Putting a price on carbon should reduce emissions, because it makes dirty production processes more expensive than clean ones, right?<\/p>\n
Thats the economic theory. Stated baldly, its obvious, but there is perhaps a tiny chance that what happens in practice might be something else.<\/p>\n
In a newly-published paper, we set out the results of the largest-ever study of what happens to emissions from fuel combustion when they attract a charge.<\/p>\n
We analysed data for 142 countries over more than two decades, 43 of which had a carbon price of some form by the end of the study period.<\/p>\n
The results show that countries with carbon prices on average have annual carbon dioxide emissions growth rates that are about two percentage points lower than countries without a carbon price, after taking many other factors into account.<\/p>\n
By way of context, the average annual emissions growth rate for the 142 countries was about 2% per year.<\/p>\n
This size of effect adds up to very large differences over time. It is often enough to make the difference between a country having a rising or a declining emissions trajectory.<\/p>\n
Emissions tend to fall in countries with carbon prices<\/p>\n
A quick look at the data gives a first clue.<\/p>\n
The figure below shows countries that had a carbon price in 2007 as a black triangle, and countries that did not as a green circle.<\/p>\n
On average, carbon dioxide emissions fell by 2% per year over 20072017 in countries with a carbon price in 2007 and increased by 3% per year in the others.<\/p>\n
Emissions are from fuel combustion and include road-sector emissions. <\/p>\n
Image: Best, Burke, Jotzo 2020 <\/p>\n
The difference between an increase of 3% per year and a decrease of 2% per year is five percentage points. Our study finds that about two percentage points of that are due to the carbon price, with the remainder due to other factors.<\/p>\n
The challenge was pinning down the extent to which the change was due to the implementation of a carbon price and the extent to which it was due to a raft of other things happening at the same time, including improving technologies, population and economic growth, economic shocks, measures to support renewables and differences in fuel tax rates.<\/p>\n
We controlled for a long list of other factors, including the use of other policy instruments.<\/p>\n
The higher the price, the larger the emissions reductions. <\/p>\n
Image: The Conversation <\/p>\n
It would be reasonable to expect a higher carbon price to have bigger effects, and this is indeed what we found.<\/p>\n
On average an extra euro per tonne of carbon dioxide price is associated with a lowering in the annual emissions growth rate in the sectors it covers of about 0.3 percentage points.<\/p>\n
The message to governments is that carbon pricing almost certainly works, and typically to great effect.<\/p>\n
While a well-designed approach to reducing emissions would include other complementary policies such as regulations in some sectors and support for low-carbon research and development, carbon pricing should ideally be the centrepiece of the effort.<\/p>\n
Unfortunately, the politics of carbon pricing have been highly poisoned in Australia, despite it being popular in a number of countries with conservative governments including Britain and Germany. Even Australias Labor opposition seems to have given up.<\/p>\n
Nevertheless, it should be remembered that Australias two-year experiment with carbon pricing delivered emissions reductions as the economy grew. It was working as designed.<\/p>\n
Groups such as the Business Council of Australia that welcomed the abolition of the carbon price back in 2014 are now calling for an effective climate policy with a price signal at its heart.<\/p>\n
The results of our study are highly relevant to many governments, especially those in industrialising and developing countries, that are weighing up their options.<\/p>\n
The worlds top economics organisations including the International Monetary Fund, the World Bank and the Organisation for Economic Co-operation and Development continue to call for expanded use of carbon pricing.<\/p>\n
If countries are keen on a low-carbon development model, the evidence suggests that putting an appropriate price on carbon is a very effective way of achieving it.<\/p>\n
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See the article here: <\/p>\n
Does carbon pricing work? This is what a new study found - World Economic Forum<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Putting a price on carbon should reduce emissions, because it makes dirty production processes more expensive than clean ones, right? Thats the economic theory. Stated baldly, its obvious, but there is perhaps a tiny chance that what happens in practice might be something else. Continue reading