Carbon pricing schemes are forecast to raise a total $22 billion for governments this year, up from an estimated $15 billion in 2014, according to a report released on Wednesday.
Around three quarters of that amount, or some $16.5 billion, is being generated in Europe through CO2 allowance sales under the EU ETS and national carbon taxes, for example in the UK and France, said the Climate Markets & Investment Association (CMIA), a London-headquartered trade group.
A further $5 billion or so is being raised by state and provincial governments in North America such as California, Quebec, and members of RGGI, with the remainder being collected under Japanese carbon taxes, the study said.
“Revenues from carbon pricing appear likely to continue to increase around the world, and continuing debate will be needed about how these funds should best be used in future,” it said.
Other countries including China, South Korea and New Zealand have carbon pricing mechanisms, but the programmes don’t currently channel revenue to the government.
CMIA said the year-on-year increase is mainly due to higher prices and auction volumes in the EU, an increase in the UK’s carbon price floor and France’s carbon tax, and an expansion in California and Quebec’s markets to include transportation.
The report also forecasts that South Africa’s national carbon tax, which may be delayed further beyond its planned 2016 launch, could raise over $1 billion annually, while a Chinese national scheme could also rake in for its government an amount similar to the current global total.
A draft of the rules that will underpin the Chinese ETS when it launches in 2017 show that Beijing is considering allowance auctions as well as free allocations.
CMIA predicted that carbon revenues could reach into the hundreds of billions of dollars in the long-term, as more governments put a price on greenhouse gas emissions.
“However, even if revenue grows to approximately 10 times current levels over the next decade or more, it would still represent only perhaps 0.2% of global GDP, and so remain only a small proportion of total flows within the world economy,” the report said.
Carbon pricing advocates are hoping negotiators at this December’s UN climate summit agree a framework for countries with existing and planned emissions trading systems and CO2 taxes to count those programmes towards their GHG reduction targets, in the hope that this will spur more such schemes.
In their submissions to this December’s UN climate summit, more than 70 nations have said they support carbon pricing in the form of market-based mechanisms.
By Mike Szabo – firstname.lastname@example.org