Carbon Pricing Policies Research Articles

Greenwashing by the fossil fuel industry: impediments to SDGs

Abstract The fossil fuel industry, a major commercial determinant of public and environmental health, constitutes a central challenge to the achievement of the SDGs. Motivated by profit, the industry has contributed to establishing the current global reliance on fossil fuel as the primary energy source and essential raw material in global production. Major oil companies have purposefully hindered the research and transition towards renewable energy. This was achieved through an intricate web of interference and mechanisms that fall under the corporate playbook, such as political interference through lobbying to stagnate carbon emission reduction, influences on carbon pricing policies, and hinderances to environmental protection legislation. These practices known as ‘greenwashing’ have resulted in misinformation, interfered with climate action in an aim to increase demand for their products, to decrease the pressure from society on the industry, and portray a green image to consumers. Using the commercial determinants of health framework and focusing on the Middle East, this presentation will illustrate how fossil fuel companies falsely advertise their products as environmentally friendly, resulting in environmental degradation, and impede the achievement of most SDGs, especially SDG 3 (good health and wellbeing), SDG 7 (affordable and clean energy), and SDG 13 (climate action).

Social Cost of Carbon as an International Benchmark to Drive Countries’ Carbon Pricing during the Transition

Building on updated estimates of the social cost of carbon obtained from the most recent literature, this article proposes a social cost of carbon-based benchmark for carbon pricing to drive world countries’ carbon pricing policies up to 2050, consistent with the Paris Agreement targets. By using a dataset on net effective carbon rates developed by the Organisation for Economic Co-operation and Development (OECD), we firstly compare both explicit and implicit carbon pricing in 2021 in 71 OECD and non-OECD countries with the social cost of carbon benchmark for 2021 and calculate the degree of internalization of the social cost of carbon averagely related to their carbon pricing instruments. We find that there is a serious gap in current climate policies, which are far from creating optimal pricing conditions to reduce global emissions to levels needed by the Paris Agreement. The economic and distributional feasibility of a full implementation of the carbon pricing benchmark is tested in the same set of countries using two indicators, which are calculated for 2025, 2030, 2040 and 2050. Since the test results are income-regressive among income country groups, benchmark implementation by countries within the cooperative approaches of Paris Agreement art. 6 should be accompanied by the creation of an international cooperative fund aimed to recycle at least part of the revenues collected by high-income countries to compensate affected population in lower-income countries.

Does information change public support for climate mitigation policies?

ABSTRACT Carbon pricing policies can play an important role in reducing global greenhouse gas emissions. However, policymakers often cite the lack of public support as a major obstacle to adopting and expanding the coverage of such policies. Using data from a large cross-country survey of about 28,500 people across 28 countries conducted during the summer of 2022, we show that providing information about the costs and benefits of carbon pricing can swing public support. Highlighting the efficacy and revenue recycling potential of carbon pricing increases support, especially in emerging market economies. In contrast, highlighting costs reduces support, but less so for people who report being already significantly impacted by climate change. Moreover, people adopt more negative views of subsidies for renewable energy and low-carbon technologies when the salience of their costs is increased, with the shift being more pronounced for people, especially in advanced economies, who believe that effective climate polices require global efforts. Our results suggest that there is scope to increase public support for climate mitigation measures by providing people with the policy information they may lack.

Assessing the Sectoral Economics Consequences of Carbon Price Using Price-Output Model Analysis

Abstract A carbon pricing policy is featured in the Twelfth Malaysia Plan as a considered measure for Malaysia to achieve its net-zero emissions goal by 2050.This study utilised price and output model analysis using Eora Multi-Region Input-Output Table 2016 (MRIO) database to assess the impact of carbon tax policy on price and output changes. The study reveals that the manufacturing sector is the most sensitive to the introduction of a carbon tax, with pronounced effects including a price escalation of 0.54% and a reduction in output of 0.81%. The ranks of sensitivity then followed by agriculture, services, mining and construction sector. the services sector presents a compelling opportunity for policymakers, offering a robust tax revenue stream while displaying lower vulnerability to the tax’s effects. This observation underscores the importance of a strategic approach in carbon tax policy, where the potential for revenue generation is balanced against the differential impacts on sectoral vulnerability. This study provides an insightful information for policymakers to develop strategic plans to ensure a smooth transition towards carbon pricing policy and foster sustainable economic development.

