Implicit carbon prices: Difference between revisions
KylieTastic (talk | contribs) format |
reworded headings to meet Wikipedia:Manual of Style guidelines on "Instructional and presumptuous language" |
||
| (14 intermediate revisions by 10 users not shown) | |||
| Line 1: | Line 1: | ||
{{Short description|Indirect costs of climate change measures}} |
|||
{{AFC submission|r||u=Mairin3|ns=118|reviewer=Curb Safe Charmer|reviewts=20230306133840|ts=20230306133453}} <!-- Do not remove this line! --> |
|||
{{Technical|date=May 2023|talk=talk:Implicit_carbon_prices%23Too_technical_and_hard_to_understand}} |
|||
| ⚫ | '''Implicit carbon prices''' arise from measures which impact on the [[marginal cost]] of emitting [[Greenhouse gas emissions|greenhouse gas (GHG) emissions]] without targeting GHG emissions or the carbon content of fuel directly.<ref name=":0">{{Cite journal |last=Dominioni |first=Goran |date=2022 |title=Pricing carbon effectively: a pathway for higher climate change ambition |journal=Climate Policy |volume=22 |issue=7|pages=897–905 |doi=10.1080/14693062.2022.2042177 |doi-access=free }}</ref> As such, they contribute to [[climate change mitigation]]. Examples of these instruments include [[fuel tax]]es applied to reduce local pollution and the removal of [[Fossil fuel subsidies|subsidies for fossil fuel]] consumption.<ref name=":1">{{Cite journal |last1=Dominioni |first1=Goran |last2=Esty |first2=Daniel C. |date=2023 |title=Designing Effective Border-Carbon Adjustment Mechanisms: Aligning the Global Trade and Climate Change Regimes |url=https://arizonalawreview.org/designing-effective-border-carbon-adjustment-mechanisms-aligning-the-global-trade-and-climate-change-regimes/ |journal=Arizona Law Review |volume=65 |issue=1}}</ref> |
||
{{Short description|implicit carbon pricing policies}} |
|||
{{Draft topics|business-and-economics|society|earth-and-environment}} |
|||
{{AfC topic|stem}} |
|||
| ⚫ | |||
| ⚫ | '''Implicit carbon prices''' arise from measures which impact on the [[marginal cost]] of emitting [[Greenhouse gas emissions|greenhouse gas (GHG) emissions]] without targeting GHG emissions or the carbon content of fuel directly.<ref name=":0">{{Cite journal |last=Dominioni |first=Goran |date=2022 |title=Pricing carbon effectively: a pathway for higher climate change ambition |
||
| ⚫ | The sum of implicit and explicit carbon prices is referred to as the effective carbon price.<ref name=":0" /><ref name=":2">{{Cite journal |last=World Bank Group |date=2019 |title=State and Trends of Carbon Pricing 2019 |url=https://openknowledge.worldbank.org/handle/10986/31755 |journal=World Bank}}</ref><ref>{{Cite journal |last=International Monetary Fund |date=2019 |title=Fiscal policies for Paris climate strategies—From principle to practice. IMF Policy Paper. |url=https://www.imf.org/en/Publications/Policy-Papers/Issues/2019/05/01/Fiscal-Policies-for-Paris-Climate-Strategies-from-Principle-to-Practice-46826 |journal=IMF}}</ref> Considering both the implicit and explicit carbon prices can contribute to a better understanding of a country's progress on tackling emissions. It can also lead to better policy alignment and reduce inconsistencies in the fiscal system—such as when subsidies for fossil fuel consumption are combined with carbon taxes.<ref name=":2" /> |
||
| ⚫ | |||
==Examples of Policies== |
|||
| ⚫ | The sum of implicit and explicit carbon prices is referred to as the effective carbon price.<ref name=":0" /><ref name=":2">{{Cite journal |last=World Bank Group |date=2019 |title=State and Trends of Carbon Pricing 2019 |url=https://openknowledge.worldbank.org/handle/10986/31755 |journal=World Bank}}</ref><ref>{{Cite journal |last=International Monetary Fund |date=2019 |title=Fiscal policies for Paris climate strategies—From principle to practice. IMF Policy Paper. |url=https://www.imf.org/en/Publications/Policy-Papers/Issues/2019/05/01/Fiscal-Policies-for-Paris-Climate-Strategies-from-Principle-to-Practice-46826 |journal=IMF}}</ref> Considering both the implicit and explicit carbon prices can contribute to a better understanding of a country's progress on tackling emissions. It can also lead to better policy alignment and reduce inconsistencies in the fiscal |
||
