Measuring comprehensive carbon prices of national climate policies

Abstract

ABSTRACT We measure the comprehensive carbon price from 2008 to 2019 resulting from climate policies imposed by 25 high-polluting countries that represent 82 percent of global carbon dioxide (CO2) emissions in 2019. Comprehensive carbon prices build upon previous notions—including explicit, effective, and implicit carbon prices—by incorporating a broad range of policies that reduce carbon emissions. We consider seven types of major market-based policies commonly used to create marginal incentives to reduce emissions: carbon taxes, emissions trading systems, fossil fuel taxes, fossil fuel subsidies, renewable portfolio standards, feed-in tariffs, and low-carbon fuel standards. Comprehensive carbon prices represent the weighted average of marginal incentives imposed on polluters by country policy mixes. We measure country-level comprehensive carbon prices by summing across all seven policies the product of (1) the marginal incentive imposed by a policy (expressed in dollars per ton of CO2 emitted), and (2) a CO2-emissions-coverage weight for that policy (equal to the proportion of CO2 emissions regulated by the policy relative to that country’s total CO2 emissions). We measure the global comprehensive carbon price by summing across all 25 countries the product of (1) each country’s comprehensive carbon price, and (2) that country’s proportion of CO2 emissions relative to total CO2 emissions from our sample of 25 countries. The global comprehensive carbon price has risen upward from +8.68 USD in 2008 to +19.13 USD in 2019, with a dip to +6.94 USD per ton in 2012. These values are far too low to appropriately address climate change. The comprehensive carbon price varies widely between countries, ranging from −128.35 USD to +146.25 USD in 2019. This heterogeneity means that polluters face uneven marginal incentives to reduce CO2 emissions. Our focus is on measuring marginal incentives rather than policy outcomes, such as overall emissions abatement, which we identify as a promising area for future research. KEY POLICY INSIGHTS Comprehensive carbon prices represent a useful metric for summarizing and tracking global and country-level efforts to mitigate carbon emissions through public policy. Comprehensive carbon prices report a dollar per ton of carbon dioxide emissions imposed by a wide range of climate policies including carbon taxes, emissions trading systems, fossil fuel subsidies and taxes, renewable portfolio standards, feed-in tariffs, and low-carbon fuel standards. Country-level comprehensive carbon prices vary widely, from −128.35 to +146.25 USD in 2019, reflecting wide heterogeneity in the overall effort countries are putting into climate mitigation. The global comprehensive carbon price has approximately doubled over the last decade, reaching a value of +19.13 USD in 2019, and remains too low to seriously address climate change.