The World Bank said global carbon pricing systems generated more than $107 billion in revenues in 2025 while covering nearly 30% of worldwide greenhouse gas emissions, but the latest data also highlights Africa’s unusually limited exposure to domestic carbon costs even as the continent faces mounting pressure from international trade regulations linked to climate policy.
According to the World Bank’s State and Trends of Carbon Pricing 2026 report released on May 19, carbon taxes and emissions trading systems now operate through 87 instruments globally, seven more than a year earlier. Average carbon prices reached approximately $21 per tonne of carbon dioxide equivalent in 2025, more than double 2016 levels, reflecting the growing role of carbon pricing in fiscal and industrial policy across major economies.
For Africa, however, the report points to a markedly different position within the global climate economy. Sub-Saharan Africa accounts for only around 3% of global emissions covered by carbon pricing mechanisms, with an average carbon price of $19 per tonne. That remains significantly below Europe and Central Asia, where average prices stand at $68 per tonne, and North America at $43 per tonne.
The figures underscore how limited carbon pricing remains across most African economies at a time when governments continue prioritising industrial expansion, energy access and infrastructure development. North Africa is almost entirely absent from the global carbon pricing landscape, with Israel’s carbon tax representing the only mechanism recorded across the wider Middle East and North Africa region.
Even so, the report identifies gradual movement across several African economies. Mauritania and Nigeria introduced new carbon-related taxes over the past year, while South Africa increased its carbon tax rate by 31% for 2026, reinforcing its position as the continent’s most developed carbon pricing framework.
Nigeria’s approach differs from conventional carbon taxes. Its new levy targets gas flaring at a rate of $3.50 per thousand standard cubic feet as part of efforts to eliminate routine flaring by 2030, reflecting how African governments are increasingly linking climate policy to resource management and energy-sector reform rather than broad emissions taxation.
According to the report, countries including Senegal, Morocco, Côte d’Ivoire, Botswana and Kenya are also studying or preparing domestic carbon pricing mechanisms, although implementation timelines remain uncertain.
The World Bank’s findings also expose widening imbalances in how carbon pricing revenues are distributed globally. While roughly 70% of emissions covered by carbon pricing systems are located in low- and middle-income countries, those economies collectively receive only around 1% of total global carbon revenues.
The disparity largely reflects structural differences between advanced and developing economies. Wealthier jurisdictions such as the European Union and California generate substantial revenues through auctioning emissions allowances, while many developing-country systems either allocate permits for free or apply relatively low tax rates to avoid increasing industrial costs.
For African economies, the data suggests that limited domestic carbon pricing may not necessarily represent a disadvantage in the short term. With few industries currently exposed to major internal carbon costs, African manufacturers and exporters retain a degree of pricing flexibility unavailable to many firms operating in heavily regulated industrial economies.
At the same time, the continent is becoming increasingly active in international carbon credit markets under Article 6 of the Paris Agreement. According to the report, Ghana completed a carbon credit transfer agreement with Switzerland in 2025, while countries including Rwanda, Malawi, Madagascar, Sierra Leone, Zimbabwe, Tanzania, Togo, Benin and Morocco have authorised carbon market projects.
Forestry, land restoration and renewable energy projects are emerging as potential revenue sources for governments seeking to attract climate-linked investment without imposing large domestic carbon taxes on industry.
Yet analysts say the most immediate pressure on African economies may come not from domestic carbon pricing itself, but from climate-related trade measures introduced by developed markets.
The European Union’s Carbon Border Adjustment Mechanism (CBAM), which entered its definitive phase in January 2026, imposes carbon-related charges on imports including steel, aluminium, cement and fertiliser based on the emissions intensity of production.
Although CBAM covers only around 0.3% of global emissions, its impact on African exports could be significant. A joint study by the London School of Economics and the African Climate Foundation found that African aluminium exports to the European Union could decline by as much as 13.9% under the mechanism.
The challenge is compounded by financing constraints facing African industries attempting to transition toward lower-carbon production systems. African governments and regional institutions have repeatedly argued that high borrowing costs and limited access to concessional finance risk slowing industrial decarbonisation efforts across the continent.
That debate increasingly shapes Africa’s position in global climate negotiations. At the African Union summit in Addis Ababa in 2025, several governments framed climate finance as a question of economic equity, calling for greater reliance on grants and lower-cost financing instruments rather than additional debt burdens.
The World Bank report stops short of prescribing policy responses, but its data highlights a broader tension shaping Africa’s transition strategy. The continent currently benefits from relatively low domestic carbon obligations while simultaneously expanding its role in international carbon credit markets. The main economic risk instead lies in external trade regulations and the cost of financing cleaner industrial systems.
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That dynamic may ultimately determine whether Africa’s low-carbon transition strengthens industrial competitiveness or deepens existing structural vulnerabilities. According to the report, if African industries can reduce the carbon intensity of exports below that of competing producers in advanced economies, mechanisms such as CBAM could eventually improve rather than weaken market access.
What remains unresolved is how African economies will finance the upfront investments required to achieve that transition, particularly as climate-linked trade measures expand across major export markets.
