Carbon pricing design: Effectiveness, efficiency and feasibility: An investment perspective

Florens Flues and Kurt van Dender

No 48, OECD Taxation Working Papers from OECD Publishing

Abstract: Carbon pricing helps countries steer their economies towards and along a carbon-neutral growth path. This paper considers how the design of carbon pricing instruments affects their effectiveness, efficiency and feasibility. Design choices matter both for taxes and Emissions Trading Systems (ETSs). Considering the role of carbon price stability for clean investment, the paper shows how volatile carbon prices can cause risk-averse investors to forego clean investment that they would have undertaken with more stable prices. The paper then evaluates the effectiveness and efficiency of policy instruments to stabilise carbon prices in ETSs, which tend to produce more volatile carbon prices than taxes. The paper analyses the auction reserve price in California, the carbon price support in the UK, and the market stability reserve in the EU ETS. Considering feasibility, the paper discusses the tax (or emissions) base, how revenue use can affect support from households and firms, and administrative choices.

JEL-codes: D04 D40 G11 H21 H23 H32 Q52 Q54 (search for similar items in EconPapers)
Date: 2020-06-22
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.1787/91ad6a1e-en (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oec:ctpaaa:48-en

Access Statistics for this paper

More papers in OECD Taxation Working Papers from OECD Publishing Contact information at EDIRC.
Bibliographic data for series maintained by ().