1、Working together for better climate actionCARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 1CONTENTSExecutive summary.31.The state of global climate action.72.The menu of policy tools.153.Carbon pricing metrics.214.Spillover effects

2、of climate policies.295.Coordination to maximize positive spillovers and limit negative crossborder impacts.416.Coordination to scale up climate action.49WORKING TOGETHER FOR BETTER CLIMATE ACTION2ACKNOWLEDGEMENTSThe preparation of this report was coordinated by Eddy Bekkers(WTO),James Roaf(IMF),Ass

3、ia Elgouacem(OECD),Chantal Line Carpentier(UNCTAD)and Stphane Hallegatte(The World Bank)under the guidance of Ruud de Mooij(Deputy Director,Fiscal Affairs Department,IMF),Kurt van Dender(Head of Tax Policy and Statistics Division,Centre for Tax Policy and Administration,OECD),Juergen Voegele(Vice-Pr

4、esident for Sustainable Development,The World Bank),Pablo Saavedra(Vice-President for the Prosperity Vertical,The World Bank),Bright Okogu(Chief of Staff,Office of the Director General,WTO)and Ralph Ossa(Chief Economist,WTO).The Sections were coordinated by Mateo Ferrero(WTO),Marco Fugazza(UNCTAD),M

5、aryla Maliszewska(The World Bank),Daniel Ramos(WTO),and Stphane Hallegatte(The World Bank).The authors of the report are Alberto Garcia Huitron,James Roaf,Nate Vernon,and Karlygash Zhunussova(IMF),Kurt van Dender,Assia Elgouacem,Grgoire Garsous,Alonso Gonzales Marentis,Elisa Lanzi,Daniel Nachtigall,

6、Mauro Pisu,and Enxhi Tresa(OECD),Susanne Aakerfeldt,Alexandra Campmas,Sebastien Dessus,Carolyn Fischer,Mona Haddad,Stephane Hallegatte,Dirk Heine,Penny Mealy,Maryla Maliszewska,Joseph Pryor,Ammara Shariq,Iryna Sikora(The World Bank),Chantal Line Carpentier,Claudia Contreras,Marco Fugazza(UNCTAD),Mar

7、c Bacchetta,Eddy Bekkers,Mateo Ferrero,Ralph Ossa,Daniel Ramos,and Ankai Xu(WTO).Research assistance was provided by Julia Collado Serrano,Fulvio Silvy and Yu Wang(WTO).Serge Marin-Pache and Anthony Martin(WTO)managed the production of the report.UNFCCC staff contributed inputs.DISCLAIMERPrepared by

8、 the staffs of the International Monetary Fund(IMF),the Organisation for Economic Co-operation and Development(OECD),the United Nations Conference on Trade and Development(UNCTAD),The World Bank,and the World Trade Organization(WTO).For the IMF,the views expressed here are those of the authors and s

9、hould not be construed as the views of the IMF,its Executive Board,member governments,or any other entity mentioned herein.For the OECD,this work is published under the responsibility of the Secretary-General of the OECD.The opinions expressed and arguments employed herein do not necessarily reflect

10、 the official views of the Member countries of the OECD.For the OECD,please refer to the OECDs terms and conditions for specific territorial disclaimers applicable to this joint publication(https:/www.oecd.org/termsandconditions/).For the United Nations,the findings,interpretations and conclusions e

11、xpressed herein are those of the author(s)and do not necessarily reflect the views of the United Nations or its officials or Member States.For The World Bank,the findings,interpretations,and conclusions expressed in this work do not necessarily reflect the views of The World Bank,its Board of Execut

12、ive Directors,or the governments they represent.For the WTO,this work is published under the responsibility of the WTO Secretariat.The views expressed,and the terms and illustrations used in this publication are without prejudice to WTO members rights and obligations,nor intended to provide any auth

13、oritative or legal interpretation of the provisions of the WTO Agreements.The names of countries and territories used in this joint publication follow the practice of the WTO.This document,as well as any data,illustrations and map included herein,are without prejudice to and do not constitute or imp

14、ly an expression of opinion on the status of or sovereignty over any territory,to the delimitation of international frontiers and boundaries and to the name of any territory,city or area.For the World Bank,the boundaries,colors,denominations,links/footnotes and other information shown in this work d

15、o not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.The citation of works authored by others does not mean the World Bank endorses the views expressed by those authors or the content of their works.Co

