Environment

Climate and carbon: Aligning prices and policies

 

 

 

This report brings together lessons learned from OECD analysis on carbon pricing and climate policies. A key component of this approach is putting an explicit price on every tonne of CO2 emitted. Explicit pricing instruments, however, may not cover all sources of emissions and will often need to be complemented by other policies that effectively put an implicit price on emissions.

Carbon pricing mechanisms must be mutually supportive, cost-effective, and sustainable in order to inspire confidence to invest in technologies and infrastructure that shift production and consumption decisions towards low-carbon choices. In addition, tax exemptions and fossil-fuel subsidies that undermine the transition towards zero carbon solutions must be reformed.

Finally, the report highlights the issues of competitiveness, distributional impacts and communication as key elements in implementing climate policy reform.


 

 

Video - Lecture by OECD Secretary-General, LSE London, (Full event, 1h55)

Key messages        

The international community has agreed to limit the average global temperature increase to no more than 2ºC above pre-industrial levels. To achieve this objective, countries worldwide must take on the responsibility to gradually phase out their emissions of CO2 in the second half of this century. Key issues to consider include:

  • Put an explicit price on carbon.
  • Identify other cost-effective policy instruments that put an implicit price on carbon.
  • Review the broader fiscal policy to ensure that it is coherent with stated climate goals.
  • Ensure that any regressive impacts of carbon pricing measures are alleviated through complementary measures and that a clear communication strategy is developed to explain them.
  • Agree on climate pricing and policy measures today but plan for the long-term to achieve stated climate targets. 

Related publications

Taxing Energy Use Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels 2013
Effective Carbon Prices

Taxing Energy Use:
A Graphical Analysis
Inventory of Estimated Budgetary
Support and Tax Expenditures
for Fossil Fuels 2013

OECD Environment Policy Papers      

Designed for a wide readership, the OECD Environment Policy Papers distil many of today’s environment-related policy issues based on a wide range of OECD work. In the form of country case studies or thematic reviews across countries, the Papers highlight practical implementation experience. They are available in either English or French, with a summary in the other language when possible.

The paper "Climate and carbon: Aligning prices and policies" is the first paper of this series.

 

International media coverage      

Video - OECD: We must eliminate fossil fuel emissions, The Telegraph

Related OECD work programmes      

 

For further information, contact Nicolina Lamhauge (Nicolina.LAMHAUGE@oecd.org).

 

 

 

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