Pricing carbon provides an incentive to reduce GHG emissions and invest in low-carbon technologies. While current carbon prices average around USD 40/tCO2, they are expected to increase in the near future, reaching up to USD 120/tCO2 by 2030 in Organisation for Economic Co-operation and Development (OECD) countries under a 2 degrees Celsius-aligned scenario.
The growing carbon price could affect companies directly with regulatory costs imposed on their operations through energy and fuel price increases, or indirectly through costs passed on by suppliers. These costs may be borne by companies or passed on to consumers in the form of higher prices. Rising prices, along with the increased cost of using carbon-intensive products such as motor vehicles, may depress consumer demand.