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How Much Carbon Pricing is in Countries’ Own Interests? The Critical Role of Co-Benefits
Author: Ian W.H. Parry, Mr. Chandara Veung, and Mr. Dirk Heine
Series:
IMF Working Papers
Volume/Issue:
Volume 2014: Issue 174
Language:
English
Publication Date:
17 Sep 2014
DOI:
https://0-doi-org.library.svsu.edu/10.5089/9781498358279.001
ISBN:
9781498358279
ISSN:
1018-5941
Pages:
36
Keywords:
WP; price; net; pricing; carbon pricing; co-benefits; air pollution; fuel taxes; top twenty emitters; fuel price elasticity; uniform price; price responsiveness; welfare cost; cross-price effect; price-gap concept; net benefit; responsiveness of fuel use; mitigation cost; countries price carbon; Carbon tax; Greenhouse gas emissions; Non-renewable resources; Public expenditure review; Fuel prices; Global; Africa
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund