Mobilizing domestic resources for the Agenda 2030 via carbon pricing

Abstract

The twenty-first century is characterized by an underprovision of basic public goods, such as public health, education, infrastructure and so on, and an overuse of the atmosphere as disposal space for greenhouse gases. Carbon pricing could address both problems simultaneously: a transition from negative carbon prices (fossil fuel subsidies) to positive levels could generate revenues to finance progress towards the Sustainable Development Goals. Given the scarcity of private sources of finance in many lower-income countries, carbon pricing could be a particularly attractive policy option. Our analysis identifies countries where domestic revenues from carbon pricing consistent with the 2 °C target could contribute substantially to financing the Sustainable Development Goals. A shift away from fossil fuel subsidies to carbon pricing could generate revenues to finance progress towards the Sustainable Development Goals. This Perspective shows that in many low-income countries, as private sources of finance are limited, revenues from carbon taxes could be a particularly attractive policy option for financing the SDGs.