Investigating the Impacts of Carbon Pricing Mechanism on CCS development in ASEAN countries

Abstract Carbon Capture and Storage (CCS) is a technology that contributes toward a reduction in carbon dioxide (CO2) emissions from large point sources. It has been proven to be a crucial technology to decarbonise ASEAN’s hard-to-abate industry sector. ASEAN countries are a concentrated cluster, contributing to significant emissions, and provides the potential for suitable geological storage for CCS according to current studies. This paper discusses the impact of carbon pricing on the CCS development in ASEAN countries, through studying factors that enable or disable successful CCS projects. Causal Loop Diagram (CLD), as a part of system dynamics, was employed as an analytical tool to identify and visualize the key variables, system’s structure, the network of existing carbon pricing mechanisms and other financing instruments needed in CCS deployment. The results of this study indicate that strong public and private finance, the development of carbon markets, and carbon pricing policies are the key enablers for CCS projects in ASEAN. Carbon pricing should be viewed as an effective catalyst that helps the growth of CCS with the right policies in place, government and regulatory support, and market forces.

Corporate credit risk modeling under carbon pricing uncertainty: A Knightian uncertainty approach

This study examines the financial implications of carbon pricing policies within the Knightian uncertainty framework. Employing a dynamic behavioural credit risk model driven by Lévy jump-diffusion, we scrutinise how carbon pricing uncertainty influences default probability and securities value. We explore investors' strategic responses to ambiguity and assess their impact on their investment decisions. Our findings reveal that carbon pricing uncertainty exacerbates the margin of default risk, has a moderating effect on stock value, and makes investors more cautious, thereby altering corporate capital structures. This study contributes to the discourse on carbon credit risk assessment and sustainable finance by addressing policy-driven uncertainties in the financial markets.

Impartial policymakers prefer to impose carbon pricing to capping, especially when combined with offsets

Sustainable socio-economic development requires a global reduction of greenhouse gas emissions. We utilize an incentivized experiment to map the preferences of ‘policymakers’ over climate actions of ‘decision-makers’. Our design guarantees that these preferences are unaffected by selfish motives such as a concern about being re-elected or an unwillingness to pay for the greater good. Few of our impartial policymakers choose interventions that leave the autonomy of decision-makers' completely untouched. The choice patterns of those who intervene suggest that policymakers care not only about minimizing emissions, but also about how emissions are reduced. Policymakers strongly prefer pricing policies over capping emissions, and among the pricing policies, they prefer those that include voluntary carbon offsets, even if this leaves considerable scope for decision-makers to selfishly emit CO2. The reason is that policymakers expect decision-makers to voluntarily offset some of their emissions at their own cost, and believe that this would eventually improve the outcome in terms of both emissions and the decision-makers' profit relative to a standard carbon pricing policy (without offsetting). Our decision-making data confirm this expectation.

Biorefinery superstructure optimization under carbon pricing policies using stochastic programming

The growing utilization of biomass feedstocks for climate change mitigation has led to increased research on biorefineries. Concurrently, environmental policies are evolving as crucial tools to address these global concerns. Cap-and-trade, carbon tax, and carbon cap policies have been established to reduce carbon dioxide emissions. In this work, a mathematical optimization model is developed to integrate biorefinery process design with carbon pricing policies and crediting mechanisms. A two-stage stochastic mixed integer linear programming model is proposed to account for emissions, feedstock supply, chemical demand, and pricing uncertainties. A bi-objective optimization framework is employed to consider economic and environmental metrics. The framework is a valuable tool for governments and businesses to determine pareto-optimal investment strategies under environmental policies. It is applicable for evaluating prospective chemical technologies with carbon pricing policies beyond biorefineries. The results indicate that carbon crediting mechanisms can minimize the financial penalty by up to 50% under a carbon tax policy. Implementing chemical demand constraints within a cap-and-trade policy reduces potential profits, especially when the carbon prices are high. The stochastic programming approach revealed that underestimating the expected carbon cap leads to lower expected profits. Despite the financial implications of these policies, profitable process designs are achievable.

