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Ian W.H. Parry, Mr. Chandara Veung, and Mr. Dirk Heine
This paper calculates, for the top twenty emitting countries, how much pricing of carbon dioxide (CO2) emissions is in their own national interests due to domestic co-benefits (leaving aside the global climate benefits). On average, nationally efficient prices are substantial, $57.5 per ton of CO2 (for year 2010), reflecting primarily health co-benefits from reduced air pollution at coal plants and, in some cases, reductions in automobile externalities (net of fuel taxes/subsidies). Pricing co-benefits reduces CO2 emissions from the top twenty emitters by 13.5 percent (a 10.8 percent reduction in global emissions). However, co-benefits vary dramatically across countries (e.g., with population exposure to pollution) and differentiated pricing of CO2 emissions therefore yields higher net benefits (by 23 percent) than uniform pricing. Importantly, the efficiency case for pricing carbon’s co-benefits hinges critically on (i) weak prospects for internalizing other externalities through other pricing instruments and (ii) productive use of carbon pricing revenues.
Mrs. Mai Farid, Mr. Michael Keen, Mr. Michael G. Papaioannou, Ian W.H. Parry, Ms. Catherine A Pattillo, and Anna Ter-Martirosyan
This paper discusses the implications of climate change for fiscal, financial, and macroeconomic policies. Most pressing is the use of carbon taxes (or equivalent trading systems) to implement the emissions mitigation pledges submitted by 186 countries for the December 2015 Paris Agreement while providing revenue for lowering other taxes or debt. Carbon pricing in developing countries would effectively mobilize climate finance, and carbon price floor arrangements are a promising way to coordinate policies internationally. Targeted fiscal measures that are tailored to national circumstances and robust across climate scenarios are needed to counter private sector under-investment in climate adaptation. And increased disclosure of carbon footprints, stress testing of asset values, and greater proliferation of hedging instruments, will facilitate low-emission investments and climate risk diversification through financial markets.
Mrs. Mai Farid, Mr. Michael Keen, Mr. Michael G. Papaioannou, Ian W.H. Parry, Ms. Catherine A Pattillo, and Anna Ter-Martirosyan

the competitiveness of energy-intensive, trade-exposed firms . Leakage rates are not that substantial however, typically about 5–20 percent of the first-round emissions reduction from carbon pricing if a sizeable coalition of countries price carbon ( Fischer, Morgenstern, and Richardson 2015 , pp. 163), and the problem is confined to a limited number of industries (for example, chemicals, plastics, primary metals, petroleum refining). 40 Efficient resource allocation generally implies that industries unable to compete when energy is properly priced should

Ian W.H. Parry, Mr. Chandara Veung, and Mr. Dirk Heine

fuel importers—effectively, a worsening of the terms of trade for the former. From a national welfare perspective, this would represent a co-cost rather than a co-benefit for exporters. But these costs are not considered here as they are tricky to estimate—they depend, for example, on how many countries price carbon and how fuel supply (often in administered markets) responds. Aggregating over fuel markets (where quantity changes reflect both own- and cross-price effects), the total welfare change is: ( 2 ) − Σ i ( z