Increasing Climate Ambition: Analysis of an International Carbon Price Floor

The analysis finds that an International Carbon Price Floor (ICPF) could reduce global greenhouse gas emissions by 9.5% to 12.3% by 2030 with a global GDP contraction of less than 1%. The report highlights that middle-income countries, particularly China, would drive the majority of emissions reductions. While impacts are uneven—with the South African Customs Union seeing the largest GDP drop—the resulting revenues could be redistributed as 'carbon dividends' to support a just transition. The study also concludes that an ICPF would result in limited carbon leakage compared to scenarios where only high-income countries participate.

• An international carbon price floor (ICPF) could lead to a significant reduction in greenhouse gas emissions, ranging from a 9.5% decrease under the core scenario to a 12.3% decrease if all regions, sectors, and gases are included.
• The global economic cost of implementing an ICPF is estimated to be less than 1% of GDP, with the core scenario resulting in a contraction of approximately 0.4%. These losses could be largely offset by the long-term avoided costs of global warming, such as reduced health and environmental damages.
• Middle-income countries are the primary drivers of emissions reductions under the ICPF; in the core scenario, they account for 84% of total reductions, with China alone estimated to reduce CO2 emissions by 2.5 billion tonnes by 2030.
• The economic impact of the ICPF is unevenly distributed. The South African Customs Union is projected to experience the largest GDP drop at 1.2%, primarily due to a contraction in coal mining.
• Carbon leakage—the shifting of emissions to jurisdictions with lower costs—is limited to 1% or less in all fossil fuel and high-emitting manufacturing industries (HEIs) under the core scenario. However, leakage rates would rise significantly (averaging 9%) if only high-income countries participated.
• The ICPF would generate substantial revenues, potentially as high as 3% of GDP in some regions, which could be used as 'carbon dividends' for households or to compensate low-income economies. Only 13% of revenues from high-income economies would be needed to offset the GDP losses in low-income economies.
• The most significant sectoral contractions in terms of Gross Value Added (GVA) under the core scenario are in coal mining (-15%) and gas and gas distribution (-4% and -3% respectively).

APA

World Economic Forum (2021). Increasing Climate Ambition: Analysis of an International Carbon Price Floor. https://www3.weforum.org/docs/WEF_Analysis_of_an_International_Carbon_Price_Floor_2021.pdf

Chicago

World Economic Forum. Increasing Climate Ambition: Analysis of an International Carbon Price Floor. 2021. https://www3.weforum.org/docs/WEF_Analysis_of_an_International_Carbon_Price_Floor_2021.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=Increasing Climate Ambition: Analysis of an International Carbon Price Floor |date=November 2021 |url=https://www3.weforum.org/docs/WEF_Analysis_of_an_International_Carbon_Price_Floor_2021.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2021increasing, author = {{World Economic Forum}}, title = {{Increasing Climate Ambition: Analysis of an International Carbon Price Floor}}, institution = {World Economic Forum}, year = {2021}, month = nov, url = {https://www3.weforum.org/docs/WEF_Analysis_of_an_International_Carbon_Price_Floor_2021.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }