Evaluation on the effectiveness of energy policies – Evidence from the carbon reductions in 25 countries

Abstract

Linking the external costs of the production of fossil fuels to the generating sources to reduce carbon emissions is gaining momentum around the world. The main goal of the pricing initiative is to reduce carbon emissions, and attract new investment to clean energy projects. This paper evaluates the effectiveness of national level policies that have been in place since 2005 including: countries in the EU emissions trading system, nationwide carbon tax policies and hybrid policies. The selected countries following these policies were compared to countries where no national carbon policies were implemented during the same period. As the results show, the per capita greenhouse gas emissions increased in all countries examined during the study period including countries where carbon pricing mechanisms were implemented, although to a lesser extent. These changes were mainly independent of the type of policy applied. When the increase of the emissions due to gross domestic product per capita and the volume of exports of goods and services were separated, the emissions still increased regardless of policy types, except in those countries which apply a hybrid policy. These results highlight the need to improve on the current greenhouse gas reduction programs to meet COP21 climate targets.