate-change/planning-andaction/carbon-tax.
Source: Government of British Columbia, Carbon Tax Programs, accessed April 11, 2019, https://www2.gov.bc.ca/gov/content/environment/climate-change/planning-andaction/carbon-tax/programs.
Source: Government of British Columbia, Motor Fuel Tax & Carbon Tax Exemptions, accessed April 11, 2019, https://www2.gov.bc.ca/gov/content/taxes/sales-taxes/motorfuel-carbon-tax/business/exemptions.
Source: Dobson et al., The Greenhouse Gas Emissions Coverage of Carbon Pricing Instruments for Canadian Provinces, SSP Research Paper, February 2019.
Source: Government of Canada, Manitoba and Pollution Pricing, accessed February 21, 2019, https://www.canada.ca/en/environment-climate-change/services/climatechange/pricing-pollution-how-it-will-work/manitoba.html.

Annex II

Jurisdiction Type and status
Nova Scotia

ETS implemented
Federalbenchmark met

Coverage
80% (own
initiative)

Revenue use
Use of carbon pricing revenues include:333−− A broad range of measures that help
reduce GHG emissions, mitigate socialand economic impacts, or adapt to theimpacts of climate change.
−− Governance and administration of thefunds will be established in 2019.

83

Exemptions
Exemptions and/or competitivenessmeasures include:334−− Free distribution of some of theallowances each year. Auctioning ofallowances will start in 2020−− Industrial facilities receive freeallowances according to historicalemission intensities, actual production
volumes, a general cap adjustment
factor and a sector-specific assistancefactor−− Electricity importers (except Nova Scotia
Power) and fuel suppliers receive 80%of their reported emissions as freeallowances−− The largest utility in the province, Nova
Scotia Power Inc, receives a set amountof free allowances that were based on
90% of its buisness as usual emission
projections

Nunavut

Ontario

Federal backstop
system opt-in

ETS under
consideration
Federal backstop
system fully
imposed

324
325
326
327
328
329

330
331
332
333
334
335
336
337
338
339

77% (federal
backstop)335

82% (federal
backstop)338

The territorial government is still
considering how best to return the
carbon pricing revenues to its citizens
and businesses, aiming to minimize
the effect of federal carbon pricing on
the cost of living and doing business inNunavut.336
Carbon pricing revenues from thefederal backstop system are returned tothe province’s population as describedabove and do not go to the provincial
government.

Exemptions and/or competitivenessmeasures include:337−− In addition to federal exemptions,additional relief for fuels used foraviation in the territory and dieselfired electricity generation for remotecommunities
No additional exemptions and/or
competitiveness measures to the federal
backstop system have been introduced
for the province.

Tax returns to individuals(CAN$154/US$173 single/first adult;
CAN$77/US$86 for second adult in
couple or first child for single parents;
CAN$38/US$43 per child other thanfirst for single parent in 2019) 339

Source: Dobson et al., The Greenhouse Gas Emissions Coverage of Carbon Pricing Instruments for Canadian Provinces, SSP Research Paper, February 2019.
Source: Government of Canada, New Brunswick and Pollution Pricing, February 21, 2019, https://www.canada.ca/en/environment-climate-change/services/climate-change/
pricing-pollution-how-it-will-work/new-brunswick.html.
Source: Ibid.
Source: Ibid.
Source: Government of Newfoundland and Labrador, Provincial Government Releases Federally-Approved Made-in-Newfoundland and Labrador Approach to Carbon Pricing,
October 23, 2018, https://www.releases.gov.nl.ca/releases/2018/mae/1023n01.aspx.
The NWT carbon tax is to be introduced by July 1, 2019 pending passage of Bill 42 “An Act to Amend the Petroleum Products Tax Act”. As of April 1, 2019— the cut-off
date of this report—Bill 42 has not been adopted yet. The NWT carbon tax will be considered “scheduled for implementation” once it has been formally adopted throughlegislation. Any upcoming developments regarding the status of the NWT carbon tax will be included in the next edition of the State and Trends of Carbon Pricing report
and the Carbon Pricing Dashboard.
Source: Government of Northwest Territories, Implementing Carbon Pricing in the NWT - Investing in Green Initiatives, accessed March 19, 2019, https://www.fin.gov.nt.ca/en/
carbon-pricing.
Source: Government of Northwest Territories, Implementing Carbon Pricing in the NWT, accessed April 11, 2019, https://www.fin.gov.nt.ca/en/carbon-pricing.
Source: Ibid.
Source: Ibid.
Source: Ibid.
Authors' calculation based on Environment Canada, National Inventory Report 1990-2017: Greenhouse Gas Sources and Sinks in Canada, 2019.
Source: Government of Nunavut, Budget Address 2019, February 20, 2019, https://www.gov.nu.ca/sites/default/files/2019-20_budget_address_2019-english.pdf.
Source: Government of Canada, Nunavut and Pollution Pricing, November 23, 2018, https://www.canada.ca/en/environment-climate-change/services/climate-change/
pricing-pollution-how-it-will-work/nunavut.html.
Source: Dobson et al., The Greenhouse Gas Emissions Coverage of Carbon Pricing Instruments for Canadian Provinces, SSP Research Paper, February 2019.
Source: Government of Canada, Ontario and Pollution Pricing, February 21, 2019, https://www.canada.ca/en/environment-climate-change/services/climate-change/pricingpollution-how-it-will-work/ontario.html.

