Governments around the world are turning to carbon pricing to reduce greenhouse gas emissions and raise money for climate and development efforts. Carbon pricing tools—such as carbon taxes and emissions trading systems (ETSs)—now cover nearly a third of the world’s carbon pollution and generate billions in public revenue.
This article looks at recent trends in carbon pricing as seen in key industry reports. It covers global revenue figures, market changes, and how the money is spent.
From Niche to Norm: Carbon Pricing Goes Mainstream
Carbon pricing, a mechanism that puts a price on emissions, continues to grow as a global policy tool. Axel van Trotsenburg, World Bank Senior Managing Director, remarked:
“Carbon pricing remains a powerful tool for advancing multiple policy goals. It helps countries cut emissions, raise domestic revenues… and stimulate green growth and job creation. Carbon credit markets can also help mobilize private capital and channel funds to development priorities.”
As of early 2025, 80 carbon pricing instruments are in operation across the world, including 43 carbon taxes and 37 emissions trading systems (ETSs). This is a big jump from only 10 such instruments 20 years ago.
This trend shows how popular carbon pricing has become. These figures come from the World Bank’s State and Trends of Carbon Pricing 2025 report.
Combined, these systems now cover approximately 28% of global greenhouse gas emissions, up from 24% in 2023. This growth in coverage reflects major policy moves, especially the expansion of China’s national ETS.
In 2024, China expanded its system beyond just the power sector. Now, it includes major heavy industries like cement, steel, and aluminum. This change means the system now covers 15% of global emissions, as noted in the Global Carbon Accounts 2025 from I4CE (Institute for Climate Economics).
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Carbon pricing tools are used in countries that make up two-thirds of global GDP. More high-income and middle-income nations are adopting them.
In Latin America, Chile has expanded its pricing scheme to include non-electric sectors. In Africa, South Africa’s carbon tax is being strengthened. Meanwhile, countries like Brazil, Türkiye, and India are designing new systems with support from international institutions.
Most new carbon pricing programs in 2024 were ETSs, as governments seek more flexible, market-driven tools. ETSs allow companies to buy and sell allowances, creating a price signal while giving industries a pathway to adjust.
Still, many jurisdictions are layering ETSs on top of existing carbon taxes, or phasing in taxes where market systems are not yet feasible.
Another important trend is regional cooperation. The European Union is moving forward with its carbon border adjustment mechanism (CBAM). Meanwhile, U.S. states are looking into connected carbon markets. These changes show a worldwide shift to linked carbon pricing systems. This could boost climate efforts and enhance efficiency in the long run.
Over $100 Billion in Revenue—and Growing Potential
Carbon pricing is not only a climate policy—it’s also a growing source of public revenue. In 2024, governments around the world collected about $103 billion through carbon taxes and emissions trading systems. This figure, reported in the Global Carbon Accounts 2025, represents more than three times the total carbon revenue collected in 2013.
Most of this revenue came from ETSs, which generated 67% of the total, while carbon taxes accounted for the remaining 33%. The biggest source was the European Union’s Emissions Trading System (EU ETS). It provided 41% of global carbon revenues.
Germany’s national ETS came second with 14%, followed by Canada’s federal carbon tax, which generated 9%. Just ten jurisdictions made up 86% of global carbon revenues. This shows how important major economies are.
In 2024, revenues were a bit lower than in 2023 because of price changes in some markets. Still, the long-term trend is strong.
Similarly, the State and Trends of Carbon Pricing 2025 shows that around $102 billion in revenue was generated. The report also notes that average carbon prices in ETSs and taxes continued to rise or stabilize in most systems. This is especially true in the EU, the U.K., and New Zealand.
The revenue potential of carbon pricing is even more striking when modeled globally. If 2024 emissions were priced at $50 per ton of CO₂ equivalent, total annual revenue could hit an impressive $2.6 trillion, says the Global Carbon Accounts 2025. This would represent about 2% of global GDP and far exceed current climate finance flows.
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However, the current picture shows that most emissions are still unpriced or underpriced.
Many systems have carbon prices that fall below the $40–80 per ton range. This range is recommended by the High-Level Commission on Carbon Prices. It’s crucial to stay on track for Paris Agreement goals. This price gap limits both the environmental and fiscal impact of carbon pricing instruments.
The current revenue stream is crucial for funding clean energy, public transport, and climate resilience, despite these limitations. As more places use carbon pricing, this funding can help fill the climate finance gap. It also reduces the need for general taxes or debt.
How Are Carbon Revenues Used?
How governments use carbon revenues can affect public support and climate impact. In 2024, about 56% of all revenues were earmarked for environmental, climate, and development projects, according to both reports. These funds went to areas like green infrastructure, clean technology, and climate adaptation.
Meanwhile, 25% of revenues were used for social and economic support, such as direct transfers to households (19%) or tax breaks for businesses (6%). The remaining 19% went into general government budgets without a specific climate-related use.
Some countries use innovative models. For example, Germany uses its carbon revenues to fund the “Climate and Transformation Fund.” This fund helps clean energy, boosts energy efficiency, and provides social protections. The EU ETS recently mandated that 100% of its revenue be spent on climate and energy purposes, up from 50% before 2023.
Private Sector and Carbon Credit Market Growth
Beyond government pricing, the voluntary carbon market is playing a bigger role in driving emissions reductions. In 2024, private companies, especially in tech and energy-heavy sectors, drove the need for high-quality carbon credits. They focused on nature-based removal credits.
Although prices dropped slightly overall, credits with strong environmental benefits or international compliance status attracted premiums. Nature-based projects like reforestation and clean cooking saw strong issuance and demand.
By late 2024, nearly 1 billion tons of carbon credits remained unretired, mostly from older forestry or renewable energy projects. Companies use carbon credits for different reasons:
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To meet voluntary climate goals,
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To comply with emissions laws, and
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To offset travel.
New rules under Article 6 of the Paris Agreement are expected to boost international trade in these credits.
Looking Ahead: Trends and Takeaways
Carbon pricing is spreading, but not evenly. The power and industry sectors face the most pricing, while agriculture and transport remain largely unpriced. Most new systems are ETSs, and middle-income countries like Brazil, India, and Türkiye are preparing for implementation.
The carbon pricing landscape is dynamic, shaped by politics, economic pressures, and public support. For example, Canada repealed its national carbon tax in 2025, even though it returned all revenue to citizens. Poor communication and worries about inflation led to its failure. This shows that just using revenue isn’t enough: citizens need to understand and support the system.
Still, carbon pricing remains a powerful tool to fight climate change, raise funds for sustainable development, and drive investment. With better policy design, transparency, and communication, it can become a cornerstone of global climate finance.
