Nearly half of all energy-related CO2 emissions in G20 economies are now covered by a carbon price, as several countries introduced or extended carbon taxes or emissions trading systems in the last few years to fight climate change, according to a new report from the Organization for Economic Cooperation and Development (OECD).
The study showed that G20 economies priced 49% of CO2 emissions from energy use in 2021, up from 37% in 2018.
The rise was driven by new emissions trading systems (ETS) in Canada, China, and Germany, new carbon levies in Canada, and a new carbon tax in South Africa, as well as Mexico’s introduction of carbon taxes at the subnational level, it said.
“G20 economies are lifting their ambition and efforts, including through the explicit and implicit pricing of carbon emissions. However, progress remains uneven across countries and sectors and is not well enough coordinated globally,” OECD Secretary-General Mathias Cormann said in a statement.
Carbon prices and equivalent measures need to become significantly more stringent, he said.
G20 economies made up for around 80% of global greenhouse gas emissions, with energy-related CO2 emissions making up around 80% of total G20 greenhouse gas emissions.
The share of emissions covered by carbon prices varies substantially across G20 economies, with South Korea in the lead at 97% of emissions priced.
“G20 emissions pricing is highest in road transport (where 94% of emissions are covered by fuel excise taxes) and electricity (64% of emissions priced) and lowest in industry (24%) and buildings (21%). Recent changes have been concentrated in the electricity sector.”
Recent progress has been driven by “explicit” carbon pricing, which uses carbon taxes and emissions trading systems to raise the cost of carbon-intensive fuels, thus encouraging firms and households to make more climate-friendly choices.
In all, twelve G20 economies now have explicit carbon pricing instruments in place or participate in the EU ETS.
Explicit carbon prices in the G20 have risen to an average of €4 ($4.64) per ton of CO2, with ETS prices at €3 versus €1 in 2018, as carbon prices in the EU’s ETS quadrupled. On the other hand, average carbon taxes across the G20 remain below €1 per ton.
The report also calculated an average “effective carbon rate”– the sum of explicit carbon prices and fuel excise taxes – for G20 economies and found it has increased by around €2 since 2018 to €19 per ton of CO2.