84

Jurisdiction Type and status
Prince Edward
IslandCoverage

Carbon tax
implemented

65% (own
initiative)

Federal OBPS
only opt-in

3% (federal
backstop)340

Revenue use
Use of carbon pricing revenues include:341−− All revenues on gasoline and diesel
are returned to its citizens to partly
incentivize low emission activities
through public transport grants, freevehicle registration for electric andplug-in hybrid vehicles, a reductionof registration fees for other vehicles,
and free driver’s licenses

Exemptions
Exemptions and/or competitivenessmeasures include:342−− Various exemptions including fuel usedby farmers, fishers, aquaculturists,
international aviation and shipping, andfuels used by facilities under the federal
OBPS−− Furnace oil used for heating andpropane are exempt, subject to a review
in 2020343
No additional exemptions and/or
competitiveness measures to the federal
OBPS have been introduced for theprovince.

QuébecETS implemented
Federalbenchmark met

85% (own
initiative)

Use of carbon pricing revenues include:344−− Energy efficiency measures forbuildings, industrial processes andvehicle fleets−− Support for the development of mass
and active transit−− Electrification of transport−− Support of renewable energy sourcesin all activity sectors−− Research and development in the fieldof clean technology

Exemptions and/or competitivenessmeasures include:345−− Industrial facilities that are consideredemissions-intensive and trade exposed
receive free allowances throughbenchmarks based on input of material
or output of products, production levels,and an increasingly stringent GHG
emission intensity target that varies per
activity.
−− Free allowances are allocated also tovoluntary emitters, i.e. entities thatvoluntarily participate in the scheme.
Intensity targets and production levels forfree allocation are increasingly stringent
over time.

Saskatchewan

ETS implemented
Federal backstop
system partially
imposed12%(Saskatchewan
OBPS)
51% (federal
backstop)346

Contribution to a provincial technology
fund is one of several compliancemechanisms in Saskatchewan’s
OBPS program. Funds within thetechnology fund will be used to invest intransformative industrial innovation thatwill lower greenhouse gas emissions.

No additional exemptions and/or
competitiveness measures to the federal
backstop system have been introduced forthe province.

Carbon pricing revenues from thefederal backstop system are returned tothe province’s population as describedabove and do not go to the provincial
government.
Tax returns to individuals (CAN$305/
US$229 single/first adult; CAN$152/
US$114 for second adult in couple or
first child for single parents; CAN$76/
US$57 per child other than first for
single parent in 2019)347

