Evaluating National and Subnational Carbon Prices: A Harmonized Approach

Existing carbon pricing instruments vary in their institutional design, sectoral scope, and price. Thus, in the context of the Paris Agreement, comparing and evaluating policies across jurisdictions requires a harmonized approach. This paper’s contribution is twofold. First, I present data and methodology that provide a detailed and standardized record of carbon pricing mechanisms in force worldwide. Second, I discuss the most recent developments in carbon pricing at the jurisdiction level and quantify three commonly made observations: (i) at constant scope, emissions covered by such mechanisms tend to decline over time, as a share of both total jurisdiction and world emissions, (ii) a significant difference between the maximum and economywide average price on emissions exists, and (iii) this average price is well below the global social cost of carbon and levels compatible with the objectives of the Paris Agreement. This quantification supports the view that the global economic efficiency and environmental effectiveness of carbon pricing can be enhanced by reducing the significant cross-sectoral distortions, raising the average price of emissions, and extending carbon pricing to new jurisdictions and sectors.The data used to construct the World Carbon Pricing Database is currently available here, and the data used to calculate the emissions-weighted carbon price is available here. An interactive dashboard visualizing the data will be available online soon.Read the full working paper here.