Countries are using carbon pricing in more flexible and targeted ways to meet multiple goals, not just cutting emissions, according to a new Organisation for Economic Co-operation and Development (OECD) report. The latest “Effective Carbon Rates 2025” analysis shows that carbon taxes and emissions trading systems (ETS) are expanding across more countries and sectors, with growing attention to energy costs, competitiveness, and revenue needs alongside climate targets.
Across 79 countries, which together produce 82% of global greenhouse gas emissions, almost 27% of emissions were covered by a carbon tax or ETS in 2023, up from 15% in 2018. More than 50 countries now use at least one of these tools, and a dozen more in Asia, Europe, and Latin America and the Caribbean have recently introduced or are considering new schemes. Most of the growth comes from ETSs: tax coverage has stayed at about 5%, while ETS coverage has more than doubled from 10% to 22%, and could reach 29% by 2025 with the expansion of China’s national system to aluminium, cement, and steel.
ETSs remain the main instrument in the power and industrial sectors, which account for around two-thirds of emissions, and are now reaching into transport, buildings, and even international shipping. Their design is also shifting. Instead of relying only on fixed caps, many systems now use intensity-based targets tied to emissions per unit of output, which gives companies more flexibility when production levels change. In 2018, just two of 20 ETSs were structured this way; by 2023, 12 of 34 were, covering about 70% of all emissions under ETSs. More schemes also adjust free allowances to current production levels, even in classic cap‑and‑trade systems, as policymakers try to balance climate ambition with economic realities.