16、pyright 2024,the International Monetary Fund,the Organisation for Economic Co-operation and Development,the United Nations,The World Bank and the World Trade Organization.CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 3EXECUTIVE SUMMARYIn response to the threat of global warming,countries

17、 around the world are scaling up actions to limit climate change.Mitigation policies include carbon pricing,regulations,subsidies,and direct investments.Because economic and political contexts and available resources vary across countries,these policies differ in ambition,sequencing,and policy appro

18、aches.The Paris Agreement accommodates this diversity,and its bottom-up approach has helped to increase the ambition for climate action.Yet more needs to be done.Both climate ambition and climate action must increase to achieve global emission reduction targets.Two barriers impede these goals.First,

19、many countries struggle to introduce an effective mix of climate change policies.In particular,carbon pricing through carbon taxes or emissions trading systems(ETSs)even though it can strongly contribute to cost-effective mitigation and raise badly needed revenueshas faced strong political headwinds

20、 because of visible distributional and competitiveness effects and carbon leakage concerns.Second,domestic climate policy choices can have global spillover effects and policy fragmentation from unilateral reactions to these spillovers can lead to trade tensions,with potential negative economic and c

21、limate impacts.The World Trade Organization(WTO)convened the Task Force on Climate Action,Carbon Pricing,and Policy Spilloverswhich was joined by the International Monetary Fund(IMF),Organisation for Economic Co-operation and Development(OECD),United Nations Conference on Trade and Development(UNCTA

22、D),and the World Bankto identify ways to foster coordination to maximize positive and limit negative cross-border spillovers from climate change mitigation policies;to introduce a common understanding of carbon pricing metrics;and to promote coordination to scale up climate action,including through

23、carbon pricing.Effective climate policiesReducing greenhouse gas(GHG)emissions generates substantial global benefits by reducing or averting climate change.Individual countries that reduce GHG emissions can also experience significant immediate benefits by advancing several Sustainable Development G

24、oals(SDGs).For instance,promoting energy efficiency and the deployment of low-cost green technologies,such as solar power and e-mobility,can expand access to energy services and improve air quality.In World Banks Country Climate and Development Reports(CCDRs),low-emission scenarios have faster short

25、-term economic growth than current economic trends in most countries studied,thanks to these co-benefits and assuming well-designed climate policies and a supportive economic environment.Countries currently employ a range of policy instruments to reduce emissions.Momentum is building for explicit ca

26、rbon pricing policies,with the use of such policies on the rise since 2010 according to OECD and World Bank research.Currently,75 carbon taxes and ETSs are in operation worldwide,covering approximately 24 percent of global emissions.While most carbon pricing policies to date have been implemented in

27、 high-income countries,they are also gaining traction in middle-and low-income countries.Most countries also tax some fossil fuel use through energy or fuel taxes,creating an implicit carbon price that disincentivizes related GHG emissions.However,many subsidize fossil fuel with the reverse incentiv

28、e,making subsidy reform an important component for the evolution of carbon pricing and climate action.Carbon pricing is the only abatement instrument that can implement the Polluter Pays Principle.Introducing a charge per unit of emissions leads emitters to cut emissions as long as that is less cost

29、ly than paying the carbon price.And because it makes polluters pay for each unit of emissions,it also creates a price signal to incentivize final consumers and other firms to reduce their consumption of carbon-intensive goods and services.For this reason,carbon pricing can form a key element of a co

30、st-efficient emissions reduction policy package.It also creates revenues that can be used to ease adjustment costs as well as to contribute to the general budget and achieve other policy and development goals.Even with mitigation policies creating incentives to invest in emission reducing technologi

31、es,other pervasive market failures can hinder their innovation and diffusion.These unaddressed market failures,infrastructure constraints,and other barriers can hinder the effectiveness of a climate policy mix.For that reason,non-carbon-pricing policies need to complement carbon pricing,if it is imp

32、lemented,by dealing with other market failures so as to make carbon pricing more efficient and WORKING TOGETHER FOR BETTER CLIMATE ACTION4also more acceptable politically.Achieving the same level of emission reductions requires a higher carbon price if it is not complemented with non-pricing policie

33、s.However,opposition to pricing instruments can be strong,as the benefits of carbon pricing are diffuse and indirect while the costs are often concentrated and visible.Contrary to carbon pricing,alternative policy instrumentslike regulations and subsidiesoften involve lower and less visible direct c

