What is Carbon Pricing?

Carbon pricing is a mechanism that harnesses market forces to create incentives for companies and countries to reduce and compensate for their emissions. 

What determines the price of carbon credits?

There are many ways to value a carbon credit. One of the critical factors that influence its price is the quality of the project. A higher cost is required to ensure that project benefits are real, long-term, and as significant as possible. Pricing can also vary by project type, size, location, and other determining factors. For instance, carbon credits from reforestation projects are more expensive than those from cookstove projects. Moreover, reforestation projects with solid conservation elements fetch higher prices than regular reforestation projects. 

Increasingly applied

According to the World Bank, priced emissions accounted for just over 20 % of emissions in 2021, up from 15% in 2020 and 5% in 2021. Most emissions, however, are not yet subject to pricing. 

Current state

The World Bank states that current prices should be between $40 and $80 per tonne of CO2 emissions to comply with the Paris Climate Agreement. But most of the time, the price is under $40.

Why is Carbon Pricing important?

Carbon pricing is a tool to capture the external costs of greenhouse gas (GHG) emissions – such as crop damage, health care costs, natural disaster losses, or the costs of emissions paid for by the public. It ties these emissions to their source. Usually in the form of a price on the carbon dioxide (CO2) emitted. 

At DGB, we support better pricing of CO2 emissions. This could be done by applying a price tag to multiple emissions and raising those prices over time. Organisations can do this in various ways. Introducing a CO2 tax or an Emissions Trading System (ETS) are excellent tools for companies to purchase credits to compensate for their carbon emissions.

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Carbon Pricing in Europe

At the European level, much more can be achieved. The European Commission (EC) presented a comprehensive set of proposals to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels in July 2021. 

Carbon pricing is an integral part of the proposal. Currently, only certain companies in the EU’s energy and heavy industry sectors pay for their carbon footprint. 

Some countries that have already implemented methods of national carbon pricing are: Argentina, Canada, Chile, China, Colombia, Denmark, the European Union (27 countries), Japan, Kazakhstan, Korea, Mexico, New Zealand, Norway, Singapore, South Africa, Sweden, the UK, and Ukraine.

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We invest, develop and manage on-the-ground projects to originate carbon- and biodiversity credits

According to “State and Trends of Carbon Pricing” report, global carbon pricing revenue in 2021 increased by almost 60 per cent from 2020 to around $84 billion. This result provides an essential source of funds to help support a sustainable economic recovery, finance broader fiscal reforms, or invest in communities as part of the low-carbon transition future.

How we create value for the planet

Help build a greener future

With tailor-made project investment opportunities and a transparent verification process, you will be involved every step of the way.

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Worldwide scouting for the best nature conservation projects

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Planting trees, conserving nature and monitoring the land

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Certifying & verifying our impact and creating carbon credits

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Helping corporations achieve net zero by selling our offsets

Get in touch

As the world’s first publicly traded purpose company focused on ecosystem restoration, DGB is harnessing market forces and the access to capital needed to accelerate Earth’s reforestation rapidly. Reach out to us to learn more about our work.

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