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The Effectiveness of Carbon Pricing: A Global Evaluation

Author

Listed:
  • Suphi Sen
  • Serhan Sadikoglu
  • Changjing Ji
  • Edwin van der Werf

Abstract

We estimate the effect of the staggered adoption of carbon pricing policies across the globe between 1990 and 2017 on per capita CO2 emissions from fossil fuel combustion. Applying recent econometric techniques robust to treatment effect heterogeneity, we find reductions of 8 to 12 percent on average. Our dynamic treatment effect estimations indicate gradual adjustments after implementation, resulting in a 19 to 23 percent decrease after 10 years. These effects were primarily driven by resource substitution rather than improvements in energy efficiency, largely independent of the potential effects of renewable energy policies, and were not driven by short-term responses to carbon prices. These results highlight the role of carbon pricing policies in steering medium-term expectations and complementing the climate policy mix.

Suggested Citation

  • Suphi Sen & Serhan Sadikoglu & Changjing Ji & Edwin van der Werf, 2024. "The Effectiveness of Carbon Pricing: A Global Evaluation," CESifo Working Paper Series 11291, CESifo.
    • Handle: RePEc:ces:ceswps:_11291
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    File URL: https://www.ifo.de/DocDL/cesifo1_wp11291.pdf
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    References listed on IDEAS

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    1. Sen, Suphi & Vollebergh, Herman, 2018. "The effectiveness of taxing the carbon content of energy consumption," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 74-99.
    2. Martin, Ralf & de Preux, Laure B. & Wagner, Ulrich J., 2014. "The impact of a carbon tax on manufacturing: Evidence from microdata," Journal of Public Economics, Elsevier, vol. 117(C), pages 1-14.
    3. Matthew Adler & David Anthoff & Valentina Bosetti & Greg Garner & Klaus Keller & Nicolas Treich, 2017. "Priority for the worse-off and the social cost of carbon," Nature Climate Change, Nature, vol. 7(6), pages 443-449, June.
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    5. Sen, Suphi, 2015. "Corporate governance, environmental regulations, and technological change," European Economic Review, Elsevier, vol. 80(C), pages 36-61.
    6. Sen, Suphi & von Schickfus, Marie-Theres, 2020. "Climate policy, stranded assets, and investors’ expectations," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
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    Keywords

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    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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