Effective Carbon Rates 2023
Pricing Greenhouse Gas Emissions through Taxes and Emissions Trading
Successfully transitioning to net-zero greenhouse gas (GHG) emissions requires effective mitigation policy packages, which include carbon pricing measures: a cost-effective policy instrument that not only reduces emissions but also generates revenue to support the transition. This fourth edition of Effective Carbon Rates provides an overview of the carbon pricing landscape, examining fuel excise taxes, carbon taxes, and emissions trading systems (ETSs) through 2021, with updates on developments until 2023. The policy mechanisms examined directly impact the cost of emitting GHGs, influencing shifts in production, consumption, and investment towards low- or zero-carbon options. The analysis covers 72 countries which together account for approximately 80% of global GHG emissions. The report focuses on developments in ETSs and transport fuel taxes amidst the energy crisis and provides comprehensive and comparable data on the current status of GHG emissions pricing that can assist policymakers in identifying priorities and refining carbon mitigation strategies.
Also available in: French
Introduction
Attaining the 1.5°C or 2°C goals set out by the Paris Agreement requires immediate and global action, as recently stressed by the 2023 Intergovernmental Panel on Climate Change’s Sixth Assessment Report (AR6, IPCC (2023[1])). By absorbing long-wave infrared radiation reflected by the earth's surface, GHG emissions are directly responsible for climate change through global warming. While this is already causing weather and climate extremes worldwide, increased global warming could ultimately result in crossing tipping points beyond which severe and disruptive changes to human society would become irreversible. To face these threats, the objective set out by the Paris Agreement is to keep the increase in the global average temperature to well below 2°C above pre-industrial levels and to preferably limit the increase to 1.5°C above pre-industrial levels. Even if these goals were to be overshot, every incremental degree would escalate risks “and projected adverse impacts and related losses and damages” (IPCC, 2023[1]).
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