Carbon pricing

Section overview

Carbon pricing seeks to reduce emissions by making them costly for emitters, and are an application of the Polluter Pays Principle.  It is an approach widely advocated by economists and a range of other participants in the policy debate.  Carbon pricing is increasingly being adopted by governments as part of their suite of climate change and energy policies.

The pages in this section cover the following

  1. Looks at the spread in the adoption of carbon pricing around the world.  This shows  how the coverage of carbon pricing has expanded over the last decade or so, from a few carbon taxes in Scandinavia to a substantial proportion of world emissions.
  2. Compares the various types of carbon pricing that have been adopted in different jurisdictions, with carbon taxes and emissions trading being adopted in many different varieties.
  3. Examines the use of price floors and ceilings within an emissions trading scheme, which can increase its effectiveness and economic efficiency, or other forms of price management are very often part of the design of schemes around the world.
  4. Considers the reasons for choosing different sort of instruments – pricing, emissions trading and hybrids.  This looks at the principles that should guide the choice of carbon pricing instruments according to the policy literature.  It acts as background for understanding the sorts of choice that can be made in specific circumstances.  The text is rather long, so it’s included as a pdf file.
  5. Looks at the relationship between emissions trading and performance standards, and how trading might increase the cost effectiveness of standards.
  6. Looks at how energy taxes can in effect give a signal like a carbon price.  It focuses on taxes on petrol as and example of this, showing that in some jurisdictions petrol taxes give an effective price around two orders of magnitude above that in the carbon price.
  7. Looks at border carbon adjustments, or border tax adjustments, and finds that they only make sense in very limited circumstances.

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