Development of major new markets in China and reforms in Europe have provided a crucial boost as countries look at tools to cut carbon and meet their Paris climate targets

Global carbon markets have been revived from the brink of collapse as, after years in the doldrums, recent developments have provided a much-needed boost, according to a new report from the World Bank.

China has made strong progress on its new carbon markets, which when complete will be the biggest in the world, while the EU initiated reforms of its carbon trading system which have already had an effect on prices.

Though these fledgling efforts need to be confirmed in the coming few years, more carbon markets are also likely to come forward: 88 of the countries that have completed the first stage of the Paris agreement, representing more than half of global emissions, have said they are using or plan to use carbon pricing as a tool.

The World Bank, in Tuesday’s annual report on carbon pricing, found that governments raised about $33bn in revenue last year from putting a price on carbon through carbon trading or taxes, a 50% increase on the previous year.

John Roome, senior director for climate change at the World Bank, said: “Governments are starting to see the effectiveness of carbon pricing in their efforts to cut carbon, while also raising revenues for climate and other policies. Carbon pricing mechanisms are proving to be essential elements of the toolkits [to meet the commitments made in the Paris agreement].”

Dirk Forrister, chief executive of the International Emissions Trading Association, told the Guardian the report showed “widespread interest in using pricing systems to meet the Paris goals”. He said: “The market is beginning to accelerate. We anticipate a major role for China and the market for international aviation [which when operational from 2020 will] more than double the amount of carbon subject to market pricing.”

In addition to the national carbon markets across the world, there are more than 20 that have been set up at a regional level.

If taxes on carbon are also included, the value of the world’s carbon markets and carbon taxes is likely to be about $82bn this year, compared with $52bn in 2017, according to the World Bank report.

Carbon pricing has long been considered a key way of reducing greenhouse gas emissions, and numerous efforts have been made to develop markets where organisations can trade “rights” to produce carbon, with an overall cap on the allocation of rights ensuring emissions are limited.

Economists consider carbon trading, which was enshrined in the Kyoto protocol of 1997, an efficient tool to encourage businesses to cut their greenhouse gases in the most cost-effective ways, but the problem has been that governments – the main creators of carbon markets – have been unwilling to impose costs on their industries. As a result, the caps on carbon have usually been too weak and the resulting price of carbon too low to generate a strong signal to the markets.

Carbon markets are also supposed to benefit developing countries, as under UN systems rich countries can buy credits from poor countries that have instituted protections for their forests, or other ways to reduce greenhouse gases.