34、osts for polluters(and consumers of carbon-intensive goods and services),which is why they are often more readily accepted even when they have indirect effects that generate higher aggregate economic costs.Combining emission pricing with other policy interventions,such as strengthening public transp

35、ort and public infrastructure and making benefits visible,such as through compensatory cash transfers,can strengthen social support for carbon pricing and fuel subsidy reforms.Support for carbon pricing and fossil fuel subsidy reforms can increase over time as the benefits of the reform materialize,

36、making it essential to design reforms such that they generate visible early benefits.And intermediate solutions are available too,for instance using output-based rebates to minimize impacts on production costs while maintaining an incentive to reduce emissions.A common understanding of carbon pricin

37、g metricsTransparent carbon pricing metrics serve two key objectives.First,they can enhance transparency and accountability by informing on the extent and scale at which countries are shifting private sector incentives toward decarbonization through pricing.Second,they can inform on cross-country va

38、riation in carbon prices,a key determinant of international spillover effects and competitiveness concerns.Metrics for measuring the impact of carbon pricing and other climate mitigation policies on GHG emissions can also inform policy efforts to scale up climate action.Carbon pricing metrics measur

39、e the price that households and firms that emit GHGs have to pay per unit of these emissions,either in the form of a tax or fee or by buying permits,or the rewards they receive if emissions are being subsidized.Carbon prices can measure average or marginal prices and can consider explicit carbon pri

40、cing or also implicit or indirect pricing.Explicit carbon prices capture the extent to which a cost is directly applied to GHGs in terms of a monetary unit per unit of warming effect.Fuel excise taxes and fossil fuel consumption subsidies can similarly be quantified as implicit carbon prices.The Wor

41、ld Banks Carbon Pricing Dashboard considers explicit carbon taxes and ETS permit prices.The OECDs net effective carbon rate adds fossil fuel consumption taxes and subsidies that lower pre-tax fuel prices,and is available at the sector and fuel level in over 70 countries,covering 82 percent of global

42、 GHG emissions.The World Banks total carbon price,available for over 140 countries,employs an alternative approach to data collection and calculation of carbon price levels by leveraging IMF estimates of fossil fuel taxes and subsidies.This taskforce on climate action,carbon pricing,and policy spill

43、overs provides a common measurement framework,converging on a set of scopes and methodologies,while maintaining a diversity of metrics appropriate for different contexts and use cases.Aggregated metrics cannot inform all decisions.To understand how carbon pricing affects competitiveness in relation

44、to internationally traded products,disaggregated metrics measuring sector-and product-level carbon pricing are needed.To calculate embodied carbon pricing,such as for recognition in border carbon adjustment(BCA)measures,the carbon prices paid on all relevant direct and indirect emissions,as well as

45、free allocations and rebates that reduce the payments on residual emissions,must be considered.To estimate ex-ante the impact of carbon pricing and other policies on emissions,economic modeling or calculations based on estimated elasticities calibrated on historical data series reflecting behavioral

46、 responses can be employed.The World Banks CCDRs and the OECDs Inclusive Forum on Carbon Mitigation Approaches(IFCMA)employ modeling.Elasticity-based calculations underlie the IMFs effective carbon price,which considers all price-based policies,or IMFs carbon price equivalent(CPE),which considers a

47、broad range of policies,and calculates the uniform economywide carbon price that would generate the same emission reductions as the policies considered.Coordination to maximize positive cross-border spillovers and limit negative cross-border impactsWhen a jurisdiction introduces a climate policy,bot

48、h positive and negative cross-border spillovers may ensue.In general,climate policies generate three types of positive spillovers.The first is the primary objective:reducing global GHG emissions helps limit climate change and thus reduces its cost everywhere.Second,CARBON PRICING,POLICY SPILLOVERS,A

49、ND GLOBAL CLIMATE GOALS 5climate policies can promote the development and dissemination of green technologies,which reduce the costs of the climate transition in other countries.Third,experience with climate policy approaches may encourage other countries to follow the example and implement their ow

50、n policies.Climate policies that raise costs for domestic producers,such as carbon pricing,present a risk that industrial activity and the associated emissions will shift to jurisdictions with less costly climate policies,possibly reducing the environmental benefits(carbon leakage).The shift of emis

