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Carbon Pricing Efficacy: Cross-Country Evidence

Rohan Best, Paul Burke () and Frank Jotzo
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Frank Jotzo: Australian National University

Environmental & Resource Economics, 2020, vol. 77, issue 1, No 3, 69-94

Abstract: Abstract To date there has been an absence of cross-country empirical studies on the efficacy of carbon pricing. In this paper we present estimates of the contribution of carbon pricing to reducing national carbon dioxide (CO2) emissions from fuel combustion, using several econometric modelling approaches that control for other key policies and for structural factors that are relevant for emissions. We use data for 142 countries over a period of two decades, 43 of which had a carbon price in place at the national level or below by the end of the study period. We find evidence that the average annual growth rate of CO2 emissions from fuel combustion has been around 2 percentage points lower in countries that have had a carbon price compared to countries without. An additional euro per tonne of CO2 in carbon price is associated with a reduction in the subsequent annual emissions growth rate of approximately 0.3 percentage points, all else equal. While it is impossible to fully control for all relevant influences on emissions growth, our estimates suggest that the emissions trajectories of countries with and without carbon prices tend to diverge over time.

Keywords: Carbon dioxide emissions; Carbon pricing; Carbon tax; Cross-country; Emissions trading; Fossil fuel policies; Growth rates; Renewable energy policies (search for similar items in EconPapers)
JEL-codes: O57 Q43 Q48 Q50 Q58 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10640-020-00436-x

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