Can technological progress abate the negative impact of low carbon policies on economic growth in China?

ABSTRACT Whether technological progress can provide a complementary solution that reduces the economic costs of carbon pricing policies, thereby accomplishing a win-win situation for carbon abatement and economic growth? By developing an improved multi-regional dynamic CGE model that integrates investment adjustment costs into the capital accumulation equation, this study provides a lens through which to evaluate the collective impacts of the national carbon market, carbon tax, and technology progress in China. The findings confirm the substantial potential of carbon pricing policies to curtail CO 2 emissions, highlighting their critical role in climate change mitigation. Yet, it also exposes a trade-off, where these policies might impact GDP growth and exports, necessitating a balanced approach to policy design. The outputs of energy sectors are particularly vulnerable to carbon pricing policies, indicating a need for tailored strategies to support these industries in their transition towards sustainability. The study uncovers that the fusion of carbon pricing policies with technological progress can enhance carbon abatement efforts while softening the economic blow, illuminating a path to sustainable development that balances environmental and economic imperatives.

Provincial-level analysis of electrification feasibility and climate policy interactions

Improving electrification feasibility is essential for reducing emissions from non-electric energy sources, thereby enhancing air quality and public health. Concurrently, climate mitigation actions, such as carbon pricing policies, have significant potential to alleviate increasing carbon dioxide (CO2) and other co-emitted air pollutants. However, the interactions between climate policy and the improvement of electrification feasibility at the provincial level remain unclear, collectively impacting the net-zero transition of energy-intensive sectors. Here we combine a technologically rich economic-energy-environment model with air quality modeling across China to examine the health, climate, and economic implications of large-scale upgrades in electrification feasibility and climate policies from 2017 to 2030. The results indicate that advancing electrification feasibility, coupled with adopting carbon pricing policies, is likely to facilitate a transition towards electricity-dominant energy systems. Improved electrification feasibility is projected to yield a 7–25% increase in nationwide climate benefits and a 5–14% increase in health benefits by 2030. These incremental benefits, coupled with reduced economic costs, result in a 22–68% increase in net benefits. However, regionally, improvements in electrification feasibility will lead to heightened power demand and unintended emissions from electric energy production in certain provinces (e.g., Nei Mongol) due to the coal-dominated power system. Additionally, in major coal-producing provinces like Shanxi and Shaanxi, enhanced electrification feasibility exacerbates the negative economic impacts of climate policies. This study provides quantitative insights into how improving electrification feasibility reshapes energy evolution and the benefit-cost profile of climate policy at the provincial level. The findings underscore the necessity of a well-designed compensation scheme between affected and unaffected provinces and coordinated emission mitigation across the power and other end-use sectors.

Carbon Pricing Policies for the Asia-Pacific Neighbors and the Carbon Fee Policy of Taiwan's Climate Change Response Act

Carbon Pricing Policies for the Asia-Pacific Neighbors and the Carbon Fee Policy of Taiwan's Climate Change Response Act

Green industrial policy can strengthen carbon pricing but not replace it

Carbon pricing has received prominent support as the key policy to reduce greenhouse gas emissions. Yet, in the context of heightened geopolitical tensions and risks of supply chain disruptions, policy makers are increasingly resorting to green industrial policies to support the deployment of clean energy technologies. This Perspective discusses whether this development represents a paradigm shift in the design of climate policies and assesses arguments for and against carbon pricing and green industrial policies. Our analysis addresses implications for economic efficiency, security of supply, distributional concerns and political economy issues. We find that green industrial policies can support carbon pricing by lowering market barriers for clean technology diffusion and strengthening political support for climate policy. Yet, we also emphasize that a carbon price should be an essential element in any effective climate mitigation policy mix and the key is to find the optimal policy mix for carbon pricing and green industrial policies for the unique context of each location. In the EU, green industrial policy should mainly be employed to complement carbon pricing and deal with additional market barriers. In the US, by contrast, green industrial policy could be used strategically to try to build political support for and reduce resistance to a carbon price.

