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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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Introduction

This chapter provides the context and motivation for the analysis of effective carbon rates. Effective carbon rates are the total price that applies to carbon dioxide emissions from energy use as a result of market-based instruments (specific energy taxes, carbon taxes and carbon emission permit prices). The chapter also provides an overview of the main results for 42 OECD and G20 countries, which together account for about 80% of global carbon emissions from energy use.

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