340
341
342
343
344
345
346
347

Source: Dobson et al., The Greenhouse Gas Emissions Coverage of Carbon Pricing Instruments for Canadian Provinces, SSP Research Paper, February 2019.
Source: Government of Nova Scotia, Nova Scotia’s Cap and Trade Program - Regulatory Framework, October 2018, https://climatechange.novascotia.ca/sites/default/files/
Nova-Scotia-Cap-and-Trade-Regulatory-Framework.pdf.
Source: Government of Prince Edward Islands, Carbon Levy Exemptions, November 8, 2018, https://www.princeedwardisland.ca/en/information/finance/carbon-levyexemptions.
Source: Government of Prince Edward Islands, Carbon Levy Rates, November 8, 2018, https://www.princeedwardisland.ca/en/information/finance/carbon-levy-rates.
Source: Government of Québec, 2013-2020 Climate Change Action Plan, accessed April 11, 2019, http://www.environnement.gouv.qc.ca/changementsclimatiques/planaction-fonds-vert-en.asp.
Source: ICAP, Canada - Québec Cap-and-Trade System, April 9, 2019, https://icapcarbonaction.com/en/?option=com_
etsmap&task=export&format=pdf&layout=list&systems[]=73.
Source: Dobson et al., The Greenhouse Gas Emissions Coverage of Carbon Pricing Instruments for Canadian Provinces, SSP Research Paper, February 2019.
Source: Government of Canada, Saskatchewan and Pollution Pricing, 21 2019, https://www.canada.ca/en/environment-climate-change/services/climate-change/pricingpollution-how-it-will-work/saskatchewan.html.

Annex II

Jurisdiction Type and status
Yukon

Federal backstop
system opt-in

Coverage
95% (federal
backstop)348

Revenue use
Use of carbon pricing revenues include:349−− Rebates to households(CAN$43/US$48 per person)350 witha supplement for individuals who live
outside of an urban area−− Tax credits to businesses withadditional credits for businesses who
invest in clean energy generation andequipment

348
349
350
351

Exemptions
Exemptions and/or competitivenessmeasures include:351−− In addition to federal exemptions,additional relief for fuels used foraviation in the territory and dieselfired electricity generation for remotecommunities

Authors' calculation based on Government of Yukon, Greenhouse gas emissions in Yukon, 2018.
Source: Government of Canada, Saskatchewan and Pollution Pricing, 21 2019, https://www.canada.ca/en/environment-climate-change/services/climate-change/pricingpollution-how-it-will-work/saskatchewan.html.
Source: Government of Yukon, Proposed Framework for the Yukon Government Carbon Price Rebate, January 2019, https://yukon.ca/sites/yukon.ca/files/fin/proposed_
framework_ygcpr_17_jan_2019.pdf.
Source: Government of Canada, Nunavut and Pollution Pricing, November 23, 2018, https://www.canada.ca/en/environment-climate-change/services/climate-change/
pricing-pollution-how-it-will-work/nunavut.html.

85

86

Annex IIINDC table

Table 5 shows the main unconditional and conditionaltargets in the NDC of each Party, whether the NDC
states that the Party is planning or considering theuse of carbon pricing, and whether carbon pricing will
be a domestic or international initiative. Only NDCs
that have been uploaded to the UNFCCC interim
NDC Registry are listed below. For the purpose of thisreport, carbon pricing includes ETSs, carbon taxes andother market mechanisms. The targets are based on
the UNFCCC interim NDC Registry and the World Bank
Group NDC Platform. The authors recognize that the
text in NDCs can be interpreted in different ways andother assessments of the targets and the mentionof carbon pricing/market mechanisms are possible,
because this information is not always presented ina clear and consistent manner in NDCs. The mentionof carbon pricing in a domestic context may notnecessarily mean that a domestic carbon pricing
initiative is formally under consideration. Also, not all
Parties that already have a carbon pricing initiative
implemented, scheduled or under consideration
have reported this in their NDC. The number ofParties planning or considering the use of carbon
pricing in their NDC is therefore not comparablewith the jurisdictions with carbon pricing initiatives
implemented, scheduled or under consideration.