Carbon pricing policies and renewable energy development: Analysis based on cross-country panel data

While studies have theoretically discussed the impact of carbon pricing on renewable energy, the practical implementation and effectiveness of these policies remain uncertain. This study empirically examines the role of carbon emissions trading and carbon tax in global renewable energy development using panel data from 196 countries and regions and employing the staggered difference-in-differences (DID) model and Bacon decomposition method. The results suggest that: (1) From the perspective of policy shocks, carbon trading has increased non-hydro renewable electricity generation by 73.32%, while carbon tax has increased it by 31.79%. This indicates that the overall impact of carbon trading on renewable energy is greater than that of carbon tax. However, the elasticity coefficients of renewable energy to carbon trading prices and carbon tax rates are 0.1801 and 0.1845, respectively, suggesting a slightly greater marginal effect of carbon tax on renewable energy compared to carbon trading. (2) Both carbon tax and carbon trading have mitigated the growth of fossil electricity and encouraged public investment in renewable energy, thereby fostering its development. (3) The influence of carbon pricing on renewable energy varies by income level; notably, the implementation of these policies in high-income countries has diminished their promotional effect on renewable energy. (4) The contribution of technological innovation to renewable energy development is smaller than that of policies including carbon trading and carbon tax, indicating that renewable energy development during the sample period was predominantly driven by policy measures. The findings indicate that the application of carbon pricing policies should be further promoted to accelerate the energy mix transition.

Does carbon pricing policy improve energy efficiency? New evidence from Canadian provinces

ABSTRACT Given the increasing damage effect of climate change, the Canadian government has taken a further step to ensure that carbon pricing is implemented in all provinces to reduce its GHGs emissions as a means of addressing climate change. Thus, this paper examines the effect of carbon pricing on energy consumption which is the main source of CO2 emission to enhance our understanding beyond carbon-pricing effects on households and revenue recycling in the prior research. Our study analyzes the energy efficiency of Canada using the province-level data between 2000 and 2021, by developing an SFA production model to understand the drivers of energy consumption and then compute the total factor energy efficiency index while controlling for the role of carbon pricing. Our empirical results reveal that increased labor input, as well as output, mitigate the rising capital-induced energy consumption, while carbon pricing policy plays no significant role in influencing energy consumption. However, the effectiveness of carbon pricing is found in reducing province-level energy efficiency. This striking evidence suggests that policymakers should consider a labor-oriented energy saving scheme and conduct a comprehensive review of the current carbon pricing policy in order to align with energy efficiency interventions toward the achievement of Canada’s Paris Agreement targets.

Systematic review and meta-analysis of ex-post evaluations on the effectiveness of carbon pricing.

Today, more than 70 carbon pricing schemes have been implemented around the globe, but their contributions to emissions reductions remains a subject of heated debate in science and policy. Here we assess the effectiveness of carbon pricing in reducing emissions using a rigorous, machine-learningassisted systematic review and meta-analysis. Based on 483 effect sizes extracted from 80 causal ex-post evaluations across 21 carbon pricing schemes, we find that introducing a carbon price has yielded immediate and substantial emission reductions for at least 17 of these policies, despite the low level of prices in most instances. Statistically significant emissions reductions range between-5% to-21% across the schemes (-4% to-15% after correcting for publication bias). Our study highlights critical evidence gaps with regard to dozens of unevaluated carbon pricing schemes and the price elasticity of emissions reductions. More rigorous synthesis of carbon pricing and other climate policies is required across a range of outcomes to advance our understanding of "what works" and accelerate learning on climate solutions in science and policy.

