Carbon Pricing Dashboard

Carbon Pricing Dashboard

Subject: Environment

Section: International Convention

Carbon Pricing Dashboard

• Carbon Pricing Dashboard is a tool developed by the World Bank to track carbon pricing initiatives around the world. The dashboard provides information on carbon pricing policies and initiatives, including carbon taxes and emissions trading schemes, and is designed to help policymakers and stakeholders assess the effectiveness of different carbon pricing approaches.
• The Carbon Pricing Dashboard is an important tool for promoting global efforts to address climate change. By tracking carbon pricing initiatives around the world and providing information on their effectiveness, the dashboard can help to promote the adoption of effective and efficient carbon pricing policies, and to support efforts to reduce greenhouse gas emissions and mitigate the impacts of climate change.
• It builds on the data and analyses of the annual State and Trends of Carbon Pricing report series.
• This interactive tool complements World Bank Group activities to advance well-designed carbon pricing systems around the world:
  • The Partnership for Market Implementation (PMI): PMI assists countries to design, pilot, and implement pricing instruments aligned with their development priorities. A 10-year program with a capitalization target of US$250 million, the Partnership brings an ambitious and long-term vision for the viability of carbon markets to its support for programs and policies — across jurisdictions and sectors — that introduce a strong price signal on carbon emissions and contribute to the Paris Agreement goal of limiting temperature rise to 1.5°C.
  • The Carbon Pricing Leadership Coalition (CPLC): Launched in 2015, the CPLC brings together leaders from government, business and civil society, with the goal of putting in place effective carbon pricing policies that maintain competitiveness, create jobs, encourage innovation, and deliver meaningful emissions reductions.
  • The Mitigation Action Assessment Protocol (MAAP): the MAAP is an online interface a tool that establishes a transparent and independent framework to help governments, project developers, investors and other relevant stakeholders to design, assess and compare the relative risks and performance of mitigation efforts across the globe.
  • The International Carbon Action Partnership (ICAP) Secretariat supports the Carbon Pricing Dashboard by providing the latest data for mandatory cap-and-trade systems—building off the ICAP ETS Map.
  • ICAP is an international forum for governments and public authorities that have implemented or are planning to implement emissions trading systems (ETS). Founded in 2007 and now counting 40 jurisdictions from four continents among its Members and Observers, ICAP facilitates the exchange of experience and best practices among jurisdictions, with a view to improving collaboration and support in the gradual alignment and linking of domestic carbon markets.

What is carbon pricing?

• Carbon pricing is the value ascribed to the external costs – usually social costs – of pollution emitted by an industry
• Carbon pricing is done either through a carbon tax or an emission trading system.
• Carbon tax is the price that governments impose on polluters for each metric ton of carbon dioxide emissions generated.
• Carbon trading is a market-based approach in which each polluter is allotted a specific quota (permit) or allowance of pollution that it can emit and trade these permits.

Why a price on carbon?

• Carbon is priced because CO2 being the most emitted GHGs
• According to the latest IPCC report, the window of action for reducing emissions to limit global warming to 1.5 – 2 deg C above pre industrial level is rapidly closing.
• And global warming & climate change create conditions beyond human tolerance
• Currently, Carbon pricing is done in two ways: (1) carbon tax, (2) Cap-and-trading or emission trading system (ETS)

What is Carbon tax?

• Governments impose on polluters for each metric ton of CO2 emissions (mt CO2e) generated
• Levied on coal, oil products, and natural gases, according to their carbon content
• It motivates industries to improve energy efficiencies, move towards low-carbon fuels and renewable energy sources.
• Carbon taxes are fairly easy to administer as add-ons to already existent fuel taxes
• Generate revenue for governments that can be  utilised for achieving sustainable development goals.
• However, Carbon tax affects people of lower income groups as it increases fuel prices, and carbon taxes on industries trickle down to consumers
• In addition, carbon taxes may discourage investment and economic growth as businesses may shift production into countries without carbon taxes
• Finally, the administrative costs of monitoring and measuring emissions, and uncertainties in measuring the social costs of carbon pollution can make carbon taxation a difficult task.

What is carbon trading? 

• Market-based approach to pricing carbon emissions and to limit the total amount of carbon-based pollution that can be produced.
• Governments allocate a limited number (set as a cap) of permits that allow a specified amount of emissions over a period of time.
• Polluters are then allowed to trade these permits with each other.
• if a polluter manages to maintains emission levels lower than its assigned permit values, it can sell the right to emit carbon to another polluter which may be emitting more that its quota

What are carbon credits?

• A carbon credit is a generic term for a tradeable certificate or permit to emit a 1 metric tonCO2 or an equivalent amount of different GHGs.
• It is the basic trading unit for carbon markets.
• The carbon trading market was set up in 1997, after the Kyoto Protocol was signed. 
• Under this protocol, all participating countries were to set and adhere to a limit on their carbon emissions over a series of commitment periods.
• However, the protocol also allowed countries to trade emissions permits with each other.
• Apart from these permits, carbon removal units (from activities such as reforestation), emission reduction units, and certified emission reductions (from clean development mechanism projects) can also be traded
• The prices in cap-and-trade schemes, which use carbon credits, are market driven (meaning that their prices vary according to demand and supply), although the government controls how many units/credits are allotted to each industry/stakeholder, and so how many credits are available for sale on the whole.