| ⚫ | Depending on the instrument, implicit carbon prices can be either positive or negative.<ref name=":2" /> Fuel taxes, which increase the costs of [[fossil fuel]]s, can be considered as positive carbon pricing measures as they make it more expensive to emit GHGs. On the other hand, subsidies for fossil fuel consumption incentivize the use of fossil fuels by decreasing their cost, and therefore result in a negative carbon price.<ref name=":2" /> The removal of these subsidies through reform are a positive implicit carbon price. |
||
| ⚫ | Opinions differ on what policies can be considered implicit carbon prices. Many agree that [[energy tax]]es and (the withdrawal of) fossil fuel subsidies can be seen as pricing carbon implicitly because they alter the price of fossil fuels.<ref name=":2" /><ref name=":1" /> Other policies could also be seen as implicitly pricing carbon, such as tradable performance standards or traffic congestion taxes that are not applicable to cleaner vehicles.<ref name=":2" /><ref name=":1" /> Other instruments could be included as well as long as they affect the price of emitting GHGs. |
||
==What policies put an implicit price on carbon?== |
|||
| ⚫ | Implicit carbon prices are more common than explicit ones at a global level. While almost all countries will have a gasoline tax, only 39 have explicit carbon pricing policies.<ref>{{Cite web |last=World Bank |date=2022 |title=Carbon pricing dashboard |url=https://carbonpricingdashboard.worldbank.org/map_data }}</ref> There are a number of reasons for implicit carbon pricing being more widespread. Policies that implicitly price carbon often target problems at the local level (e.g., [[air pollution]], [[traffic congestion]], or the need for fiscal revenues).<ref name=":1" /> In addition, they often do not require as much technical or administrative capacity as explicit carbon pricing policies, which must measure and monitor GHG emissions levels.<ref name=":1" /> Implicit carbon prices can also face less political opposition as they can be less polarising than measures which explicitly reference the climate or carbon.<ref>{{Cite journal |last=Dominioni |first=Goran |date=2022 |title=Motivated Reasoning and Implicit Carbon Prices: Overcoming Public Opposition to Carbon Taxes and Emissions Trading Schemes |url=https://doi.org/10.1017/err.2020.102 |journal=European Journal of Risk Regulation |volume=13 |issue=1|pages=158–173 |doi=10.1017/err.2020.102 |s2cid=228912323 }}</ref> |
||
| ⚫ | Depending on the instrument, implicit carbon prices can be either positive or negative.<ref name=":2" /> Fuel taxes, which increase the costs of [[ |
||
| ⚫ | Opinions differ on what policies can be considered implicit carbon prices. Many agree that [[ |
||
| ⚫ | Implicit carbon prices are more common than explicit ones at a global level. While almost all countries will have a gasoline tax, only 39 have explicit carbon pricing policies.<ref>{{Cite web |last=World Bank |date=2022 |title=Carbon pricing dashboard |url=https://carbonpricingdashboard.worldbank.org/map_data |
||
==Relevance for designing border carbon adjustment mechanisms== |
==Relevance for designing border carbon adjustment mechanisms== |
||
Considering both implicit and explicit carbon pricing measures can result in a very different understanding of a country’s actions on GHG emissions reductions than if only explicit carbon pricing is examined.<ref name=":1" /> Some countries may have a carbon tax or [[Emissions trading|emissions allowance trading scheme]] in place, while others may have implemented other policies that, overall, put a much higher price on domestic GHG emissions. |
Considering both implicit and explicit carbon pricing measures can result in a very different understanding of a country’s actions on GHG emissions reductions than if only explicit carbon pricing is examined.<ref name=":1" /> Some countries may have a carbon tax or [[Emissions trading|emissions allowance trading scheme]] in place, while others may have implemented other policies that, overall, put a much higher price on domestic GHG emissions. |
||
