Calls for a global carbon pricing mechanism to drive meaningful reductions in greenhouse gas emissions are being made at the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP29) in Baku, Azerbaijan.
Carbon markets, which allow companies to buy and sell emission credits, remain complex and fragmented, with policies and prices varying widely across regions.
Dr Taj Gidda, GHD’s global leader for future energy, said a cohesive, global carbon pricing mechanism is essential to advance climate efforts.
“Carbon pricing and carbon credits are a powerful lever to mitigate emissions, and they’ve been in place in some form for nearly 25 years,” Gidda said.
“But these mechanisms vary significantly by country, region, and even by state or province which creates a lack of consistency in the market.
“A transparent, common carbon price on carbon could simplify the landscape and make it easier for developers and investors to understand the true value of their emissions reductions.”
Currently, this inconsistency makes it challenging for businesses to navigate opportunities and risks in carbon markets.
Gidda said a global price on carbon would address these inconsistencies and drive emissions reductions worldwide.
“A unified price allows us to maximise efficiencies, lower emissions, and offer businesses the predictability they need to invest in green technology,” he explains. “It also creates a clear, common price that more accurately reflects the global impact of carbon emissions.”
“Used appropriately, a global carbon price could become a tangible liability on the balance sheets of fossil fuel companies, pushing them toward a more rigorous approach to net zero planning.”
For clean energy developers, that same carbon price would be a line item that adds new revenue streams, helping substantiate their business cases and further incentivising low-carbon technologies.
“A universal carbon price isn’t just about cutting emissions - it's about embedding a consistent regulatory framework that holds emitters accountable while enabling green technologies to thrive,” he said.
Gidda believes that establishing a global price on carbon is key to accelerating the next phase of the energy transition.
Many climate experts agree that net zero will not be achieved without a carbon price.
In 2023, carbon pricing revenues reached a record $US104 billion, according to the World Bank’s annual “State and Trends of Carbon Pricing 2024 Report.
There are now 75 carbon pricing instruments in operation worldwide. Over half of the collected revenue was used to fund climate and nature-related programs.
World Bank senior managing director, Axel van Trotsenburg, said carbon pricing can be one of the most powerful tools to help countries reduce emissions.
“That’s why it is good to see these instruments expand to new sectors, become more adaptable and complement other measures,” Trotsenburg said.
“This report can help expand the knowledge base for policymakers to understand what is working and why both coverage and pricing need to go up for emissions to go down.”
The World Bank has been tracking carbon markets for around two decades and this is it’s eleventh annual carbon pricing report.
When the first report was released, carbon taxes and Emission Trading Systems (ETS) covered only seven per cent of the world’s emissions. According to the 2024 report, 24 per cent of global emissions are now covered.