Today in Bonn at COP23, Climate Policy Lab released a new study, Carbon Pricing in Practice: A Review of the Evidence. For policymakers who want to understand how carbon pricing works in practice, this report provides a detailed review of 8 emissions trading systems (ETS), 5 carbon tax instruments, and 2 hybrid regimes that mix both ETS and taxes within one jurisdiction.
Across the world, there are approximately 40 national carbon pricing mechanisms plus another 20 in cities, states, and provinces. More than 100 countries indicated that they intended to use carbon pricing to implement their nationally-determined commitments. Assuming that these 100 countries wish to learn from the experience of other governments, this report examines the effectiveness of different designs.
Two findings are of particular interest:
- The price signals to the market from existing carbon pricing policies are modest on average, and emissions reductions are likewise limited. The upside is that there are no cases where prices rose to an unexpectedly high level.
- A “double dividend” for emissions reductions may also exist in cases where mitigation occurs as a result of the carbon pricing policy and then tax or emission-permit auction revenues are reinvested in other emissions-reduction activities.
We invite you to read this study, available for download on our website, and welcome your inquiries and suggestions.