Context:
The World Bank Group (WBG) has released the 13th edition of its annual flagship report, “State and Trends of Carbon Pricing 2026”, identifying India among the world’s largest new carbon markets following the launch of India’s Carbon Credit Trading Scheme (CCTS) in 2026. The report notes that global carbon pricing systems now cover 29 per cent of global greenhouse gas (GHG) emissions, up steadily over the past decade. Annual revenues from emissions trading systems (ETS) and carbon taxes have tripled over the past ten years, from less than USD 30 billion in 2016 to over USD 107 billion in 2025. Direct carbon prices have risen 7 per cent over the past year and nearly doubled over the decade, from about USD 10 per tCO2e in 2016 to nearly USD 21 per tCO2e in 2026.
Key Highlights
- Report: “State and Trends of Carbon Pricing 2026”, 13th edition.
- Publisher: World Bank Group (WBG).
- Date: May 2026.
Key headline numbers:
| Indicator | Value | Trend |
|---|---|---|
| Global GHG emissions covered by carbon pricing | 29 per cent | Up from previous years |
| Annual revenues from ETS and carbon taxes (2025) | Over USD 107 billion | Tripled from <USD 30 bn in 2016 |
| Global average direct carbon price (2026) | ~USD 21 per tCO2e | Up 7 per cent year-on-year; nearly doubled from USD 10 in 2016 |
| Active carbon pricing policies globally | 87 | Up 7 since 2025 |
| Coverage potential if all policies under development are implemented by 2030 | ~33.33 per cent of global GHG emissions |
India’s CCTS positioning:
- India’s Carbon Credit Trading Scheme (CCTS) launched in 2026.
- Notified by the Ministry of Power in consultation with the Ministry of Environment, Forest and Climate Change (MoEFCC).
- Administrator: Bureau of Energy Efficiency (BEE).
- Regulator: Grid Controller of India (formerly POSOCO).
- Replaces and builds on the earlier PAT (Perform, Achieve and Trade) Scheme.
India’s NDC commitments:
- Reduce emissions intensity of GDP by 45 per cent from 2005 levels by 2030.
- Achieve 50 per cent non-fossil installed power capacity by 2030.
- Net zero by 2070.
About the News (Q&A)
What does the World Bank report find?
That global carbon pricing now covers 29 per cent of GHG emissions, revenues have tripled to over USD 107 billion, prices have nearly doubled to ~USD 21 per tCO2e, and 87 carbon pricing policies are now in force globally. India is among the largest new carbon markets with the launch of its Carbon Credit Trading Scheme (CCTS) in 2026.
Why is India’s CCTS significant?
(a) It marks India’s transition from an energy-efficiency framework (PAT) to a formal carbon market. (b) It positions India as a major new player in global carbon markets. (c) It supports India’s NDC and net-zero 2070 commitments. (d) It creates financial incentives for industries to reduce emissions and invest in cleaner technologies.
What is the difference between an Emissions Trading System (ETS) and a Carbon Tax?
ETS is a cap-and-trade system: a government sets a cap on total emissions, issues tradable permits, and lets the market discover the price. Carbon tax is a price-based instrument: the government sets a fixed tax per tonne of CO2 equivalent, and emitters pay the tax directly. Both are forms of carbon pricing, but they differ on whether the cap or the price is fixed.
What is the future trajectory?
If all carbon pricing policies currently under development are implemented by 2030, nearly one-third of global GHG emissions could come under formal carbon pricing, marking a significant expansion in global climate policy coverage.
Background Concepts
What is Carbon Pricing?
A policy instrument that assigns a monetary cost to greenhouse gas emissions, internalising the environmental cost of carbon into economic decisions. Two main forms: (a) Emissions Trading System (ETS) or cap-and-trade: government sets a cap on total emissions; entities trade allowances within that cap. (b) Carbon Tax: government fixes a per-tonne tax on CO2 equivalent emissions. Carbon pricing creates financial incentives for emitters to reduce emissions, invest in cleaner technologies, and shift to low-carbon pathways.
What is the Carbon Credit Trading Scheme (CCTS)?