Table 5 / Unconditional and conditional targets and intended use of carbon pricing and/or
market instruments stated in NDCs

NDCs
Afghanistan

Unconditional target

Conditional target

Mention ofcarbon pricing–

13.6% below BAU by 2030

International

Albania

11.5% below BAU by 2030–

International

Algeria

7% below BAU levels by 2030

Andorra37% below 1990 by 2030

Angola35% unconditional reduction below BAU by
2030

Antigua andBarbudaNDC sets out a number of measures

Argentina

Argentina shall not exceed a net emissionof 483 MtCO2eq by the year 2030. (18%
reductions compared to BAU)

Additional 15% reduction is conditional–
Additional 15% is conditional–

Additional 19% reductions is conditional(see graph)

No
No
No

International

International

Annex III

NDCs

Armenia

Unconditional target

Conditional target–

Ensure total emissions of Armenia do not
exceed 663MTCO2 and 189 tonnes per personby 2030

Mention ofcarbon pricing
International

Australia

26-28% below 2005 levels by 2030–

No

Azerbaijan

35% below 1990 levels by 2030–

No

Bahamas, The

30% compared to BAU levels–

International

Bahrain

NDC sets out a number of sectoral measures,without setting targets–

No

Bangladesh

5% unconditional reduction below BAU by2030

Barbados–

Additional 15% is conditional

International

37% below BAU levels by 2025, and 44% below
BAU levels by 2030

International

Belarus

28% below 1990 levels by 2030

BelizeNDC sets out a number of sectoral measures

NDC sets out a number of sectoral measures

International

Benin

NDC sets out unconditional targets per sector:
3.63% overall; energy: 1.98%; agriculture 5.8%
and LULUCF 23.4%

NDC sets out conditional targets per sector:
12.55% overall; energy: 9.53%; agriculture
25.3% and LULUCF 76.6%

No

BhutanBhutan intends to remain carbon neutral
whereby GHG emissions will not exceed
sequestration by its forests–

No

Bolivia

NDC sets out development goals–No

Bosnia andHerzegovina

2% below BAU (corresponding to +18% over1990 levels) unconditional target

Botswana

15% reduction below 2010 levels by 2030–

International

Brazil

37% below 2005 by 2025, 43% by 2030
(indicative)–

International

Brunei Darussalam

NDC sets out 3 sectoral targets–

No

Burkina Faso

Unconditional target of 6.6% below BAU by
2030

Additional 5% is conditional

International

BurundiUnconditional target of 3% compared to BAU
levels by 2030

Additional 17% is conditional

No

Cabo Verde

30% renewable energy target by 2025.

With international support, 100% renewableenergy by 2025. Overall GHG reductions will becalculated and submitted in 2016.

International

27% below 2010 levels by 2030

International

Cambodia––

Additional 21% is conditional

87

No

International

Cameroon

32% below 2010 levels by 2035–

International

Canada30% below 2005 levels by 2030 (unchanged
from NDC)–International anddomestic

88

NDCs

Unconditional target

Conditional target

Mention ofcarbon pricing

Central African
Republic

5% below BAU by 2030

Chad

Unconditional target of 18.2% below 2010
levelsAdditional 52.8% is conditional

International

Chile

30% unconditional emission intensity
reduction by 2030

Additional 35-45% is conditional

International

China

60-65% carbon intensity reduction by 2030

Colombia

20% below BAU by 2030

Comores

84% below BAU by 2030–

No

Congo, Democratic
Republic of

17% below 2000 levels by 2030

–

No

–

48% below BAU levels by 2025, 55% by 2030

No

Cook Islands

Unconditional target of 38% below 2006 levels
by 2020 in the electricity generation sector

Conditional 81% reduction below 2006 by 2030
in the electricity generation sector

No

Costa Rica

44% reduction compared to BAU levels by
2030, and a 25% reduction compared to 2012
levels. Costa Rica is committed to becoming acarbon neutral country by 2021.

–

International anddomestic

Cuba

NDC sets out a number of sectoral actions–

No

Djibouti

40% below 2010 levels by 2030

Congo, Republic of––Additional 10% is subject to international
supportInternational

Domestic
International

Additional 20% is conditional

No

Dominica–

39.2% below BAU levels by 2025, and 44.7%
below BAU levels by 2030

International

Dominican
Republic–

25% below 2010 levels by 2030

International

EcuadorUnconditional energy sector target of 20.4 to
25% below BAU levels by 2030.

Conditional target in the energy sector of 37.5
to 45.8% below BAU levels by 2030.

