Manya Rathore
Research expert covering India
Carbon pricing worldwide - Statistics & Facts
Carbon pricing is gaining momentum worldwide. Since 2010, the number of carbon pricing mechanisms in operation has quadrupled to 80, and now cover more than a quarter of global GHG emissions. As a cost-effective tool to drive decarbonization, carbon pricing is set to play an increasingly important role in global climate policy. However, with GHG emissions continuing to rise, can this approach fulfil its potential?
The two main mechanisms are carbon taxes and emissions trading systems (ETS), of which 43 and 37 in operation as of 2025, respectively. Under a carbon tax, governments set a fixed price that businesses and industries must pay for each metric ton of carbon dioxide equivalent (tCoâ‚‚) they emit from burning carbon-based fossil fuels in their operations. ETSs, on the other hand, work on a cap-and-trade principle whereby governments set a limit on the amount of GHGs entities can emit each year. A fixed number of allowances are put on the market that allow the holder to emit one tCOâ‚‚ equivalent. These mechanisms cover emissions from several sectors, including power, industry, and buildings, though coverage varies depending on the jurisdiction. Additionally, voluntary carbon markets exist, which allow private entities to offset their emissions by purchasing voluntary carbon credits from projects that reduce or remove emissions, such as through forestry conservation.
What is carbon pricing?
Carbon pricing is designed to capture the cost to society that major carbon polluters cause when adding GHG emissions to the atmosphere. By putting a price on carbon, those who are most responsible for this damage have an economic incentive to reduce their usage of fossil fuels and turn to lower-carbon alternatives, thereby reducing emissions.The two main mechanisms are carbon taxes and emissions trading systems (ETS), of which 43 and 37 in operation as of 2025, respectively. Under a carbon tax, governments set a fixed price that businesses and industries must pay for each metric ton of carbon dioxide equivalent (tCoâ‚‚) they emit from burning carbon-based fossil fuels in their operations. ETSs, on the other hand, work on a cap-and-trade principle whereby governments set a limit on the amount of GHGs entities can emit each year. A fixed number of allowances are put on the market that allow the holder to emit one tCOâ‚‚ equivalent. These mechanisms cover emissions from several sectors, including power, industry, and buildings, though coverage varies depending on the jurisdiction. Additionally, voluntary carbon markets exist, which allow private entities to offset their emissions by purchasing voluntary carbon credits from projects that reduce or remove emissions, such as through forestry conservation.
Global carbon prices
Carbon prices vary greatly depending on the jurisdiction, the policies in place, and the pricing mechanism. For example, carbon trading prices on the European Union ETS, the world’s first major carbon market, were around 70 USD/tCO₂ as of April 2025. By comparison, prices on China’s national ETS, which launched to much fanfare in 2021 and is now the largest ETS by coverage, were just 12 USD/tCO₂. Carbon tax rates show similar disparity. In early 2025, the highest tax rates exceeded 150 USD/tCO₂, while the lowest rates were less than five USD/tCO₂.  Despite these differences, carbon pricing revenues are surging: in 2024 alone, countries around the world generated more than 100 billion U.S. dollars, double the amount generated just four years earlier.The outlook of carbon pricing
Carbon pricing is growing as a global strategy to combat climate change. Operational programs are set to expand to cover additional sectors, while several new mechanisms are expected to launch in the coming years, such as the EU ETS II. However, with direct carbon prices averaging just 23 U.S. dollars per metric ton globally in 2023, prices remain well below what is needed to meet Paris Agreement targets.
