Assessing Criticisms of Carbon Pricing

Jeroen van den Bergh and Wouter W.J. Botzen

International Review of Environmental and Resource Economics, 2024, vol. 18, issue 3, 315-384

Abstract: There is still considerable resistance against carbon pricing — i.e. carbon taxation or cap-and-trade — in the social and policy sciences. We review its main arguments and conclude that they are not supported by the theoretical and empirical literature on instrument performance. Critics are also unable to offer alternative and feasible instruments that limit free riding in climate solutions and perform better on main evaluation criteria, namely effectiveness, efficiency, equity, and global-harmonization potential. Their argument that carbon pricing meets strong political resistance is countered by its widespread implementation already and by its ability to compensate inequitable impacts. We argue that overcoming unsubstantiated criticism on carbon pricing will lead to more consistent advice from policy experts to politicians, thus improving the feasibility of, and accelerating progress towards, globally harmonized and stringent climate policy. All in all, it might be more widely acknowledged that the remarkable feature of carbon pricing is that, if well implemented, it has a great number of advantages and few disadvantages. Rather than weakening political support by criticizing carbon pricing, critics would contribute more productively to effective global climate policy by defending proper and uniform implementation of it.

Date: 2024
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