51、sions abroad is a negative cross-border spillover,reducing the positive climate spillover of carbon pricing.To limit leakage,jurisdictions adopting carbon pricing have used free allowances or output-based subsidies,and are increasingly considering BCAs.In addition to limiting leakage,such policies c

52、an help buttress domestic support for climate action and create incentives for emission reductions in other countries exporting to countries introducing a BCA.However,BCAs can create nontrivial compliance and reporting costs for trade partners and the higher carbon intensity of developing countries

53、and their lower financial and institutional capacity could make them more affected,with the risk of adversely affecting their position in global trade.Hence,they could lead to heightened trade tensions and risk inciting tit-for-tat trade actions.Designing BCAs to ensure proportionality with the impa

54、ct of climate policies is challenging but important to promote environmental effectiveness.Climate policies that reduce costs for domestic producers,such as subsidies to encourage decarbonization,can generate positive spillovers by reducing prices of low carbon goods globally due to learning by doin

55、g and innovation.However,they can also generate negative spillovers,because foreign producers of similar goods competing with the subsidized goods are adversely affected by producer subsidies or discriminatory demand subsidies,for example when accompanied by local content requirements.These policies

56、 pose the risk of hurting low-and lower-middle income countries that cannot invest in a lower-emission production process or cannot propose similar subsidies,for instance because of limited fiscal space and high debt-servicing costs.International coordination can help to maximize positive spillovers

57、 and limit negative cross-border impacts of climate and climate-related policies.Coordination can focus on aligning methods of measuring carbon intensities and product-specific emission metrics to streamline reporting for anti-leakage measures,ensure their transparent application,avoid duplicative c

58、ompliance costs,and limit market access concerns.Coordination could spur green technology dissemination globally by pooling resources,supporting technology deployment,and improving access to low-cost financeenabling the investments needed to help countries increase their climate policy ambition and

59、reduce emissions,while advancing the SDGs.However,it is challenging to implement such coordination in a balanced way.Developing a common understanding of cross-border spillovers and balancing issues in designing trade-related climate measures can help address concerns over arbitrariness,climate poli

60、cy inefficiency,distrust,and protectionism.Options to scale up climate actionInternational organizations help countries to implement a variety of climate policies by providing support through technical assistance,capacity building,analytical work,and climate finance.Enhanced international coordinati

61、on aligned with the Paris Agreement principlessuch as Common but Differentiated Responsibility and Respective Capabilities(CBDR-RC)and with norms of other multilateral systems,like those of the WTO,can elevate climate action and should be designed to contribute to the SDGs.Such coordination can aim

62、at closing the gaps in transparency,implementation,and ambition.The task force does not recommend a specific approach;rather,it encourages exploration of all possible options.To close the transparency gap,countries could agree on enhanced reporting and transparency of their policy and economic envir

63、onment related to climate change mitigation.Existing initiatives to identify the full set of climate policies and measure their impact on emissions comprise the World Banks CCDRs,the IMFs calculation of the CPE,the IFCMA launched at the OECD,and the UNFCCCs Stocktake and Biennial Transparency Report

64、s(BTRs).Enhanced transparency can facilitate peer exchange and self-discipline.To close the implementation gap,countries could agree to implement certain policies and policy instruments such as fossil fuel subsidy reform,climate finance and technical cooperation under the UNFCCCs ongoing negotiation

65、s,sectoral measures,or a mix of climate policies delivering targeted emission reductions.Existing initiatives focus on emissions in specific sectors such as aviation,maritime shipping,or steel.Future initiatives could expand markets for deeply decarbonized products such as zero-carbon steel or alumi

66、num.WORKING TOGETHER FOR BETTER CLIMATE ACTION6To close the ambition gap,countries could coordinate on enhanced levels of ambition,ideally along with the policies to achieve these goals.The next round of updated nationally determined contributions(NDCs)leading up to the 30th UNFCCC conference of the

67、 Parties(COP30)is a key opportunity to increase countries climate ambitions to be consistent with the Paris Agreement temperature goal.Enhanced ambition could be supported by initiatives led by a subgroup of countries defining and preparing“high-ambition NDCs”that meet commonly agreed criteria for a

68、mbition and implementation.In addition to be reflected in updated NDCs,such initiatives could take the form of open international coordination arrangements embedded in or aligned with the Paris Agreement.These initiatives could target emission reductions or alternatively equivalent carbon prices,alt

