Carbon pricing efficacy: Cross-country evidence

To date there has been an absence of cross-country empirical studies on the efficacy of
carbon pricing. In this paper we present estimates of the contribution of carbon pricing to
reducing national carbon dioxide (CO2) emissions from fuel combustion, using several
econometric modelling approaches that control for other key policies and for structural
factors that are relevant for emissions. We use data for 142 countries over a period of two
decades, 43 of which had a carbon price in place at the national level or below by the end
of the study period. We find evidence that the average annual growth rate of CO2
emissions from fuel combustion has been around two percentage points lower in
countries that have had a carbon price compared to countries without. An additional euro
per tonne of CO2 in carbon price is associated with a reduction in the subsequent annual
emissions growth rate of approximately 0.3 percentage points, all else equal. While it is
impossible to fully control for all relevant influences on emissions growth, our estimates
suggest that the emissions trajectories of countries with and without carbon prices tend to
diverge over time.