Government policies seeking to transition economies to net-zero emissions are likely to increase globally, amid the urgency of mitigating climate change impacts. These are likely to include some form of carbon pricing regulations, one of the policy levers that we have observed being used by some governments as they aim to achieve emissions abatement targets. Many economists argue that carbon pricing policies are one of the most efficient policy levers to encourage reductions of GHG emissions. From an economic perspective, they provide direct incentives for households and firms to account for the environmental cost of carbon emissions.

Relatively few carbon pricing regulations are currently in place, covering less than a quarter of global GHG emissions. The largest carbon markets by emissions coverage are found in the EU and China, and others are in place in the U.K., Canada, select U.S. states, and Asia, among others.