Experience with Carbon Taxes and Greenhouse Gas Emissions Trading Systems

Carbon taxes and emissions trading systems (ETSs) to limit emissions of greenhouse gases (GHGs) are increasingly common. At the end of 2015, 17 GHG ETSs were operational in 55 jurisdictions, and 18 jurisdictions collected at least one carbon tax. This paper assesses the performance of carbon taxes and ETSs with respect to environmental effectiveness (reduction of emissions regulated by the instrument), cost-effectiveness (marginal abatement cost), economic efficiency, public finance, and administrative issues. Data on emissions subject to carbon taxes are rarely reported. We estimate the taxed emissions for 17 taxes in 12 jurisdictions from 1991 through the end of 2015. All 17 taxes have reduced emissions relative to business-as-usual. Six of the jurisdictions actually reduced emissions, although in at least three of those jurisdictions the reductions appear to be due to other policies. The small sizes of reduction in almost all 17 cases are partially due to the low tax rates; the modest and uncertain changes in tax rates over time; and the limited response of taxed sources, such as fossil fuels, to price changes. Actual emissions declined for at least six of 10 ETSs. Other policies and developments, such as the 2009 recession, contributed to the reductions, but estimates of the share of the reduction attributable to the instrument are rare. All of the ETSs have accumulated banks of surplus allowances and most have implemented measures to reduce these banks. On average, the marginal cost of compliance is substantially lower for ETSs than carbon taxes. ETS experience has been shared bilaterally and via dedicated institutions. As a result, most ETSs have increased the share of allowances auctioned; adopted declining emissions caps; specified future caps and floor prices several years into the future; shifted to benchmarking for free allowance allocations to emissions-intensive, trade-exposed (EITE) sources; reduced accessibility to foreign offset credits; and established market stability reserves. By contrast, there is little evidence of shared learning and virtually no change to the design of carbon taxes. We found no jurisdiction that routinely tracks the taxed emissions. Very few jurisdictions regularly assess the effectiveness of the tax in achieving emission reductions. Additionally, adjustments to the tax rate often are unpredictable after an introductory period of three to five years. Both instruments reduce emissions, but ETSs have performed better than carbon taxes on the principal criteria of environmental effectiveness and cost-effectiveness. Many jurisdictions have implemented both a carbon tax and a GHG ETS, and every jurisdiction that has adopted either instrument has also implemented other policies. More research is needed to improve the design of both instruments and their interaction with non-market-based carbon policies because the use of multiple instruments produces complex interactive and distributional effects. While economically inefficient, market-based policies should be supplemented by non-market-based policies to ensure sustained political support

Informing the Financing of Universal Energy Access: An Assessment of Current Flows

Energy poverty is widely recognized as a major obstacle to economic and social development and poverty alleviation. To help inform the design of appropriate and effective policies to reduce energy poverty, we present a brief analysis of the current macro financial flows in the electricity and gas distribution sectors in developing countries. We build on the methodology used to quantify the flows of investment in the climate change area. This methodology relies on national gross fixed capital formation, overseas development assistance, and foreign direct investment. These high-level and aggregated investment figures provide a sense of scale to policy-makers, but are only a small part of the information required to design financial vehicles. In addition, these figures tend to mask numerous variations between sectors and countries, as well as trends and other temporal fluctuations. Nonetheless, for the poorest countries, one can conclude that the current flows are considerably short (at least five times) of what will be required to provide a basic level of access to clean, modern energy services to the “energy poor”.Energy Access, Energy Finance, Financial flows

IPCC, 2023: Climate Change 2023: Synthesis Report, Summary for Policymakers. Contribution of Working Groups I, II and III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, H. Lee and J. Romero (eds.)]. IPCC, Geneva, Switzerland.

This Synthesis Report (SYR) of the IPCC Sixth Assessment Report (AR6) summarises the state of knowledge of climate change, its widespread impacts and risks, and climate change mitigation and adaptation. It integrates the main findings of the Sixth Assessment Report (AR6) based on contributions from the three Working Groups1 , and the three Special Reports. The summary for Policymakers (SPM) is structured in three parts: SPM.A Current Status and Trends, SPM.B Future Climate Change, Risks, and Long-Term Responses, and SPM.C Responses in the Near Term.This report recognizes the interdependence of climate, ecosystems and biodiversity, and human societies; the value of diverse forms of knowledge; and the close linkages between climate change adaptation, mitigation, ecosystem health, human well-being and sustainable development, and reflects the increasing diversity of actors involved in climate action. Based on scientific understanding, key findings can be formulated as statements of fact or associated with an assessed level of confidence using the IPCC calibrated language

.Negotiations on Additional Investment and Financial Flows to Address Climate Change in Developing Countrie: An Environment & Energy Group Publication

This paper is one of a series produced for the project that provides in-depth information on the four thematic building blocks of the Bali Action Plan—mitigation, adaptation, technology and finance—as well as on land-use, land-use change and forestry. The project materials also include executive summaries for policymakers, background briefing documents and workshop presentations. These materials will be used for national awareness raising workshops in the participating countries