69、hough the latter approach presents challenges as it requires significant assumptions to convert policies into a carbon price equivalent.Research by the IMF on an International Carbon Price Floor,the WTO Secretariat on a Global Carbon Pricing Framework,the World Bank in Climate Change Development Rep

70、orts,or OECDs IFCMA on a global stocktake of carbon mitigation approaches could help inform discussions at UNFCCC on such initiatives.Research by UNCTAD on the effect of climate policies on developing countries can also help ensure that they have a positive development impact.International organizat

71、ions future joint work can help fill the knowledge and information gaps identified in this report,such as the need for more granular and better data on embedded carbon prices,the calculation of equivalent carbon prices,further analysis of the impact of domestic climate policies on other countries(in

72、cluding lower income countries),the costs of fragmentation of climate policies,design of border adjustment policies and their interoperability,solutions to promote and facilitate green technology and knowhow diffusion,and approaches to increased cooperation and climate finance which enhance climate

73、action and ensure a just transition.This work will contribute to the optimization of climate policies for the benefit of all,ensuring no one is left behind,and to scale up climate action and sustainable development.CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 7The state of global climat

74、e actionAccording to climate projections,gaps in ambition and implementation in nationally determined contributions(NDCs)need to be closed to achieve the objectives of the Paris Agreement.To meet their climate mitigation targets,countries rely on a range of climate policy instruments with momentum b

75、uilding for the use of carbon pricing policies.However,the current coverage and stringency levels of mitigation policies are not commensurate with the policies needed to achieve a 1.5C pathway.A resilient,low-emission development pathway delivers many benefits and can help promote economic growth,su

76、pporting the achievements of various Sustainable Development Goals(SDGs).1WORKING TOGETHER FOR BETTER CLIMATE ACTION81.1 Key climate projections show gaps in both ambition and implementation to achieve the objectives of the Paris AgreementIncreased climate ambition is needed to achieve rapid and sus

77、tained reductions in GHG emissions to limit global warming to the Paris Agreements temperature goals.According to the first Global Stocktake(a five-yearly review of the Paris Agreement implementation),to maintain the commitment to limit long-term global warming to 1.5C above pre-industrial levels in

78、 a cost effective way,GHG emissions need to decline by“43 percent by 2030 and 60 percent by 2035 relative to the 2019 level and reach net zero carbon dioxide emissions by 2050.”1 Nonetheless,while emissions have peaked in developed and some developing countries(Calvin et al.,2023),in the Global Stoc

79、ktake all parties recognized that a gap exists in ambition,implying that objectives established in current NDCs are not enough to achieve the necessary emissions reductions for achieving the 2C and 1.5C targets(UNFCCC,2023).IMF estimates suggest that despite countries having increased their mitigati

80、on ambition since the Paris Agreement was signed in 2015,current NDCs would lead to reductions of global GHG emissions of 11 percent by 2030 relative to 2019.2 The United Nations Environment Programme 2023 Emissions Gap Report estimates that full implementation of unconditional and conditional NDCs

81、for 2030 would reduce expected emissions in 2030 by only 2 percent and 9 percent,respectively(United Nations Environment Programme(UNEP),2023).Countries are falling short of achieving the targets set in their NDCs,creating an implementation gap.Even if the ambition gap is closed through higher commi

82、tments in NDCs,all parties in the Global Stocktake recognize that a large implementation gap still exists,defined as the gap between NDC targets and actual policies implemented.IMF estimates suggest that in a business-as-usual scenario with no new or tightening of existing mitigation policies,global

83、 GHG emissions are projected to increase 5 percentto 52 billion tons of CO2 equivalentby 2030(Black,Parry,and Zhunussova,2023).To address this gap,the Global Stocktake lists a series of“global efforts”for parties to implement,including:transitioning away from fossil fuels in energy systems,in a just

84、,orderly and equitable manner;tripling renewable energy capacity globally and doubling the global average annual rate of energy efficiency improvements by 2030;and accelerating zero-and low-emission technologies.Ramping up climate finance,affordable access to existing technologies,and development of

85、 new technologies are key to achieving the Paris Agreement goals.There is a large gap between current and needed climate mitigation finance and investment.IMF estimates suggest that public and private mitigation investment would need to increase sixfold globally and fivefold in developing countries

