A total of 64 carbon pricing instruments are now in operation around the world, covering over 20 per cent of global Greenhouse Gas (GHG) emissions and generating USD 53 billion in revenue, according to a new World Bank report released on Tuesday.

A carbon cost can come in the form of a tax of via an Emissions Trading (ETS), or cap-and-trade scheme, said the annual State and Trends of Carbon Pricing report.

The advances represent a 17 per cent increase in revenue from last year, driven mainly by the rise in the European Union (EU) allowance prices – a programme that caps emissions, requiring countries that exceed these limits to purchase additional allowances.

Emissions trading systems have been also largely resilient to reduced economic activity during the COVID-19 pandemic, and likely helped by their price or supply adjustment mechanisms.

"It is encouraging to see how governments and companies are integrating carbon pricing into their climate strategies," said Ms Bernice Van Bronkhorst, Global Director for Climate Change at the World Bank. "But the potential of carbon pricing is still largely untapped, despite the fact that it can be effective in driving decarbonisation for countries in all stages of development. If implemented carefully, these policies can also be redirected to support lower income communities, getting resources to those who need them the most."

Key highlights in the report include the operational launch of China’s national ETS in January, 2021 and the upcoming changes to the EU ETS as part of the European Green Deal recovery package.

The report also finds that the majority of carbon prices remain far below the USD 40-80/tCO2e range recommended for 2020 to meet the 'well below 2°C’ temperature goal of the Paris Agreement. At this point, carbon prices in the recommended range cover less than 5 per cent of global emissions.

The report was launched at Innovate4Climate, the World Bank Group's flagship annual event on climate finance, investment, and markets, held virtually this year from May 25-27. Now in its fifth year, the conference will bring together leaders from government, business, policy, and finance to discuss innovative climate finance solutions.