GCPC Workshop No. 5: “Carbon pricing at different jurisdictional levels”
On December 17, 2024, the GCPC held its fifth online workshop on carbon pricing at different jurisdictional levels. Experts from GCPC Partners and Friends, Network Members, and countries interested in the GCPC shared their experiences with the implementation and interaction of carbon pricing policies across jurisdictional levels. The workshop was attended by more than 20 participants from government, international organisations, and research institutions.
Carbon pricing instruments can be implemented across various jurisdictional levels. In several countries, subnational jurisdictions have established their own carbon pricing policies. In some cases, these are complemented by carbon pricing instruments at the national level. Additionally, there are regional carbon pricing schemes, like the EU Emissions Trading System (EU ETS), which coexists with national carbon pricing policies in several EU member states.
Presentations
1. Germany’s national ETS and the planned transition to the EU ETS 2
Sophia Stüber, Federal Ministry for Economic Affairs and Climate Action, Germany
Sophia Stüber presented the German national ETS and the planned transition to the EU ETS 2 from 2027. The German national ETS started in 2021 and covers emissions from all fossil fuels especially in the in transport and heating sectors. It effectively complements the EU ETS by covering all emissions from fuel use that are not already covered by the EU ETS. However, unlike the EU ETS, the German national ETS covers upstream fuel distributors and suppliers, who then pass on the carbon price to consumers through retail prices. The system is currently still in an introduction phase with increasing fixed prices. A planned price increase from 2022 to 2023 was postponed in response to the sharp rise in energy prices that was caused by the Russian invasion of Ukraine. In 2025, the price per tonne of CO2 is €55. In 2026, auctioning will take place within a price corridor of €55-65. With the introduction of the EU ETS 2 in 2027 in all EU member states, the national ETS will be transitioned into the EU ETS 2.
2. The national carbon tax in France and interaction with the EU ETS
Jérémie Benhamou, Ministry of Ecological Transition, France
Jérémie Benhamou gave an overview of the French national carbon tax which was introduced in 2014. Unlike carbon taxes in other European countries, the French model is not a stand-alone carbon tax levied on emissions, but a carbon price component that is part of the general energy taxation. The carbon component applies to transport fuels and natural gas for heating, with rates starting at €5 per tonne of CO₂ in 2015 and rising to €100 by 2030. It currently stands at €45 per tonne of CO₂, or 11-13 cents per liter for fuels.
In 2018, planned increases were frozen following the “Yellow Vest” protests, sparked by public dissatisfaction with rising fuel prices and the lack of targeted use of revenues to support households. The scope of the scheme is closely aligned with the forthcoming EU ETS 2. Amongst other policy options, France is considering whether to maintain or adjust energy taxation schemes to ensure smoother integration into the EU ETS 2.
3. Carbon pricing at the subnational level: Querétaro’s carbon tax initiative and interaction with the federal level
Ricardo Hernández, Secretaría De Desarrollo Sustentable, Querétaro (Mexico)
Ricardo Hernández presented Mexico’s decarbonization strategy, which is in line with the country’s NDC targets for 2030 and 2050. To achieve these targets, 12 decarbonization pathways have been developed, including solar energy, vehicle electrification, renewable energy production and forestry initiatives. Due to limited fiscal capacity, Querétaro opted for a carbon pricing instrument - a compensable carbon tax targeting the industrial sector. Companies that emit greenhouse gases can either pay $34 per tonne or invest in approved local decarbonization projects to offset emissions. Compensation rates vary, with low emitters allowed to offset up to 20% and EITE (“Emission Intensive and Trade Exposed“) companies up to 90%.
The scheme prioritizes local and national carbon offset projects but allows international offsets where local supply is insufficient. Since its implementation in 2021, limited domestic project development has constrained the market, forcing companies to rely on international credits. Despite these challenges, the scheme has facilitated modest progress in reducing emissions, with plans to expand and refine operations in 2025.