The Role of Carbon Pricing in Combating Climate Change

Mechanisms, Implementation and Impact.

This post is issued by Osmosis (Holdings) Limited, a London based investment management group. For more information, please contact Lisa Harrison on 07716 912832 or [email protected]

Although progress with carbon pricing has been swift in recent years, the actual prices of carbon are still insufficient if we are to achieve the Paris Agreement goals.

Executive Summary

  • Carbon pricing, primarily in the form of a carbon tax or an Emissions Trading System (ETS) is utilised as a cost-effective way of encouraging green innovation, emissions reductions, and the global transition to a low-carbon economy
  • Whilst growth in numbers of globally implemented carbon pricing mechanisms plateaued in 2023, there are promising signs of uptake from emerging market countries, which would add to global carbon pricing coverage
  • Carbon pricing revenues reached record highs in 2023, allowing investment into climate and biodiversity programmes
  • Although progress with carbon pricing has been swift in recent years, the actual prices of carbon are still insufficient if we are to achieve the Paris Agreement goals

The carbon pricing landscape continues to be a cost-effective policy lever in the global effort to combat climate change, as highlighted by the release of the World Bank’s annual State and Trends of Carbon Pricing Report, published this week. At their core, carbon pricing mechanisms are market-based strategies aimed at lowering global emissions by assigning a monetary value to greenhouse gas emissions and revolve around the idea of internalizing the external costs of carbon emissions. These costs, often borne by society in the form of health impacts, property and infrastructure damage, livelihood loss, and ecosystem degradation, are not typically factored into the price of goods and services.

The map below (chart 1) shows jurisdictions with carbon taxes or emissions trading systems implemented, under development or under consideration

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Important Information

Global Investors (ex US). This report is issued in the UK by Osmosis Investment Management UK Limited (“Osmosis”). Osmosis is authorised and regulated by the Financial Conduct Authority “FCA” with FRN 765056. This document is a “financial promotion” within the scope of the rules of the FCA. In the United Kingdom, the issue or distribution of this document is being made only to and directed only at professional clients (as defined in the rules of the FCA) (“Professional Clients”). This document must not be acted or relied upon by persons who are not Professional Clients. Any investment or investment activity to which this document relates is available only to Professional Clients and will be engaged in only with Professional Clients.

This document is issued by Osmosis Investment Management US LLC (“Osmosis”). Osmosis Investment Management UK Limited (“Osmosis UK”) is an affiliate of Osmosis and has been operating the Osmosis Model of Resource Efficiency. Osmosis UK is regulated by the FCA. Osmosis and Osmosis UK are both wholly owned by Osmosis (Holdings) Limited (“OHL”).

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