Carbon Pricing Impacts on Four Pollutants: A Cross-Country Analysis

Abstract

Research on climate change mitigation has increasingly considered carbon pricing, with these efforts concentrating on reductions in carbon dioxide (CO2) emissions. Our comprehensive cross-country analysis extends this focus by quantitatively evaluating the effects of carbon pricing on four major pollutants: CO2, nitrous oxide (N2O), methane (CH4), and particulate matter (PM). We use regressions and introduce entropy balancing to this research area. Analyzing data from 132 countries from 1992 to 2019, we find that carbon pricing is associated with an average annual reduction in CO2 emissions by 3 percentage points. A one-unit increase in a coverage-weighted carbon price is associated with reductions in N2O emissions by approximately 0.1 percentage points. A shorter panel for 2010–2017 shows a larger impact of 0.3 percentage points for PM. These findings underline the efficacy of carbon pricing not just in curtailing CO2 but in significantly mitigating other harmful pollutants on a global scale. Reductions in pollutants beyond CO2 provide further motivation for policymakers to pursue carbon pricing.