–

Egypt

–

NDC sets out a number of sectoral measures

International anddomestic

El Salvador

NDC sets out a number of sectoral measures–

No

Equatorial Guinea

20% below 2010 levels by 2030–

International

Eritrea

39.2% unconditionally below BAU by 2030

Ethiopia–

Additional 41.6% is conditional
64% by 2030 compared to BAU projections

International

European Union

40% below 1990 levels by 2030

–

No

Fiji

Reduction of emissions from the energy sector
by 30% below BAU by 2030–

International

Annex III

NDCs

Unconditional target

Conditional target

Mention ofcarbon pricing

Gabon

At least 50% by 2025 compared to reference
scenario–

Domestic

Gambia, The

44.4% in 2025 and 45.4% in 2030-both below
2010 levels–

International

Georgia

15% unconditional emissions reduction below
BAU by 2030

Additional 10% is conditional

No

Ghana

15% unconditional reduction below BAU by
2030

Additional 30% is conditional

International

30% reduction by 2025, with an indicative
reduction of 40% by 2030

International

Additional 11.4% is conditional

International–

13% reduction below BAU by 2030

International–

According to 2006 data, Guinea-Bissau is anabsolute sink for greenhouse gases and assuch has not put forward a GHG reduction
target. It will however, implement new policies
to combat deforestation in the country.

International–

International

GrenadaGuatemalaGuineaGuinea-Bissau–
11.2% unconditional below BAU by 2030

Guyana52MtC02e reduction by 2025

Haiti

Unconditional target of 5% below BAU levels
by 2030

Honduras

15% below BAU by 2030–

No

Iceland

40% below 1990 levels by 2030–

Domestic

India

33 to 35% carbon intensity reduction over2005 levels by 2030–

International

Indonesia

29% below BAU by 2030

Additional 12% is conditional

InternationalIran, Islamic
Republic ofUnconditional reduction of 4% below BAU by
2030

Additional 8% is conditional

No

Iraq

1% reduction below BAU by 2035

Additional 13% is conditional

No

Israel

26% below 2005 levels by 2030–

No

Ivory Coast

28% below BAU by 2030–

International

Jamaica

7.8% unconditional reduction below BAU by
2030

Japan

26% by 2030 (equivalent to 25.4% reduction
compared to 2005)

Jordan

1.5% below BAU by 2030

Additional 12.5% is conditional

International

Kazakhstan

Conditional target of a 15% reduction below
1990 levels by 2030

Additional 10% is conditional

International

Additional 21% is conditional

Additional 2.2% is conditional–

89

International

No

International

90

NDCs

Unconditional target

Kenya

–

Kiribati

Conditional target

Mention ofcarbon pricing

30% below BAU by 2030

International

12.8% by 2030 below BAU

Additional 49% is conditional

International

Korea, Democratic
People's RepublicofUnconditional 8% reduction below BAU by
2030

An additional 32.25% reductions conditional

No

Korea, Republic of

37% below BAU by 2030–

International anddomestic

Kuwait

NDC sets out a number of measures–

No

Kyrgyz Republic

11.49 to 13.75% below BAU levels by 2030

Lao People’s
Democratic
Republic

NDC sets out a number of sectoral measures

LebanonUnconditional target of 15% compared to BAU
levels by 2030

Additional 15% is conditional

No

LesothoUnconditional target of 10% compared to BAU
levels by 2030

Additional 25% is conditional

International

Liberia–

15% below BAU levels by 2030

International

Additionally, with international support

Liechtenstein
Madagascar

40% below 1990 levels by 2030–

It could reduce emissions by 35.06 - 36.75%
below BAU in 2050

–

–

No

International

No

14% below BAU by 2030 reduction isconditional

No

MalawiNDC sets out a number of sectoral measures

NDC sets out a number of sectoral measures

No

Malaysia

Reduce GDP emissions intensity by 35% by2030 compared to 2005 levels

Additional 10% is conditional

No

Maldives

Unconditional target of 10% below BAU by
2030

Additional 14% is conditionalNo

29% reduction below BAU for agriculture, 31%
for energy and 21% for forests and changes inland use

International

Mali

–

Marshall Islands

32% GHG reduction by 2025 compared to 2010
levels; 45% reduction by 2030 compared to2010 levels

58% reduction by 2035; net-zero by 2050

No

Mauritania

22.3% below BAU by 2030

Additional 65.7% is conditional

No

Mauritius–

30% below BAU by 2030

No

Additional 15% is subject to a global
agreement addressing important topics suchas carbon pricing, technical cooperation andaccess to financial resources and technology.

