Putting a Price on CO₂: Reshaping Daily Life, Industry, and Global Economic Rules
What would you do if, in the future, the cost of your everyday life changed depending on how much CO₂ you emit? Do you know if the company you work for might one day have to pay a price on carbon when exporting products overseas?
Carbon pricing, a system that assigns a monetary cost to CO₂ emissions, is spreading across the world. Carbon is becoming a “new currency” that shapes international competitiveness and the rules of the global economy.
How carbon pricing works
Countries around the world are taking various measures to achieve their decarbonization targets, such as subsidies for clean energy, energy efficiency regulations, and forest conservation. One of the key tools is carbon pricing.
Carbon pricing is a mechanism that assigns a monetary value to CO₂ emissions to incentivize companies and individuals to reduce their emissions. The two major approaches are carbon taxes, which impose a fee based on the amount of emissions, and emissions trading systems, where a governing body determines the maximum amount of emissions allowed (the cap) and lets the emission allowances be bought and sold in a market. Both methods encourage economy‑wide decarbonization by placing a cost on emitting CO₂. According to the International Energy Agency (IEA) World Energy Outlook 2025, there are currently 80 direct carbon pricing systems in place worldwide, up from 75 in 2024. Together, these systems now cover about 28% of global greenhouse gas emissions.
While countries adopt carbon pricing to promote emission reductions, carbon pricing schemes also serve to strengthen the technological capabilities of domestic industries so that they can provide more sustainable energy and products.
Figure 1: Carbon pricing by the numbers
Overview of Countries with High CO₂ Emissions Trading Systems
The European Union
The EU has operated an emissions trading system known as the EU ETS since 2005. The system has become stricter over time through multiple phases. The EU has now set achieving net zero by 2050 as its ultimate goal. To achieve this target, the EU requires large emitters to achieve continuous reductions in their emissions. It is currently in Phase 4, which has expanded coverage beyond the traditional sectors of power generation, industry, and aviation to include the maritime sector. Additionally, a new system called EU ETS II will begin in 2027 and is expected to cover buildings and road transport. Since the introduction of the EU ETS, CO₂ emissions in the EU have steadily declined. To achieve decarbonization, the emissions cap will continue to be gradually tightened in the future.
Although the price was low in the past, EU Allowance（EUA）is currently hovering around EUR 100/t. This is because the system is now strictly enforced, although excessive free allowances were initially allowed, which kept the prices low. As carbon prices rise, the financial burden on high-emission companies increases. As a result, their incentive to reduce emissions will be strengthened.
Furthermore, the Carbon Border Adjustment Mechanism (CBAM) has been fully implemented since the start of 2026. CBAM applies an equivalent carbon cost to carbon‑intensive products imported from outside the EU, ensuring that foreign producers face the same carbon price as companies operating within the EU. Its purpose is to prevent EU firms from losing international competitiveness due to higher carbon prices. This means that companies in the US, where there is no national carbon pricing scheme, will become subject to the same policies meant to reduce emissions if they want to continue operating in the EU, and could directly impact US operations.
US
The United States does not have a federal carbon pricing system. Instead of relying on regulation, the federal approach has focused on using subsidies to support the growth of clean energy industries and encourage reductions in CO₂ emissions.
However, several states have implemented their own emissions trading systems. In California, the California Greenhouse Gas Cap-and-Trade Program regulates emissions from sectors such as power generation, industry, and fuel suppliers. Allowance price in California has generally been in the range of roughly USD 30 – 40/t in recent years.
In the northeastern United States, eleven states participate in the Regional Greenhouse Gas Initiative (RGGI), which regulates emissions from the power sector. The RGGI’s price has typically been lower, often below USD 20/t. Generally, these levels are substantially lower than in the EU ETS. This fact suggests that carbon price signals in the US remain more modest in comparison. Although these policies vary depending on political conditions, it remains possible that federal‑level CO₂ regulations will become more stringent as climate action grows in importance.
Global Trend and Outlook
There is a stark contrast between the EU’s high prices and strict regulations and the US with a subsidy-first approach. The EU has a strong tradition of changing society through regulations, standards, and market design. The US has historically led technological innovation and tends to avoid heavy regulation. In carbon pricing, the EU has become the de facto leader. In practice, other countries, such as China, which is making its China-ETS more stringent, and Japan, which fully operationalizes the GX-ETS in 2026, show willingness to introduce or increase carbon prices. The trends in carbon pricing for high-emission countries are shown below. Although there are fluctuations, prices in all regions have generally been rising over time. This is related to the introduction of each country’s emission reduction targets, and prices may rise further as awareness of the climate change crisis increases.
<Figure 2> Carbon pricing trends in major economies
Furthermore, according to the IEA, carbon prices are expected to rise significantly in a scenario where the world achieves net zero emissions by 2050. In advanced economies, the carbon price could reach as high as USD 250/t by 2050.
Looking at this forecast, would you be able to remain calm? USD 250/t is a cost level that fundamentally changes company profit margins, supply chains, and consumer prices. It is important to understand the impact and think about the ways to avoid the heavy burden of carbon pricing.
<Figure 3> Projected carbon price levels in the IEA’s NZE scenario
Impact
Let us consider the impacts that carbon pricing can have. One key effect is the potential increase in the cost of everyday goods. If you live in a region where carbon pricing is already in place or coming soon, daily necessities such as gasoline, electricity, and automobiles may become more expensive. The regressive impact on low income households is a particularly important issue. Increases in the prices of essential goods impose a heavier burden on lower income families. If the policy design is flawed, it could create a sense of unfairness and trigger opposition to the policy.
The impact on companies is also significant. When carbon costs are added to products, high-emitting firms face a competitive disadvantage. They may be forced to substantially revise the manufacturing processes and supply chains they have built over many years, although this could ultimately lead to more sustainable operations. Carbon pricing can put pressure on corporate cash flows and potentially reduce future firm value. In addition, carbon leakage is a major concern. In regions with high carbon prices, companies may relocate production to countries where carbon prices are lower in order to avoid the additional expenses. In such cases, global emissions would not decline and industrial hollowing out could occur instead.
Even so, I would argue that rising carbon prices are evidence that society has begun to move seriously toward decarbonization. Emission reduction inevitably involves a certain degree of pain, but making that pain visible through pricing and encouraging behavioral change is the essence of carbon pricing.
The fact that companies and individuals have started to seriously consider pathways to reduce emissions is a positive. What truly matters is how this burden can be shared fairly across society. For that purpose, appropriate policy design is essential. For example, revenues from carbon taxes or emissions allowance auctions can be used to support low income households and promote energy efficiency improvements. By combining carbon pricing with redistribution, the system can become more sustainable and socially acceptable. In addition, international coordination is indispensable to prevent carbon leakage. The CBAM introduced by the EU is one example, and broader international rule making that includes other regions will be required in the future.
Conclusion
The idea of putting a price on carbon is becoming more than an environmental policy. In my view, it is emerging as a new economic rule that can reshape people’s daily lives and influence the competitiveness of companies. Understanding these changes, engaging in informed discussion, and developing the ability to adapt are essential steps for those of us who aspire to become future policymakers, business leaders, and researchers. Now is the time to view global developments surrounding the price of carbon as something that directly concerns us. As a starting point, you might consider taking the following actions:
- Practice reducing your personal carbon footprint by saving energy or using public transportation
- Explore the “carbon risks” faced by industries you are interested in
- Build a habit of reading corporate sustainability reports
Reader Question:
What preparations can we make as carbon pricing begins to permeate our daily lives?
And how should US companies respond when the era arrives in which multiple countries adopt border carbon taxes?