Carbon Pricing Metrics : Analyzing Existing Tools and Databases of Platform for Collaboration on Tax (PCT) Partners

Overview & Synopsis

Carbon pricing (CP) is an economic and environmental policy strategy that places a monetary cost on the emission of carbon dioxide and other greenhouse gases. It is designed to internalize the external (social) costs of these emissions, such as the damage caused by climate change, air pollution, and the associated health impacts. As a tool in climate policy, CP aims to incentivize businesses, industries, and individuals to reduce their carbon emissions by making it financially beneficial to shift towards cleaner, more sustainable practices. This policy instrument can take various forms including carbon taxes, emissions trading schemes, or a combination of both. Despite its potential effectiveness and cost-efficiency in reducing greenhouse gas emissions, CP is not neutral in its impact across society and faces numerous challenges. The aim of this paper is to facilitate comparison of the various metrics. This paper provides an overview of how various metrics complement each other and how they differ. It identifies unifying concepts behind different terminologies and provides insight into how the various forms of CP relate: direct, indirect, positive, and negative. Thus, it can inform pricing decisions such as removing fossil fuel subsidies alongside introducing carbon or fuel excise taxes, and it can improve policy coherence. This paper describes a new typology for analyzing and understating CP metrics. The typology comprises two general components: what is measured (coverage and rate) and why it is measured (purpose and use). This paper is organized as follows. Section 1 gives introduction; section 2 describes the metrics of the platform for collaboration on tax (PCT) Partners to CP. Section 3 suggests a framework to compare different CP metrics. Section 4 presents a new typology to compare metrics and then analyzes and compares the CP metrics. Section 5 compares CP metrics based on technical considerations. Section 6 uses country examples to illustrate messages that are common across PCT Partners. This section exemplifies how countries can use this typology and complementary information from different metrics to assess the CP levels better. Section 7 provides concluding remarks.