Carbon Price Floor Heavy Industry

Steel, cement, aluminum, and fertilizer sit behind a fifth of global emissions, and a carbon price floor could raise $200 billion a year.

In almost every large economy, making steel, cement, aluminum, and fertilizer releases large amounts of carbon, and those emissions cost their producers very little. Any government that starts charging for it expects to lose the business to one that doesn’t.

A team of economists now calculates that a group of countries could charge together instead. Their coalition cuts 1.5% of the world’s greenhouse gas emissions and raises nearly $200 billion a year in public money. The point is that it wouldn’t need everyone to agree first.

Those numbers come from a model, not a measurement. Catherine Wolfram, an energy economist at the MIT Sloan School of Management , and 22 co-authors built it from data on individual plants and the trade running between them. They published the design in Science as a proposal.

Four industries carry the plan

The plan starts narrow. Iron and steel, aluminum, cement, and nitrogen fertilizer make roughly 20% of the world’s greenhouse gases. They make less than 5% of its economic output.

These goods also cross borders constantly. Countries use 25% of steel and 40% of aluminum outside the countries that produce them. A price in one country and none in the changes who sells what.

They sit early in the supply chain, too. A charge on the climate costs of raw materials shows up in the price of a car or a building long before a grocery bill. The authors argue that makes it easier for a government to accept.

Imports pay the same price

Members agree on a floor price for the emissions these industries make directly, plus the electricity they use. Each picks its own tool, a tax or a trading system, and only has to keep the real price at or above the floor.

Goods from outside the group pay a border charge set at that same level, and goods moving between members pay nothing extra. When officials know a product’s emissions, they base the charge on those emissions. When they don’t, they use a default rate. A clean factory outside the group can pay less by showing its numbers.

The building blocks are already there. In 2025 there were 80 carbon pricing systems running in 50 places, covering 28% of global emissions and raising more than $100 billion a year, the World Bank reported.

WTO rules also allow countries to use trade measures for environmental reasons and give developing countries more favorable treatment.

Emissions were modeled, not measured

In the model, the group builds out from the European Union and its trading partners, then adds Australia, Brazil, Canada, China, India, Indonesia, and Thailand. It also takes in ten African countries whose industrial plants already produce fewer emissions than the world average.

Set against a baseline where the EU system continues and most others do little, the coalition cuts 830 million tons (750 million metric tons) of greenhouse gases a year. That is roughly 1.5% of the world’s total.

The plan does not rely on new technology to cut emissions. Researchers are still testing carbon capture at kilns and low-carbon cement recipes ; the model instead shows how today’s plants would respond to a change in price.

Either version of the price floor raises $186 billion a year. Nearly all of that comes from the carbon price at , and the border charge brings in less than $1 billion. The money is a charge on a country’s own industry rather than a tariff on somebody else’s.

Income tiers change who pays

Output moves less than the fight over these policies suggests. Production falls by 1.5% to 4% inside the coalition, while countries outside it see a modest increase of 0.5% to 4% in output. That gap is the leakage the border charge exists to limit.

Prices do move. In coalition markets they rise 11% for aluminum, 4% for steel, 5% for cement and 10% to 13% for fertilizers.

Who carries that cost depends on which floor the group picks. A single floor of $50 for every metric ton of carbon dioxide costs the lowest-income members 2.2% of their output. A graduated version, with floors of $25, $50 and $75 by income group, holds that loss to 0.6%.

The emissions cut is almost identical either way, so the choice is really fairness. Wolfram told Earth.com that the price is not meant to do the work alone.

“We highlight carbon pricing , and that’s an important mechanism in the fight against climate change, but it’s not the only one,” she said. “Our report also recommends including additional incentives for lower income countries to join, like subsidized financing for decarbonization of the heavy industries.”

Real programs look messier

In the model, every ton of covered emissions faces the full carbon price. Real policies usually include exceptions or discounts. The EU, California and South Africa hand out free allowances, Australia, Canada, and China charge nothing below a benchmark, and Mexico and Chile exempt some fuels and smaller plants.

Which of those counts as meeting the floor is left open, though the group’s earlier report sketched a way for members to recognize each other’s systems.

The baseline is simplified too. It assumes that countries outside the EU and its partners either drop their carbon pricing plans or end up with a price near zero. Australia, Brazil, Canada, China, India, and Indonesia are all moving the other way, so the baseline may understate the cuts already coming.

Global carbon dioxide emissions still hit a record high in 2025.

Talks are already under way

Asked by Earth.com which countries would have to move first, Wolfram named three kinds at once.

“Ideally, the coalition would start with a combination of large emitters, large consumers of the heavy industrial goods and countries from the Global South. I believe the latter is especially important because it communicates to other countries in the Global South that the coalition will take the lower income countries’ unique perspectives into account.”

A place for that conversation already exists. The Open Coalition on Compliance Carbon Markets was proposed at the 2025 UN climate conference, endorsed by Brazil, the European Union, and China. The authors treat it as where those rules could be settled.

Its members have not endorsed the structure in the paper, Wolfram said. What encourages her is the of world emissions now sitting at that table.

“Of course, the ultimate idea is that it becomes attractive for more and more countries to join the coalition, and that the coalition is ‘magnetic’ as I’ve heard one Brazilian official describe it,” she said in an email to Earth.com.

Nobody has built a coalition to this design, so nothing here has been measured outside a model. Whether the members facing the largest losses would sign is still an open question. The first real test is whether those talks can turn into a carbon price that member countries actually agree to maintain.

The full study was published in the journal Science .

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