cover image: Measuring Total Carbon Pricing

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Measuring Total Carbon Pricing

11 Jul 2023

While countries increasingly commit to pricing greenhouse gases directly through carbon taxes or emissions trading systems, indirect forms of carbon pricing—such as fuel excise taxes and fuel subsidy reforms—remain important factors affecting the mitigation incentives in an economy. Taken together, how can policy makers think about the overall price signal for carbon emissions and the incentive it creates This paper develops a methodology for calculating a total carbon price applied to carbon emissions in a sector, fuel, or the whole economy. It recognizes that rarely is a single carbon price applied across an economy; many direct carbon pricing instruments target specific sectors or even fuels, much like indirect taxes on fossil fuels; and carbon and fuel taxes can be substituted one for another. Tracking progress on carbon pricing thus requires following both kinds of price interventions, their coverage, and specific exemptions. This inclusive total carbon pricing measure can facilitate progress in discussions on minimum carbon price commitments and inform assessments of the pricing of carbon embodied in traded goods. Calculations across 142 countries from 1991 to 2021 indicate that although direct carbon pricing now covers roughly a quarter of global emissions, the global total carbon price is not that much higher than it was in 1994 when the United Nations Framework Convention on Climate Change entered into force. Indirect carbon pricing still comprises the lion’s share of the global total carbon price, and it has stagnated. Taking these policy measures into account reveals that many developing countries—particularly net fuel importers—contribute substantially to global carbon pricing. Tackling fuel subsidy reform and pricing coal and natural gas emissions more fully would have a profound effect on aligning carbon prices across countries and sectors and with their climate costs.
sustainable development climate change emissions trading carbon tax fuel subsidies carbon mitigation fiscal instrument environment :: carbon policy and trading environment :: adaptation to climate change macroeconomics and economic growth :: climate change economics greenhouse gas emission prices total carbon price fossil fuel transition

Authors

Agnolucci, Paolo, Fischer, Carolyn, Heine, Dirk, Montes De Oca Leon, Mariza, Pryor, Joseph, Patroni, Kathleen, Hallegatte, Stephane

Citation
“ Agnolucci, Paolo ; Fischer, Carolyn ; Heine, Dirk ; Montes De Oca Leon, Mariza ; Pryor, Joseph ; Patroni, Kathleen ; Hallegatte, Stephane . 2023 . Measuring Total Carbon Pricing . Policy Research Working Papers; 10486 . © World Bank, Washington, DC . http://hdl.handle.net/10986/39976 License: CC BY 3.0 IGO . ”
Collection(s)
Policy Research Working Papers
DOI
http://dx.doi.org/10.1596/1813-9450-10486
Identifier externaldocumentum
34094362
Identifier internaldocumentum
34094362
Published in
United States of America
RelationisPartofseries
Policy Research Working Papers; 10486
Report
WPS10486
Rights
CC BY 3.0 IGO
Rights Holder
World Bank
Rights URI
https://creativecommons.org/licenses/by/3.0/igo/
UNIT
GGS-CCG-Finance & Economics Unit (SCCFE)
URI
https://openknowledge.worldbank.org/handle/10986/39976
date disclosure
2023-06-15
theme
Climate change,Mitigation,Energy,Energy Policies & Reform,Environment and Natural Resource Management

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