Pricing CO2 through Taxes and Emissions Trading Systems
To tackle climate change, CO2 emissions need to be cut. Pricing carbon is one of the
most effective and lowest-cost ways of inducing such cuts. This report presents the
first full analysis of the use of carbon pricing on energy in 41 OECD and G20 economies,
covering 80% of global energy use and of CO2 emissions. The analysis takes a comprehensive
view of carbon prices, including specific taxes on energy use, carbon taxes and tradable
emission permit prices. It shows the entire distribution of effective carbon rates
by country and the composition of effective carbon rates by six economic sectors within
each country. Carbon prices are seen to be often very low, but some countries price
significant shares of their carbon emissions. The ‘carbon pricing gap’, a synthetic
indicator showing the extent to which effective carbon rates fall short of pricing
emissions at EUR 30 per tonne, the low-end estimate of the cost of carbon used in
this study, sheds light on potential ways of strengthening carbon pricing.
MIND THE GAP... MEASURING THE CARBON PRICING SHORTFALL
90% of emissions from energy use are priced at less than EUR 30 per tonne, a lower-end estimate of the damage from emitting 1 tone of CO2 and 60% of emissions are subject to no price whatsoever. We are making poor use of carbon pricing, a acost-effective means of reducing CO2 emissions
OECD Environment Director, Simon Upton, hosts Kurt van Dender, OECD environmental tax policy expert from the Centre for Tax Policy and Administration to discuss the OECD's forthcoming publication on effective carbon rates - a new, combined measure of the extent to which countries use taxes and emissions trading systems to price carbon, and to introduce the carbon pricing gap.