The EU’s Carbon Border Adjustment Mechanism, which is presently in its transitional phase, is also encouraging Government across the Globe to adopt carbon pricing in high emission prone Industries e.g. iron and steel, aluminium, cement, fertilisers, and power

According to a World Bank report, carbon price revenues have touched a record high of $104 billion in 2023.

The World Bank has been studying carbon markets for over two decades, and this is their eleventh annual carbon price report.

Report highlights the growing number of financial instruments linked to Carbon Market and outlines that there are now 75 carbon pricing instruments, in usage globally. More than half of the revenue proceeds were utilised to finance climate and environmental programmes.

Research result also found that countries with significant and rising GDP , are taking steps in implementing carbon pricing. These countries include Brazil,  India Turkey, Colombia and Chile.

Though Carbon Pricing mechanism remains dominant in conventional industries e.g. power, its financial applications are increasingly being examined in emerging sectors such as aviation and shipping.

The EU’s Carbon Border Adjustment Mechanism, which is presently in its transitional phase, is also encouraging Government across the Globe to adopt carbon pricing in high emission prone Industries e.g. iron and steel, aluminium, cement, fertilisers, and power.

By 2050, overall investment in emerging markets and developing economies (EMDEs) is expected to be between $3 and $6 trillion per year.

The International Energy Agency (IEA) projects that US$1.8 trillion would be invested in renewable energy globally in 2023, up 40% from 2020.

While investment must continue to rise in all regions, the significant growth will be in emerging markets and developing economies (EMDEs).

The volume of investment necessary to fulfil the Paris Agreement targets is well above what is available from public sources.

Carbon credits can reduce compliance costs for regulated companies and incentivise action in noncovered sectors in EMDEs that use a carbon pricing mechanism (such as carbon taxes or emission trading systems).

Carbon Credits can also be integrated into financial instruments which are innovative in nature e.g. US$50 million emission reduction-linked bond, which provides upfront capital for the distribution of water purifiers in Vietnam. Under this innovative carbon instrument, investors receive payments based on the number of carbon credits generated rather than traditional coupon payments.

Carbon credit revenues are a valuable source of finance for improving the overall economics of the relevant carbon emission mitigation programme.

For E.g. The Africa Carbon Markets Initiative (ACMI) seeks to strengthen the voluntary carbon market in Africa to finance Africa’s universal energy access and sustainable energy transition.

During the previous year, the ACMI increased demand by securing US$1 billion in intentions to acquire and aggregate high-integrity African carbon credits by 2030, as well as another US$250 million in signed intentions to invest in projects to boost project developers’ access to funding.

Report highlights that despite record revenues and increases, global carbon pricing coverage and levels remain insufficient to satisfy the Paris Agreement’s targets. Currently, direct carbon pricing covers less than 1% of global greenhouse gas emissions.

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