[GGP] Carbon Pricing in Practice: A Review of the Evidence
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The following is an abstract of a report originally published by the Center for International Environment and Resource Policy at The Fletcher School, Tufts University.
This paper analyzes carbon pricing policies in fifteen regions (EU, Switzerland, Ireland, Norway, Regional Greenhouse Gas Initiative (RGGI) and California in the U.S., British Columbia and Québec in Canada, Mexico, Chile, New Zealand, India, Japan, Republic of Korea, and pilot schemes in China) that have implemented an emissions trading scheme (ETS), a carbon tax or a hybrid of both. The paper synthesizes key findings and knowledge gaps on what is working, what isn’t and why when it comes to implementing carbon pricing policies. Institutional learning, administrative prudence, appropriate carbon revenue management, and stakeholder engagement are identified as key ingredients for a successful pricing regime. Recent implementation of ETS in regions including California, Québec and South Korea indicates significant institutional learning from prior systems, such as the EU ETS, with these regions implementing robust administrative and regulatory structures suitable for handling unique national/sub national opportunities and constraints. Cases show that carbon tax, in addition to being a standalone policy, may also serve as a good first step towards building an emissions inventory and administrative capacity necessary for countries interested in adopting an ETS in the future. Cases also show that there is potential for a “double dividend” for emissions reductions even with a modest carbon price, provided the policy increases in stringency over time and a portion of the revenue is reinvested in other emission-reduction activities. Knowledge gaps exist in understanding the interaction of pricing instruments with other climate policy instruments and how governments manage these policies to achieve optimum emissions reductions.
KEY POLICY INSIGHTS
• Countries are learning from each other on carbon pricing implementations
• Administrative and regulatory structures for carbon pricing strategies appear to evolve and become more robust in every carbon pricing system analyzed. • So far, the price signals to the market from existing carbon pricing policies are modest and less ambitious than they could be.
• A “double dividend” for emissions reductions may also exist in cases where mitigation occurs as a result of the carbon pricing policy and when auction revenues are reinvested in other emissions-reduction activities
Easwaran Narassimhan, Kelly S. Gallagher, Stefan Koester, and Julio Rivera Alejo
The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.