Whether to take explicit or effective carbon prices into account has policy implications for the design of border carbon adjustment (BCA) mechanisms. BCA mechanisms attempt to prevent carbon leakage by putting a price on the GHG emissions embedded in goods imported from countries whose GHG policies are not at a comparably stringent level as those of the importing country.<ref name=":1" /> The European Union’s proposal for a [[Carbon Border Adjustment Mechanism]] defines ‘carbon price’ as a “tax or emission allowances under a greenhouse gas emissions trading system” and so is looking at the explicit carbon tax applied.<ref>{{Cite web |last=European Commission |date=2021 |title=Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a carbon border adjustment mechanism, COM(2021) 564 final |url=https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:52021PC0564 |
Whether to take explicit or effective carbon prices into account has policy implications for the design of border carbon adjustment (BCA) mechanisms. BCA mechanisms attempt to prevent carbon leakage by putting a price on the GHG emissions embedded in goods imported from countries whose GHG policies are not at a comparably stringent level as those of the importing country.<ref name=":1" /> The European Union’s proposal for a [[Carbon Border Adjustment Mechanism]] defines ‘carbon price’ as a “tax or emission allowances under a greenhouse gas emissions trading system” and so is looking at the explicit carbon tax applied.<ref>{{Cite web |last=European Commission |date=2021 |title=Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a carbon border adjustment mechanism, COM(2021) 564 final |url=https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:52021PC0564 }}</ref> In contrast, a proposed BCA in the United States includes a wider range of policies that includes implicit carbon pricing.<ref>{{Cite web |last=Peters |first=S.H. |date=2021 |title=FAIR Transition and Competition Act, H.R.4534. 117th CONGRESS |url=https://www.congress.gov/bill/117th-congress/house-bill/4534 |website=Congress.gov}}</ref> It has been argued that using effective carbon pricing instead of explicit carbon pricing for BCA mechanisms could result in greater reductions in GHG emissions while also being more politically feasible and compatible with international trade agreements.<ref name=":1" /> |
||
== References == |
== References == |
||
<!-- Inline citations added to your article will automatically display here. See en.wikipedia.org/wiki/WP:REFB for instructions on how to add citations. --> |
|||
{{reflist}} |
{{reflist}} |
||
[[Category:Climate change mitigation]] |
|||
Latest revision as of 02:05, 22 May 2024
 | This article may be too technical for most readers to understand. (May 2023) |
Implicit carbon prices arise from measures which impact on the marginal cost of emitting greenhouse gas (GHG) emissions without targeting GHG emissions or the carbon content of fuel directly.[1] As such, they contribute to climate change mitigation. Examples of these instruments include fuel taxes applied to reduce local pollution and the removal of subsidies for fossil fuel consumption.[2]
In contrast to implicit carbon prices, explicit carbon prices are measures designed specifically to target GHG emissions or the carbon content of fuel. Measures such as carbon taxes or emissions trading schemes put an explicit price on GHG emissions.[1]
The sum of implicit and explicit carbon prices is referred to as the effective carbon price.[1][3][4] Considering both the implicit and explicit carbon prices can contribute to a better understanding of a country's progress on tackling emissions. It can also lead to better policy alignment and reduce inconsistencies in the fiscal system—such as when subsidies for fossil fuel consumption are combined with carbon taxes.[3]
Examples of Policies
[edit]Depending on the instrument, implicit carbon prices can be either positive or negative.[3] Fuel taxes, which increase the costs of fossil fuels, can be considered as positive carbon pricing measures as they make it more expensive to emit GHGs. On the other hand, subsidies for fossil fuel consumption incentivize the use of fossil fuels by decreasing their cost, and therefore result in a negative carbon price.[3] The removal of these subsidies through reform are a positive implicit carbon price.