Carbon Pricing Policy to Support Net Zero Emission: A Comparative Study of Indonesia, Finland and Sweden

The Nationally Determined Contribution (NDC) of Indonesia in the Paris Agreement targeted emission reductions of 29% on its own and 41% with international cooperation in 2030, followed by Net Zero Emissions (NZE) in 2060. To achieve NZE, Indonesia enacted a carbon tax policy on April 1, 2022. The 2022–2024 carbon tax is limited to Steam Power Plants and will be imposed on other sectors by 2030. This research examines the ratio legis of carbon cost policies in Indonesia and compares the core of carbon tax policies in Indonesia with Sweden and Finland. Indonesia is starting to implement a Carbon Pricing policy under the ‘Cap-and-Tax’ scheme. The Cap scheme will be a means to force changes in the business culture in Indonesia, so the companies will pay attention to and reduce the carbon emission produced to avoid paying penalties for carbon exceeding the limits. Meanwhile, the Carbon Tax will provide economic resources to Indonesia to develop environmentally friendly technologies, fund research on renewable energy, and provide incentives for environmentally friendly businesses during the transition process to a carbon culture in Indonesia. Referring to the results of the comparison of carbon pricing policies in Finland and Sweden, Indonesia can gradually increase the cost of carbon taxes starting from Rp30,000/US$2 per ton CO2 equivalent to US$10 per ton CO2 equivalent. Meanwhile, for the imposition of high carbon tax rates, such as in Finland (US$73.02 per ton CO2 equivalent) and Sweden (US$137 per ton CO2 equivalent), Indonesia must carry out tax reforms, so the applied carbon tax is able to reduce carbon emissions without causing adverse impacts for the Indonesian economy.

Strategic implications of carbon pricing on global environmental sustainability and economic development: A conceptual framework

This study critically evaluates the strategic implications of carbon pricing mechanisms on global environmental sustainability and economic development. Employing a systematic literature review and content analysis, the research synthesizes recent findings from peer-reviewed articles, reports, and policy documents published between 2010 and 2024. The study's objectives include analyzing the effectiveness of carbon pricing in reducing greenhouse gas emissions, assessing its economic impacts, exploring environmental benefits, and understanding the role of international cooperation in enhancing the efficacy of carbon pricing policies. The methodology hinges on a structured search strategy, applying rigorous inclusion and exclusion criteria to ensure the relevance and quality of the literature reviewed. The analysis reveals that carbon pricing, encompassing both carbon taxes and cap-and-trade systems, serves as a pivotal tool for mitigating climate change while fostering economic growth and structural transformation. Key findings highlight the potential of carbon pricing to drive innovation in green technologies, the importance of addressing social equity concerns, and the critical role of international policy coordination in mitigating cross-border carbon leakage and competitiveness issues. The study concludes that carbon pricing mechanisms, when effectively designed and equitably implemented, can align environmental sustainability with economic development goals. Recommendations for policymakers emphasize the need for comprehensive strategies that integrate carbon pricing with broader economic and environmental policies, underscore the importance of international cooperation, and advocate for continued research to refine carbon pricing models and strategies. This research contributes to the ongoing discourse on carbon pricing, offering insights into its potential as a cornerstone of global climate governance and sustainable economic policy. Keywords: Carbon Pricing Mechanisms, Environmental Sustainability, Economic Development, International Cooperation.

