Carbon taxes and greenhouse gas emissions trading systems: what have we learned?

By E. Haites. Climate Policy, 2018

302 citations recorded by the source corpus.

ABSTRACT Systematic evidence relating to the performance of carbon pricing – carbon taxes and greenhouse gas (GHG) emissions trading systems (ETSs) – is sparse. In 2015, 17 ETSs were operational in 55 jurisdictions while 18 jurisdictions collected a carbon tax. The papers in this special thematic section review the performance of many of these instruments over the 2005–2015 period. The performance of existing carbon taxes and GHG ETSs can help policy makers make informed choices about whether to introduce these instruments and to improve their design. The purpose of carbon pricing instruments is to reduce GHG emissions cost effectively. Assessing their performance is difficult because emissions are also affected by other policies and exogenous factors such as economic conditions. Carbon taxes in Europe prior to 2008 and in British Columbia reduced emissions from business-as-usual but actual emissions continued to rise. Since 2008 emissions subject to European carbon taxes have declined, but in most countries, other mitigation policies have probably contributed more to the reductions than the carbon taxes. Emissions subject to ETSs, with the exception of four systems without emissions caps, have declined. The ETSs contributed to the emissions reductions, but their share of the overall reduction is not known. Most tax rates are low relative to levels thought to be needed to achieve climate change objectives. Few jurisdictions regularly adjust their tax rates. All ETSs have accumulated surplus allowances and implemented measures to reduce these surpluses. The largest ETSs now specify annual reductions in their emissions cap several years into the future. Emissions trading system allowance prices are generally lower than the tax rates. Key policy insights Theoretical discussions usually portray carbon taxes and GHG ETSs as alternatives. In practice, a jurisdiction often implements both instruments to address emissions by different sources. Designs of ETSs have evolved based on experience shared bilaterally and via dedicated institutions. Carbon tax designs, in contrast, have hardly evolved and there are no institutions dedicated to sharing experience. Every jurisdiction with an ETS and/or carbon tax also has other policies that affect its GHG emissions.

Subfields: Economics and Econometrics, Environmental Engineering, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/fb72f9046eb439d35336d81846993bd3f1555b1c

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Citations in the corpus

Does carbon pricing reduce emissions? A review of ex-post analyses (2021, background): “Haites (2018) reviews the performance of carbon pricing policies based on emissions reductions and cost effectiveness (i.e. cost per ton CO2e reduced).”
The effect of carbon pricing on technological change for full energy decarbonization: A review of empirical ex‐post evidence (2020, background): “Many take the increasing number of countries that put a price on carbon as evidence of success (World Bank, 2019), despite first indications that existing systems have not triggered substantial emission reductions (Haites, 2018).”
Designing an effective climate-policy mix: accounting for instrument synergy (2021, background): “Indeed, most current harmonized carbon prices are due to carbon markets (Haites, 2018).”
Carbon tax or cap-and-trade: Which is more viable for Chinese remanufacturing industry? (2020, background): “Till the end of 2018, 55 jurisdictions around the world have established carbon taxes and/or emissions trading systems (ETSs), but none of them include all the sectors, leading to a merely 42.5% coverage of carbon emission sources (Haites, 2018).”