International

Mexico25% below BAU by 2030 (22% of GHG and areduction of 51% of Black Carbon).

Annex III

NDCs

Unconditional target

Conditional target

Mention ofcarbon pricing

Micronesia,
Federated States ofUnconditional reduction of 28% below 2000
levels by 2025

Additional 7% is conditionalNo

Moldova

64-67% reduction below 1990 levels by 2030

Additional 11-14% is conditional

International

Monaco50% below 1990 levels by 2030

Mongolia–

Montenegro

30% below 1990 levels by 2030

Morocco17 % reduction by 2030 compared to BAU,
with 4% coming from AFOLU actions. Without
AFOLU actions, the reduction target is 13%.

Mozambique–

Myanmar

NDC sets out a number of sectoral measures

Namibia

79% reduction compared to BAU levels by
2030

Nauru

NDC sets out a number of measures in theenergy sector

Nepal
New Zealand

Nicaragua–
30% below 2005 levels by 2030
Continue the increase of renewables to 60%
by 2030
Maintaining the countries' carbon sink atcurrent levels–
14% below BAU by 2030

International
International–

International

Additional 25% reduction (21% without AFOLU)
is conditional

International

Reduction of 76.5 MTCO2e by 2030

International–
Additional 10% is conditional–
NDC sets out sectoral targets

NoInternational

No
International–

International

Increase the national carbon sink by 20%
compared to the business-as-usual scenario
by 2030

International

Niger

Unconditional target of 2.5% below 2020 BAU
levels by 2020 and 3.5% below 2030 levels by
2030

Additional 22.5 by 2020 and 31.1% by 2030 isconditional

International

Nigeria

20% unconditional reduction below BAU by
2030

Additional 25% is conditional

International

Niue

NDC sets out a number of measures in theenergy sector–

North Macedonia

30% reduction of CO2 emissions from fossil
fuel combustion below BAU by 2030

Additional 6% is conditional on higher level ofambition

NorwayAt least 40% below 1990 levels by 2030

Oman

–

–

No

International
Domestic

2% below BAU by 2030

Pakistan

NDC does not set out any specific target

–

No

Palau

22% energy sector emissions reductions below
2005 levels by 2025–

No

Panama

10% increase of absorption capacity of forests
by 2050 compared to 2015

Additional 70% absorption capacity is
conditional

91

International anddomestic

92

NDCs

Unconditional target

Conditional target

Papua New Guinea

Carbon Neutrality by 2030

Paraguay

10% unconditional reduction below BAU by
2030

Additional 10% is conditional

International

Peru

Unconditional target of 20% below BAU by
2030

Additional 10% is conditional

International

Philippines––

Mention ofcarbon pricing
No

70% below BAU by 2030

Qatar

NDC sets out a number of sectoral measures,without setting targets–

Russian Federation

25-30% below 1990 levels by 2030–

RwandaEstimation of emissions reduction is underway–

International

Samoa

Samoa is committed to 100% renewableenergy generation by 2017 and maintaining
this to 2025. Samoa will make an economywide emission reduction target withinternational assistance.

–

International

San Marino

20% below 2005 levels by 2030–

International

São Tomé and
Príncipe–

Saudi Arabia

NDC seeks to achieve mitigation ambitions of
up to 130 million tons of CO2e avoided by 2030
annually

Senegal

5% unconditional reduction below BAU by2030

Serbia

9.8% below 1990 levels by 2030

24% reduction below 2005 levels by 2030–

Additional 16% is conditional–

No

International

No

No
No

Seychelles–

21.4% in 2025 and 29% in 2030 below BAU

No

Sierra Leone–

Emissions will not exceed 7.58 MtCO2e in 2035and carbon neutrality by 2050

International–

International

Singapore

36% carbon intensity reduction by 2030

Solomon Islands

Unconditional targets of 12% below 2015
levels by 2025 and 30% below 2015 levels by
2030

Somalia

NDC sets out a number of sectoral measures–

No

South Africa

SA’s commitment takes the form of a peak,plateau and decline GHG emissions trajectory
range. SA's emissions will peak between 2020
and 2025, plateau for approximately a decadeand decline in absolute terms thereafter.

