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Effective Carbon Rates 2018

Pricing Carbon Emissions Through Taxes and Emissions Trading

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Decarbonisation keeps climate change in check and contributes to cleaner air and water. Countries can price CO2-emissions to decarbonise their economies and steer them along a carbon-neutral growth path. Are countries using this tool to its full potential? This report measures carbon pricing of CO2-emissions from energy use in 42 OECD and G20 countries, covering 80% of world emissions. The analysis takes a comprehensive view of carbon prices, including specific taxes on energy use, carbon taxes and tradable emission permit prices. The ‘carbon pricing gap’ measures how much the 42 countries, together as well as individually, fall short of pricing emissions in line with levels needed for decarbonisation. On aggregate, the ‘carbon pricing gap’ indicates how advanced the 42 countries are with the implementation of market-based tools to decarbonise their economies. At the country level, the gap can be seen as an indicator of long-run competitiveness.

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Carbon pricing trends – Reasons to be cheerful

This chapter describes the present state of carbon pricing and evaluates recent and ongoing developments. The gap between the minimum carbon prices that are needed to reach the targets of the Paris Agreement and those currently observed remains large and is only declining slowly. Nevertheless, there are signs that carbon pricing is gaining momentum.

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