Analyzing the Effectiveness of Carbon Pricing Instruments in Reducing Carbon Emissions in Major Asian Economies

Aaron Finley (), Wei He, Hui Huang and Chitin Hon ()
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Aaron Finley: School of Business, Macau University of Science and Technology, Macau SAR, China
Wei He: Faculty of Innovation Engineering, Macau University of Science and Technology, Macau SAR, China
Hui Huang: Faculty of Business, Hong Kong Polytechnic University (PolyU), Hong Kong SAR, China
Chitin Hon: Faculty of Innovation Engineering, Macau University of Science and Technology, Macau SAR, China

Sustainability, 2024, vol. 16, issue 23, 1-20

Abstract: Carbon Pricing Instruments (CPIs), such as Carbon Taxes and Emission Trading Schemes (ETSs), have been launched in several countries, primarily in Europe and North America, as a means of limiting the emissions of greenhouse gases (GHGs) which have been known to cause climate change. The adoption of these measures in Asia has been controversial, with many arguing that they would limit economic development in the region. We review the CPIs of 18 Asian economies, 7 of which have adopted a CPI during our review period from 1990 to 2021. We perform a comparative analysis of the economies in Asia, applying the Kaya Identity to decompose the variables affecting carbon emissions and the Nearest Neighbor Matching technique to compare the effect that CPIs have on countries adopting these policies relative to other jurisdictions. We found a positive and significant effect of CPIs on reducing carbon emissions in the Asian countries compared in our study. This offers crucial insights for policymakers, stressing the effectiveness of CPIs in balancing environmental sustainability with economic development in the region.

Keywords: carbon tax; emission trading schemes; carbon pricing instruments; greenhouse gas emissions; climate policy; sustainable development (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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