The book ‘Effective Carbon Prices’ is published by the OECD today.
Economic textbooks predict that taxes and emission trading systems are the cheapest way for societies to reduce emissions of CO2. This book shows that this is also the case in the real world. It estimates the costs to society of reducing CO2 emissions in 15 countries using a broad range of policy instruments in five of the sectors generating most emissions: electricity generation, road transport, pulp & paper and cement, as well as households’ domestic energy use. Copenhagen Economics has conducted the estimates for Denmark.
Our estimates of Danish carbon prices correspond well with the general findings in the book: Market-based approaches like taxes and trading systems consistently reduce CO2 at a lower cost than other instruments. Capital subsidies and feed-in tariffs are among the most expensive ways of reducing emissions. Given the prevalence of the later type of measures, we conclude that there is a large scope for improving cost efficiency of climate policies by moving towards market-based approaches.
For further information please contact Partner Sigurd Næss-Schmidt