Carbon Pricing and the Elasticity of CO2 Emissions

Ryan Rafaty (), Geoffroy Dolphin and Felix Pretis
Additional contact information
Ryan Rafaty: Nuffield College, University of Oxford

No inetwp140, Working Papers Series from Institute for New Economic Thinking

Abstract: We study the impact of carbon pricing on CO2 emissions across five sectors for a panel of 39 countries over 1990-2016. Using newly constructed sector-level carbon price data, we implement a novel approach to estimate the changes in CO2 emissions associated with (i) the introduction of carbon pricing regardless of the price level; (ii) the implementation effect as a function of the price level; and (iii) post-implementation marginal changes in the CO2 price. We find that the introduction of carbon pricing has reduced growth in CO2 emissions by 1% to 2.5% on average relative to counterfactual emissions, with most abatement occurring in the electricity and heat sector. Exploiting variation in carbon pricing to explain heterogeneity in treatment effects, we find an imprecisely estimated semi-elasticity of a 0.05% reduction in emissions growth per average $1/metric ton (hereafter abbreviated as: ton) of CO2. After the carbon price has been implemented, each marginal price increase of $1/tCO2 has temporarily lowered the growth rate of CO2 emissions by around 0.01%. These are disappointingly small effects. Simulating potential future emissions reductions in response to carbon price paths, we conclude that – in the absence of complementary non-pricing policy interventions – carbon pricing alone is unlikely to be sufficient to achieve emission reductions consistent with the Paris climate agreement.

Keywords: Carbon Pricing; CO2 Emissions; Decarbonization; Carbon Tax; Climate Change; Climate Policy. (search for similar items in EconPapers)
JEL-codes: H23 Q43 Q48 Q54 Q58 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2020-10-21
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 (20)

Published

Downloads: (external link)
https://www.ineteconomics.org/uploads/papers/WP_14 ... d-Pretis-final-2.pdf (application/pdf)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3812786 First version, 2020 (text/html)

Related works:
Working Paper: Carbon Pricing and the Elasticity of CO2 Emissions (2021)
Working Paper: Carbon pricing and the elasticity of CO2 emissions (2020)
Working Paper: Carbon pricing and the elasticity of CO2 emissions (2020)
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:thk:wpaper:inetwp140

DOI: 10.36687/inetwp140

Access Statistics for this paper

More papers in Working Papers Series from Institute for New Economic Thinking Contact information at EDIRC.
Bibliographic data for series maintained by Pia Malaney ().