Identifying price bubbles in global carbon markets: Evidence from the SADF test, GSADF test and LPPLS method

Amid growing climate concerns, Emissions Trading Schemes (ETS) serve as key mechanisms for reducing greenhouse gas emissions through market forces. This study delves into the phenomenon of price bubbles within six major ETSs globally: the European Union Emissions Trading Scheme (EU ETS), the New Zealand Emissions Trading Scheme (NZ ETS), the California-Québec Emissions Trading Scheme (CQ ETS), the South Korea Emissions Trading Schemes (K-ETS), the China Emissions Trading Scheme (C-ETS), and the United Kingdom Emissions Trading Schemes (UK ETS). Employing the sup augmented Dickey-Fuller (SADF) test, generalized sup ADF (GSADF) test, and log-periodic power law singularity (LPPLS) model, our analysis aims to uncover the dynamics and implications of these bubbles. Our findings reveal varied patterns of price bubbles across the schemes, with the EU ETS showing the highest frequency and the NZ ETS exhibiting the longest durations. The period of 2021 and 2022 marked a significant increase in bubble occurrences across all ETSs, suggesting the influence of post-COVID-19 economic recovery and geopolitical tensions on market stability. These bubbles are attributed to factors including carbon market policies, macroeconomic conditions, energy price fluctuations, and market uncertainties. The study offers valuable insights for compliance firms, policymakers, and investors on navigating carbon market volatility. Understanding bubble dynamics can aid in formulating more effective emission reduction strategies, carbon pricing policies, and investment decisions. This research underscores the importance of integrating monetary policy considerations with environmental objectives within ETS frameworks, paving the way for future research on predictive bubble detection and the development of robust carbon market regulations.

Carbon pricing and inflation expectations: Evidence from France

We study how firms’ price expectations and decisions are affected by carbon pricing, using a survey of French manufacturing firms. Exogenous variations in the price of carbon are obtained by high-frequency identification. A change in carbon price increases firms’ inflation expectations as well as their own expected and realized price growth. Initially, positive forecast errors emerge, but over time, the impact on price expectations proves to be more enduring than on actual price growth, leading to negative forecast errors in the medium- to long-run. Furthermore, our analysis reveals that firms’ responses to these carbon pricing shocks exhibit considerable heterogeneity. Low energy-intensive firms are worse at forecasting the effects of the shock on the evolution of their own prices and firms with narrower profit margins are less able to pass through the increase in energy costs to the prices of their final products. These findings align with models of information rigidities, shedding new light on how firms navigate and adapt to carbon pricing policies.

Assessing the role of carbon pricing in global climate change mitigation strategies

Carbon pricing has emerged as a crucial policy tool in global efforts to mitigate climate change by internalizing the costs of carbon emissions and incentivizing emission reductions. This review provides an assessment of the role of carbon pricing in global climate change mitigation strategies. Carbon pricing mechanisms, including carbon taxes and emissions trading systems (ETS), have gained traction worldwide as governments seek effective ways to reduce greenhouse gas emissions. These mechanisms establish a price on carbon emissions, creating economic incentives for businesses and individuals to reduce their carbon footprint. The effectiveness of carbon pricing in mitigating climate change depends on various factors, including the stringency of pricing mechanisms, coverage of sectors and gases, and complementary policies and measures. Studies have shown that well-designed carbon pricing policies can lead to significant emission reductions while promoting innovation and investment in clean technologies. However, carbon pricing also faces challenges and limitations, including concerns about equity, competitiveness, and political acceptability. Distributional impacts on vulnerable populations and energy-intensive industries must be carefully addressed to ensure the fairness and effectiveness of carbon pricing policies. Furthermore, the success of carbon pricing depends on international cooperation and coordination, as emissions can easily shift across borders in response to pricing disparities. Global efforts to harmonize carbon pricing mechanisms and establish international carbon markets can enhance the effectiveness and efficiency of mitigation efforts. In conclusion, carbon pricing plays a crucial role in global climate change mitigation strategies by aligning economic incentives with environmental objectives. While it offers significant potential for reducing emissions and fostering the transition to a low-carbon economy, addressing challenges such as equity concerns and promoting international cooperation is essential for maximizing its effectiveness. By integrating carbon pricing into comprehensive climate policy frameworks, policymakers can accelerate progress towards a sustainable and resilient future.