The 2025 State and Trends of Carbon Pricing report reveals that carbon pricing mechanisms are playing a growing role in driving climate finance and supporting sustainable development.
As of this year, approximately 28% of global greenhouse gas emissions are covered by direct carbon pricing instruments, such as carbon taxes and emissions trading systems (ETSs).
Jurisdictions accounting for two-thirds of the world’s GDP have adopted some form of carbon pricing, positioning the tool as a critical instrument for fiscal stability, green innovation, and climate investment. In 2024 alone, carbon pricing generated over $100 billion in public revenue, supporting both climate action and development agendas, particularly in developing economies.
The report underscores how carbon pricing is especially prominent in the power sector, where over half of emissions are now priced. However, sectoral coverage remains uneven, with industrial and transport sectors lagging behind in policy implementation.
On the voluntary and compliance carbon markets, the supply of carbon credits continues to outpace demand, bringing the global pool of unretired credits to nearly 1 billion tons by the end of 2024. Nevertheless, retirements of carbon credits rose in line with increased uptake by compliance markets, demonstrating growing interest in offsetting emissions responsibly.
Despite this growth, carbon credit prices softened slightly, with market preferences shifting toward nature-based carbon removal projects and high-quality verified credits. These types of credits continue to command a premium, reflecting demand for environmental integrity.
As the world looks to accelerate its climate commitments under the Paris Agreement, carbon pricing remains a central strategy. Governments and businesses alike are expected to intensify efforts to align pricing mechanisms with broader decarbonisation pathways.
Source: Further Africa
