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


  • Erik Haites


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.

Suggested Citation

  • Erik Haites, 2018. "Carbon taxes and greenhouse gas emissions trading systems: what have we learned?," Climate Policy, Taylor & Francis Journals, vol. 18(8), pages 955-966, September.
  • Handle: RePEc:taf:tcpoxx:v:18:y:2018:i:8:p:955-966
    DOI: 10.1080/14693062.2018.1492897

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    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Environmental and Natural Resource Economics > Climate economics > Ex-post evaluation of climate policy


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Ritter, Hendrik & Zimmermann, Karl, 2019. "Cap-and-Trade Policy vs. Carbon Taxation: Of Leakage and Linkage," EconStor Preprints 197796, ZBW - Leibniz Information Centre for Economics.
    2. Shuangxi Zhou & Zhenzhen Guo & Yang Ding & Jingliang Dong & Jianming Le & Jie Fu, 2021. "Effect of Green Construction on a Building’s Carbon Emission and Its Price at Materialization," Sustainability, MDPI, Open Access Journal, vol. 13(2), pages 1-15, January.
    3. Wang-Helmreich, Hanna & Kreibich, Nicolas, 2019. "The potential impacts of a domestic offset component in a carbon tax on mitigation of national emissions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 101(C), pages 453-460.
    4. Rohan Best & Paul J. Burke & Frank Jotzo, 2020. "Carbon Pricing Efficacy: Cross-Country Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(1), pages 69-94, September.
    5. Li, Xingping & Li, Ji & Zhou, Guohui & Lv, Lucang, 2020. "Quantitative analysis of passive seasonal cold storage with a two-phase closed thermosyphon," Applied Energy, Elsevier, vol. 260(C).
    6. Li, Xiaoyu & Yao, Xilong, 2020. "Can energy supply-side and demand-side policies for energy saving and emission reduction be synergistic?--- A simulated study on China's coal capacity cut and carbon tax," Energy Policy, Elsevier, vol. 138(C).
    7. Malladi, Krishna Teja & Sowlati, Taraneh, 2020. "Bi-objective optimization of biomass supply chains considering carbon pricing policies," Applied Energy, Elsevier, vol. 264(C).
    8. Boqiang Lin & Zhijie Jia, 2020. "Supply control vs. demand control: why is resource tax more effective than carbon tax in reducing emissions?," Palgrave Communications, Palgrave Macmillan, vol. 7(1), pages 1-13, December.
    9. Dissanayake, Sumali & Mahadevan, Renuka & Asafu-Adjaye, John, 2020. "Evaluating the efficiency of carbon emissions policies in a large emitting developing country," Energy Policy, Elsevier, vol. 136(C).
    10. Rocco, Matteo V. & Golinucci, Nicolò & Ronco, Stefano M. & Colombo, Emanuela, 2020. "Fighting carbon leakage through consumption-based carbon emissions policies: Empirical analysis based on the World Trade Model with Bilateral Trades," Applied Energy, Elsevier, vol. 274(C).
    11. Malladi, Krishna Teja & Sowlati, Taraneh, 2020. "Impact of carbon pricing policies on the cost and emission of the biomass supply chain: Optimization models and a case study," Applied Energy, Elsevier, vol. 267(C).
    12. Svetlana Gercheva, 2020. "Tax or Trade: Community Energy Taxation in the Context of Climate Neutrality," Izvestia Journal of the Union of Scientists - Varna. Economic Sciences Series, Union of Scientists - Varna, Economic Sciences Section, vol. 9(1), pages 168-178, April.
    13. John F. Raffensperger, 2020. "A Climate Insidium with a Price on Warming," Papers 2003.05114,
    14. Jiancheng Qin & Hui Tao & Chinhsien Cheng & Karthikeyan Brindha & Minjin Zhan & Jianli Ding & Guijin Mu, 2020. "Analysis of Factors Influencing Carbon Emissions in the Energy Base, Xinjiang Autonomous Region, China," Sustainability, MDPI, Open Access Journal, vol. 12(3), pages 1-15, February.
    15. Rohan Best & Paul J. Burke & Frank Jotzo, 0. "Carbon Pricing Efficacy: Cross-Country Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 0, pages 1-26.
    16. Ivan Savin & Stefan Drews & Sara Maestre-Andrés & Jeroen Bergh, 2020. "Public views on carbon taxation and its fairness: a computational-linguistics analysis," Climatic Change, Springer, vol. 162(4), pages 2107-2138, October.

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