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

, $63 per ton—estimated for year 2010 and in US $ for that year—in China, and averages $57.5 per ton among the top twenty emitters. For comparison, a US government study ( US IAWG 2013 ) puts the global damage from CO 2 emissions at $35 per ton, and CO 2 prices in the European Union’s Emissions Trading System have been below $10 per ton since January 2013. In most cases, co-benefits primarily reflect reduced air pollution deaths from less coal use, though in some cases they primarily reflect reduced road fuel subsidy distortions and reduced vehicle externalities. In