How much are people across the world paying for their carbon emissions?

Recently, I was in a meeting with a group of people who do not normally spend much time in the same room: environmentalists, climate scientists, and economists.

Over several days, we debated and tried to untangle some of the most contested issues around climate change: how drastic the impacts would be, what solutions would look like, and what this would mean for global development. The discussions were intense. There were disagreements left, right, and center.

Despite all of the differences in the room, it struck me that there was one thing everyone agreed on: those who emit greenhouse gases should pay for the damage they cause — there should be a price on carbon.1

How, then, is the world acting on this rare consensus between environmentalists and economists?

We’ve made some progress. In 2010, just 7% of the world’s carbon dioxide (CO2) emissions were covered by a carbon price, either through a tax or a carbon trading scheme. Last year, 30% were.

We wrote about the coverage of carbon markets and how this has changed over time in a previous article.

But to be effective, carbon prices need to be high enough to make a meaningful difference to the price of goods and services — enough to incentivize innovation and to make cleaner alternatives meaningfully cheaper.

What is the price of carbon across these markets?

The chart below shows the global picture.2

Carbon pricing schemes are lined up from the most expensive on the left to the cheapest on the right. The width of each step shows the share of the world’s CO2 emissions it covers. This not only reflects differences across countries, but is also specific to the sectors or fuels within countries that are priced.3

On the very left-hand side of the chart, you can see that a small share of emissions — less than 0.5% of the total — are taxed at more than $100 per tonne. This is the emissions-weighted price in Uruguay, Sweden, Norway, Finland, Switzerland, and Hungary.

Many countries in Western Europe charge prices in the $65–90 range, mostly due to the European Union’s Emissions Trading Scheme. These emissions account for around 5% of the total.

The majority of carbon markets charge very little: most charge less than $10 per tonne, and some barely a dollar.

At 29%, the red line drops to zero: that’s because the remaining 71% of emissions have no carbon price at all.