–

Domestic

South Sudan

NDC sets out a number of sectoral measures–

No

Additional 15% by 2030 is conditional

International

Annex III

NDCs

Unconditional target

Conditional target

Mention ofcarbon pricing

4% unconditional reduction below BAU inenergy sector, 3% unconditional reduction inother sectors

Additional 16% conditional reductions inenergy sector and 7% conditional in othersectorsNo

St. Kitts and Nevis–

35% GHG reduction below BAU by 2030

International

St. Lucia–

23% conditional reduction below BAU by 2030

International anddomestic

Sri Lanka

St. Vincent and the
Grenadines–International–

NDC sets out a number of sectoral measures

International

Suriname

NDC sets out a number of sectoral measures;Install renewable energy and protect coastalmangrove forests.

–

International

Swaziland–

NDC sets out a number of sectoral measures

International–

International

–

No

Sudan

Switzerland
Syrian Arab
Republic
Tajikistan
Tanzania

22% below BAU by 2025

50% below 1990 levels by 2030–
Unconditional target of 10-20% reduction of1990 levels by 2030–

Thailand

20% unconditional below BAU by 2030

Timor-Leste

No emissions targets, instead outlines
activities to be undertaken in various sectors

Togo

11.14% unconditional below BAU by 2030

Tonga

NDC sets out a number of sectoral targets

Trinidad andTobago–Tunisia

13% unconditional carbon intensity reduction
by 2030

Turkey21% below BAU levels by 2030

Turkmenistan–

Tuvalu60% emissions reduction below 2010 levels by
2025

Uganda–UkraineUkraine will not exceed 60% of 1990 emission
levels by 2030.

Additional 5-15% is conditional

No10-20% below BAU emissions by 2030

No

Additional 5% is conditional

International–
Additional 20% is conditional–

No
International
No

15% below BAU by 2030 (conditional oninternational financing)

International anddomestic

Additional 28% is conditional

International–

No

Stabilization of greenhouse gas emissions by
2030

No

Further reductions conditional upon thenecessary technology and financeNo

22% below BAU by 2030

International–

93

International

94

NDCs

Mention ofcarbon pricing

Unconditional target

Conditional target

United ArabEmirates

NDC sets out a number of sectoral measures,
including a clean energy target of 24% by 2021–

No

United States

26-28% below 2005 levels by 2025–

No

Uruguay

Uruguay's first NDC specifies unconditionaltargets for GHG intensity (subdivided into
targets for CO2 [-24%], CH4 [-57%] and N2O[-48%]), GHG emission intensity of beef
production (subdivided into targets for CH4[-32%] and N2O [-34%]) and the LULUCF
sector (CO2 only, but subdivided by land-use
category: 100% maintenance of living biomass
on forest lands and avoiding CO2 emissions
from 10% of grassland, 50% of peatland and
75% of cropland)

Uruguay's first NDC specifies conditionaltargets for GHG intensity (subdivided into
targets for CO2 [-29%], CH4 [-59%] and N2O[-52%]), GHG emission intensity of beef
production (subdivided into targets for CH4[-37%] and N2O [-38%]) and the LULUCF sector(CO2 only, but subdivided by land-use category:
5% and 25% increases in native forest areaand shade and shelter forest, respectively, andavoiding CO2 emissions from 30% of grasslandand 100% of peatland)International

Uzbekistan–

10% GHG intensity reduction from 2010 levels
by 2030

No

Vanuatu

100% reduction for the power sector by 2030,
30% reduction for the energy sector as a whole–No

Venezuela,
República
Bolivariana de

20% GHG reduction below BAU by 2030–

No

VietnamUnconditional target of 8% compared to BAU
levels by 2030

Additional 17% subject to access tointernational cooperation and mechanisms

International

West Bank andGaza

NDC sets out a number of sectoral measures

24.4% below BAU by 2040

International

Yemen, Republic of

1% unconditional reduction below BAU by
2030

Additional 13% is conditionalNo

ZambiaUnconditional target of 25% compared to BAU
levels by 2030

Additional 22% is conditional

International

Zimbabwe–

33% reduction in carbon intensity below BAU
levels by 2030

International

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