National and international policies to improve cost-effectiveness of carbon pricing

Carbon pricing, in particular carbon taxes and carbon emissions trading, are a core element of government policies to combat global warming. However, as pointed out in previous chapters, such policies are often difficult to implement. Taxes may face strong opposition both from consumers and producers even if they are efficient instrument for reducing GHG emissions with respect to any alternative non-market policy instrument (Metcalf 2021). Emissions trading systems require constant monitoring and evaluation by their regulatory bodies to avoid high volatility in carbon prices. Several mechanisms underlying the impacts of unilateral environmental policies and their possible negative consequences for the implementing countries have been identified and should be accounted for. Reconciling national action plans with their potential global spillover effects, as reflected in the elevated risk of emissions (production) leakage, remains the core issue and a major determinant of cost-effectiveness.

Sustainable Development Goals:

Affordable and Clean Energy

Climate Action

Partnerships for the Goals