India’s national carbon market framework, notified under the Energy Conservation (Amendment) Act, 2022. It is administered by the Bureau of Energy Efficiency (BEE) under the Ministry of Power, with the MoEFCC involved in policy design and the Grid Controller of India as the registry and settlement operator. The CCTS replaces and builds on the earlier Perform, Achieve and Trade (PAT) scheme, and operates two market segments: a compliance market for designated obligated entities and an offset market for voluntary projects. It is the operational backbone of India’s emerging carbon market.
What is the Paris Agreement and what are India’s NDCs?
The Paris Agreement, adopted at COP21 in 2015, is a legally binding international treaty on climate change that aims to limit global warming to well below 2°C and pursue efforts to limit it to 1.5°C above pre-industrial levels. Countries submit Nationally Determined Contributions (NDCs), voluntary commitments updated every five years. India’s updated NDCs (2022) include: 45 per cent reduction in emissions intensity of GDP from 2005 levels by 2030, 50 per cent non-fossil installed power capacity by 2030, net zero by 2070, and creation of an additional 2.5 to 3 billion tonnes of CO2 equivalent carbon sink through forest and tree cover by 2030.
Practice MCQs
Q1. With reference to the World Bank’s “State and Trends of Carbon Pricing 2026” report, consider the following statements:
- Global carbon pricing systems currently cover 29 per cent of GHG emissions.
- India is identified among the world’s largest new carbon markets following the launch of its Carbon Credit Trading Scheme in 2026.
- Annual revenues from emissions trading systems and carbon taxes have tripled over the last decade.
- There are currently 87 carbon pricing policies being implemented globally.
How many of the above statements are correct? (a) Only one (b) Only two (c) Only three (d) All four (e) None
Q2. Consider the following statements about India’s Carbon Credit Trading Scheme (CCTS):
- It has been notified under the Energy Conservation (Amendment) Act, 2022.
- The Bureau of Energy Efficiency under the Ministry of Power is the administrator.
- It operates two market segments: a compliance market and an offset market.
- It replaces and builds on the earlier Perform, Achieve and Trade (PAT) scheme.
Which of the above are correct? (a) 1, 2 and 3 only (b) 1, 3 and 4 only (c) 2 and 4 only (d) 1 and 4 only (e) All four
Q3. Consider the following statements about carbon pricing instruments:
- An Emissions Trading System (ETS) is a cap-and-trade mechanism where the government sets a cap on total emissions.
- A carbon tax sets a fixed price per tonne of CO2 equivalent emissions.
- Both ETS and carbon tax are forms of carbon pricing.
- ETS and carbon tax cannot coexist in the same jurisdiction.
Which of the above are correct? (a) 1, 2 and 3 only (b) 1, 3 and 4 only (c) 2 and 4 only (d) 1 and 4 only (e) All four
Q4. With reference to India’s Nationally Determined Contributions (NDCs) under the Paris Agreement, consider the following statements:
- India has committed to reducing the emissions intensity of its GDP by 45 per cent from 2005 levels by 2030.
- India has committed to achieving 50 per cent non-fossil installed power capacity by 2030.
- India has committed to net zero emissions by 2070.
- India has committed to creating an additional carbon sink of 2.5 to 3 billion tonnes of CO2 equivalent by 2030 through forest and tree cover.
Which of the above are correct? (a) 1, 2 and 3 only (b) 1, 3 and 4 only (c) 2 and 4 only (d) 1 and 4 only (e) All four
Answer Key
- (d), All four statements are correct.
- (e), All four statements are correct.
- (a), Statements 1, 2, 3 are correct. Statement 4 is wrong; ETS and carbon tax can coexist in the same jurisdiction. Several countries operate hybrid systems, where some sectors are covered by an ETS and others by a carbon tax, or where a floor price is set within an ETS through a carbon tax.
- (e), All four statements are correct.
Exam Relevance
| Exam | Relevance |
|---|---|
| UPSC Prelims | GS Paper III on Environment (Climate change, Carbon pricing, NDCs); GS Paper II on IR (World Bank, Paris Agreement) |
| UPSC Mains | GS Paper III on Environment, Climate finance, Carbon markets |
| BPSC and State PCS | Environment, Economy, Current Affairs |
| Banking (RBI Gr B, NABARD) | ESG, climate finance, moderate to high importance |
| NABARD Grade A | Climate finance, sustainable agriculture |
