Working PaperFinance

Implementing Effective Carbon Pricing

James Rydge

Strong, predictable and rising carbon prices send an important signal to markets and can reduce greenhouse gas emissions without harming the economy. Around 40 national jurisdictions and over 20 cities, states and regions, have adopted or are planning explicit carbon prices, covering about 12% of global GHG emissions.

Authors

James Rydge New Climate Economy

Overview

Oct 2015

Strong, predictable and rising carbon prices send an important signal to markets and can reduce greenhouse gas emissions without harming the economy. Around 40 national jurisdictions and over 20 cities, states and regions, have adopted or are planning explicit carbon prices, covering about 12% of global GHG emissions. While this momentum is encouraging, current price levels and coverage of emissions are still very low.

International cooperation on carbon pricing and subsidy reform can help mitigate concerns holding back faster progress. Cooperation can help to overcome concerns about competitiveness impacts from unilateral policy action, improve knowledge-sharing and transparency, provide opportunities to link emission trading schemes, and reduce the costs of action

The Global Commission on the Economy and Climate recommends that all developed and emerging economies, and others where possible, commit to introducing or strengthening carbon pricing by 2020, and phase out fossil fuel subsidies. A carbon price in 2030 of US$75 per tonne of CO2e in developed countries and US$35 per tonne of CO2e in developing countries, on average, could see annual emissions in 2030 reduced by 2.8–5.6 Gt of CO2e.

Associated graphics

Summary of existing, emerging and proposed carbon pricing instruments (ETS and taxes)

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There is momentum on fossil fuel subsidy reform

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