IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_11291.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp11291.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. 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.
    4. Jeroen van den Bergh & Wouter Botzen, 2020. "Low-carbon transition is improbable without carbon pricing," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 117(38), pages 23219-23220, September.
    5. Thomas Sterner & Edward B. Barbier & Ian Bateman & Inge Bijgaart & Anne-Sophie Crépin & Ottmar Edenhofer & Carolyn Fischer & Wolfgang Habla & John Hassler & Olof Johansson-Stenman & Andreas Lange & St, 2019. "Policy design for the Anthropocene," Nature Sustainability, Nature, vol. 2(1), pages 14-21, January.
    6. Guojun He & Shaoda Wang & Bing Zhang, 2020. "Watering Down Environmental Regulation in China," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(4), pages 2135-2185.
    7. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    8. Sen, Suphi, 2015. "Corporate governance, environmental regulations, and technological change," European Economic Review, Elsevier, vol. 80(C), pages 36-61.
    9. Naegele, Helene & Zaklan, Aleksandar, 2019. "Does the EU ETS cause carbon leakage in European manufacturing?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 93, pages 125-147.
    10. Sen, Suphi & von Schickfus, Marie-Theres, 2020. "Climate policy, stranded assets, and investors’ expectations," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    11. Baker, Andrew C. & Larcker, David F. & Wang, Charles C.Y., 2022. "How much should we trust staggered difference-in-differences estimates?," Journal of Financial Economics, Elsevier, vol. 144(2), pages 370-395.
    12. Michelle Marcus & Pedro H. C. Sant’Anna, 2021. "The Role of Parallel Trends in Event Study Settings: An Application to Environmental Economics," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(2), pages 235-275.
    13. Cameron Hepburn, 2017. "Make carbon pricing a priority," Nature Climate Change, Nature, vol. 7(6), pages 389-390, June.
    14. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rafaty, R. & Dolphin, G. & Pretis, F., 2020. "Carbon pricing and the elasticity of CO2 emissions," Cambridge Working Papers in Economics 20116, Faculty of Economics, University of Cambridge.
    2. Rottner, Elisa, 2023. "Do climate policies lead to outsourcing? Evidence from firm-level imports," ZEW Discussion Papers 23-070, ZEW - Leibniz Centre for European Economic Research.
    3. Chen, Jidong & Shi, Xinzheng & Zhang, Ming-ang & Zhang, Sihan, 2024. "Centralization of environmental administration and air pollution: Evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 126(C).
    4. Cl'ement de Chaisemartin & Xavier D'Haultf{oe}uille, 2021. "Two-Way Fixed Effects and Differences-in-Differences with Heterogeneous Treatment Effects: A Survey," Papers 2112.04565, arXiv.org, revised Jun 2022.
    5. Arjan Trinks & Erik Hille, 2023. "Carbon costs and industrial firm performance: Evidence from international microdata," CPB Discussion Paper 445, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Roth, Jonathan & Sant’Anna, Pedro H.C. & Bilinski, Alyssa & Poe, John, 2023. "What’s trending in difference-in-differences? A synthesis of the recent econometrics literature," Journal of Econometrics, Elsevier, vol. 235(2), pages 2218-2244.
    7. Mensah, Edouard R. & Filipski, Mateusz J., 2022. "Saving for a rainy day: the impact of natural disasters on savings rates," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322266, Agricultural and Applied Economics Association.
    8. repec:osf:osfxxx:ac5ru_v1 is not listed on IDEAS
    9. Zhou, Tao & Huang, Xuhui & Zhang, Ning, 2023. "The effect of innovation pilot on carbon total factor productivity: Quasi-experimental evidence from China," Energy Economics, Elsevier, vol. 125(C).
    10. Clément de Chaisemartin & Xavier D’Haultfœuille, 2023. "Two-way fixed effects and differences-in-differences with heterogeneous treatment effects: a survey," The Econometrics Journal, Royal Economic Society, vol. 26(3), pages 1-30.
    11. Huang, Xuhui & Zhou, Tao & Zhang, Ning, 2025. "How does the carbon market influence the marginal abatement cost? Evidence from China's coal-fired power plants," Applied Energy, Elsevier, vol. 378(PA).
    12. Zhang, Renjie & Zhu, Guiyi, 2024. "Green public procurement and firms' pollution emissions: Does demand-side environmental policy matter?," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1958-1978.
    13. Alex Hollingsworth & Krzysztof Karbownik & Melissa A. Thomasson & Anthony Wray, 2024. "The Gift of a Lifetime: The Hospital, Modern Medicine, and Mortality," American Economic Review, American Economic Association, vol. 114(7), pages 2201-2238, July.
    14. Andrew G. Sutherland & Matthias Uckert & Felix W. Vetter, 2024. "Occupational Licensing and Minority Participation in Professional Labor Markets," Journal of Accounting Research, Wiley Blackwell, vol. 62(2), pages 453-503, May.
    15. Jonathan Colmer & Ralf Martin & Mirabelle Muûls & Ulrich J. Wagner, 2020. "Does pricing carbon mitigate climate change? Firm-level evidence from the European Union emissions trading scheme," CEP Discussion Papers dp1728, Centre for Economic Performance, LSE.
    16. Guignet, Dennis & Jenkins, Robin R. & Belke, James & Mason, Henry, 2023. "The property value impacts of industrial chemical accidents," Journal of Environmental Economics and Management, Elsevier, vol. 120(C).
    17. Rik Chakraborti & Gavin Roberts, 2023. "How price-gouging regulation undermined COVID-19 mitigation: county-level evidence of unintended consequences," Public Choice, Springer, vol. 196(1), pages 51-83, July.
    18. Arne J. Nagengast & Yoto V. Yotov, 2025. "Staggered Difference-in-Differences in Gravity Settings: Revisiting the Effects of Trade Agreements," American Economic Journal: Applied Economics, American Economic Association, vol. 17(1), pages 271-296, January.
    19. Pan, Yue & Chai, Jian & Tian, Lingyue & Zhang, Xiaokong & Wang, Jiaoyan, 2024. "Regional inequality in China's electricity trade," Energy, Elsevier, vol. 313(C).
    20. Xin Nie & Jianxian Wu & Han Wang & Weijuan Li & Chengdao Huang & Lihua Li, 2022. "Contributing to carbon peak: Estimating the causal impact of eco‐industrial parks on low‐carbon development in China," Journal of Industrial Ecology, Yale University, vol. 26(4), pages 1578-1593, August.
    21. Mortha, Aline & Yajima, Naonari & Arimura, Toshi H., 2024. "Impact of the feed-in-tariff exemption on energy consumption in Japanese industrial plants," Japan and the World Economy, Elsevier, vol. 69(C).

    More about this item

    Keywords

    carbon pricing; cap and trade; emission trading; carbon tax; staggered design; dynamic treatment effects;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_11291. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.