In May, the World Bank published their report on the state and trends of carbon pricing. It points to the fact that after many years of limited growth, carbon prices have grown rapidly in 2021. Both the level of carbon taxes and quota systems reached record levels in a number of jurisdictions. The underlying drivers are more ambitious climate policies and economic factors such as global energy prices.

Price per tonne of CO₂

The expansion of a number of quota systems and increases in quota prices have led to a similar increase in state revenues, and for the first time, revenues from quota sales have surpassed revenues from carbon taxes. However, the prices in most areas remain lower than necessary to achieve the goals of the Paris Agreement. The average level of carbon taxes globally in 2021 was $6 per tonnes. Among quota systems, the EU and UK stand out with prices of up to $100 per tonne of CO₂, while most other quota markets have prices around $10-30 per tonne. According to the World Bank, around 23% of global carbon emissions are subject to some form of carbon pricing instrument.

Need for transparency and verification

Regarding the voluntary markets for carbon credits, the World Bank writes that these are now at a crossroads. Market dynamics over the past year have driven a strong demand and increased diversity expressed by new buyers, different market niches and trade channels with distinct preferences. This has created a more varied pricing picture. Eventually, as the carbon credits market takes on a more important role in contributing to meeting climate goals, the need for transparency and verification of the credits sold will also grow. This will be a significant development going forwards. The volume of traded carbon credits in 2021 corresponds to 478 million tonnes of CO₂ at an average price of almost $4 per tonne. Credits focusing on removing CO₂ from the atmosphere were the most expensive, and were traded at prices of between $15 and $20 per tonne.

This is a part of the CCS environmental analysis, written by Gassnova’s analysis team. Please visit our CCS dictionary if there are professional expressions or abbreviations in this text you are not familiar with.