Opinions differ on what policies can be considered implicit carbon prices. Many agree that energy taxes and (the withdrawal of) fossil fuel subsidies can be seen as pricing carbon implicitly because they alter the price of fossil fuels.[3][2] Other policies could also be seen as implicitly pricing carbon, such as tradable performance standards or traffic congestion taxes that are not applicable to cleaner vehicles.[3][2] Other instruments could be included as well as long as they affect the price of emitting GHGs. Implicit carbon prices are more common than explicit ones at a global level. While almost all countries will have a gasoline tax, only 39 have explicit carbon pricing policies.[5] There are a number of reasons for implicit carbon pricing being more widespread. Policies that implicitly price carbon often target problems at the local level (e.g., air pollution, traffic congestion, or the need for fiscal revenues).[2] In addition, they often do not require as much technical or administrative capacity as explicit carbon pricing policies, which must measure and monitor GHG emissions levels.[2] Implicit carbon prices can also face less political opposition as they can be less polarising than measures which explicitly reference the climate or carbon.[6]
Relevance for designing border carbon adjustment mechanisms
[edit]Considering both implicit and explicit carbon pricing measures can result in a very different understanding of a country’s actions on GHG emissions reductions than if only explicit carbon pricing is examined.[2] Some countries may have a carbon tax or emissions allowance trading scheme in place, while others may have implemented other policies that, overall, put a much higher price on domestic GHG emissions.
Whether to take explicit or effective carbon prices into account has policy implications for the design of border carbon adjustment (BCA) mechanisms. BCA mechanisms attempt to prevent carbon leakage by putting a price on the GHG emissions embedded in goods imported from countries whose GHG policies are not at a comparably stringent level as those of the importing country.[2] The European Union’s proposal for a Carbon Border Adjustment Mechanism defines ‘carbon price’ as a “tax or emission allowances under a greenhouse gas emissions trading system” and so is looking at the explicit carbon tax applied.[7] In contrast, a proposed BCA in the United States includes a wider range of policies that includes implicit carbon pricing.[8] It has been argued that using effective carbon pricing instead of explicit carbon pricing for BCA mechanisms could result in greater reductions in GHG emissions while also being more politically feasible and compatible with international trade agreements.[2]
References
[edit]- ^ a b c Dominioni, Goran (2022). "Pricing carbon effectively: a pathway for higher climate change ambition". Climate Policy. 22 (7): 897–905. doi:10.1080/14693062.2022.2042177.
- ^ a b c d e f g h Dominioni, Goran; Esty, Daniel C. (2023). "Designing Effective Border-Carbon Adjustment Mechanisms: Aligning the Global Trade and Climate Change Regimes". Arizona Law Review. 65 (1).
- ^ a b c d e f World Bank Group (2019). "State and Trends of Carbon Pricing 2019". World Bank.
- ^ International Monetary Fund (2019). "Fiscal policies for Paris climate strategies—From principle to practice. IMF Policy Paper". IMF.
- ^ World Bank (2022). "Carbon pricing dashboard".
- ^ Dominioni, Goran (2022). "Motivated Reasoning and Implicit Carbon Prices: Overcoming Public Opposition to Carbon Taxes and Emissions Trading Schemes". European Journal of Risk Regulation. 13 (1): 158–173. doi:10.1017/err.2020.102. S2CID 228912323.
- ^ European Commission (2021). "Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a carbon border adjustment mechanism, COM(2021) 564 final".
- ^ Peters, S.H. (2021). "FAIR Transition and Competition Act, H.R.4534. 117th CONGRESS". Congress.gov.