This report was prepared by the Tax Policy and Statistics division in the OECD’s Centre for Tax Policy and Administration under the auspices of the Committee on Fiscal Affairs and the Environment Policy Committee. It is unique in its comprehensive approach, integrating carbon prices that result from taxes and emissions trading systems. It provides detailed effective carbon rates for 42 OECD and G20 countries in 2015 and 2012, as well as estimates of the effective carbon rates in 2018.

Pricing carbon emissions allows countries to smoothly steer their economies towards and along a carbon-neutral growth path. By putting a price on carbon emissions, countries can increase resource efficiency, boost investment in clean energy, develop and sell low-emission goods and services, and increase resilience to risks inherent in deep structural change. Failing to price carbon emissions now, increases the risk that the planet overheats, with average temperatures increasing by five or more degrees. Adaptation to such increases might be possible, but would likely be extremely costly. Decisive action to reduce the risk is by far the better option.

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.

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.

This chapter provides an overview of the state of carbon pricing in 2015. It shows effective carbon rates for all 42 countries combined and separately by country, discusses change between 2012 and 2015, and puts carbon pricing in a broader economic context.

Annex A.1 describes the seventeen emission trading systems and tradeable performance standards for which coverage and permit prices were estimated in 2015: The Alberta Specified Gas Emitters Regulation and the Quebec Cap-and-Trade System in Canada, the seven Chinese pilot systems (Beijing, Chongqing, Guangdong, Hubei, Shanghai, Shenzhen, Tianjin), the European Union Emissions Trading System, the systems in Saitama and Tokyo (Japan), Korea, New Zealand, Switzerland, and the California Cap-and-Trade Program as well as the Regional Greenhouse Gas Initiative in the United States. Annex A.2 shows results on ETS and tradeable performance standard coverage by sector and permit prices. Annex A.3 lists the system-specific adjustment and assumptions for the calculations.