Carbon price
A cost applied per tonne of CO2e emitted, through a carbon tax or an emissions trading system, so that the climate damage of emissions enters market prices.
A carbon price internalises the external cost of greenhouse gases. It takes two main forms: a carbon tax, which fixes the price and lets quantity adjust, and an emissions trading system, which fixes the quantity (cap) and lets the price adjust.
Price levels vary by an order of magnitude. EU ETS allowances traded mostly between EUR 60 and 100/t in 2022–2025, after peaking near EUR 100 in early 2023; the UK ETS was in the GBP 35–80 range; California-Quebec around USD 28–40; China's national ETS around CNY 60–100 (roughly USD 8–14). Sweden's carbon tax exceeds EUR 110/t, while many schemes covered by the World Bank State and Trends report price below USD 10/t. Around a quarter of global emissions are covered by some form of pricing.
At EUR 80/t, a coal plant emitting 0.95 t/MWh pays about EUR 76/MWh, a CCGT at 0.36 t/MWh about EUR 29/MWh. This differential drives coal-to-gas switching and improves the relative LCOE of low-carbon sources.
Related terms
All terms →- Emissions Trading System (ETS)
A cap-and-trade market in which a regulator caps total emissions, issues tradable allowances, and requires covered installations to surrender one allowance per tonne emitted.
- CBAM (Carbon Border Adjustment Mechanism)
An EU levy on the embedded emissions of imported carbon-intensive goods, aligning their carbon cost with that paid by EU producers under the EU ETS.
- LCOE (Levelized Cost of Electricity)
The constant price per MWh that recovers all lifetime costs of a power plant, discounted to present value, divided by its discounted lifetime output.
- Combined-cycle gas turbine (CCGT)
A power plant that runs a gas turbine and uses its hot exhaust to raise steam for a second, steam turbine, reaching electrical efficiencies of 55–64%.
- Carbon offset
A tradable credit representing one tonne of CO2e reduced, avoided or removed by a project outside the buyer’s own operations, used to compensate for the buyer’s emissions.