86、for net zero scenarios by 2050(Black,Parry,and Zhunussova,2023).Most of the investment needs are in the energy sector,with half in electricity generation and distribution and one-quarter in energy efficiency.The High-Level Expert Group on Climate Finance(Songwe,Stern,and Bhattacharya,2022)estimated

87、total investment needs in climate and development at$1.2-1.7 trillion per year for emerging and developing economies(excluding China)in a global net zero scenario for 2050.In the same countries,but with country-specific scenarios,World Bank CCDRs identify around$600 billion per year in climate-relat

88、ed investment needs,combining resilience and low-emission development,with most absolute needs in higher-income countries but much larger relative needs as a share of GDP in low and lower income countries(World Bank,2023a).Finally,decarbonization will require the swift deployment of low carbon techn

89、ologies in all areas of the world and investment in the development of key technologies that are not yet fully ready to go to market,including in the aviation,shipping,cement,steel,agriculture,hydrogen,electric vehicles and batteries,and energy storage industries.1.2 Countries rely on diverse climat

90、e policy instruments with momentum building for the use of carbon pricing policiesTo meet their climate mitigation targets,countries rely on a range of policy instruments.These instruments include carbon pricing,which can be explicit or implicit,and can also take the form of mitigation credits.Count

91、ries also rely on non-carbon pricing incentive-based policies to promote,for example,improved technologies,energy efficiency,and other mitigation-related activities(such as subsidies or feebates)and other noncarbon-pricing policies,such as standards,regulations,and other instruments(for example,publ

92、ic investment policies).Table 1.1 contains examples of policy instruments.CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 9Table 1.1:Examples of climate mitigation policy instrumentsCategoryExamples of policy instrumentsExplicit carbon pricingCarbon taxesEmissions trading systemsImplicit c

93、arbon pricingFuel excise taxesFuel subsidies(negative carbon prices)Value-added tax differential for fuelsMitigation creditingCarbon crediting mechanismsVoluntary carbon marketsIncentive-based policies for technologies,efficiency,and other mitigation-related activitiesVehicle feebatesTradable fuel e

94、fficiency standardsFeed-in tariffsElectricity excise taxes and subsidiesEmissions-based vehicle taxesTradable renewable portfolio standardsTradable renewable fuel standardsTechnological deployment subsidiesElectric vehicle incentivesEnergy efficiency tax creditsCertain industrial and agricultural su

95、bsidiesStandards(nontradable)and other regulationsAir pollution standardsGreenhouse gas emissions intensity standardsClean energy standardsTechnology mandates or polluting product bansFertilizer regulationsEnergy efficiency building codesFuel efficiency regulationsEnergy market reform(Nontradable)re

96、newable share mandatesInvestment and other policiesPublic investment(for example,public transportation,enabling infrastructure for innovation)Information policies(product labelling/rating,certification,information disclosure)Other electric vehicle policiesResearch and Development policiesSource:own

97、elaboration by staff of the IMF,OECD,UNCTAD,WB,and WTO.Note:Emissions trading Systems(ETSs)consist both of mass-based ETSs,including cap-and-trade systems with different allocation mechanisms,and rate-based ETSs,including tradable emission performance standards,output-based pricing systems,and low c

98、arbon fuel standards.Rate-based ETSs limit the intensity but not total amount of emissions;trading results in a price for incremental emissions but benchmark allocations limit the average pricing of emissions,much as with output-based allocation in cap-and-trade regimes or output-based rebating of e

99、mission taxes.Under rate-based systems,total emissions fluctuate with economic activity,but to a lesser extent than with carbon taxes.Flexibility mechanisms under cap-and-trade systems also allow emissions to vary but help promote price stability.Thus,subtle but important distinctions exist among th

100、e policies that can be blurred in practice.Not all international organizations categorize rate-based ETSs as explicit carbon pricing.When all trading occurs bilaterally or on secondary markets,the resulting emissions price may not be observable.WORKING TOGETHER FOR BETTER CLIMATE ACTION10Figure 1.1:

101、Policy mix by country00.20.40.60.81.0Share on climate actionExplicit carbon pricingImplicit carbon pricingIncentive-basedOther investmentStandardsSVNISRLUXLVANZLISLEURSWEGRCESTPOLCOLFINCRILTUNORSVKZAFHUNCANCHEDNKMLTPRTAUTIRLMEXFRADEUCHNCZEKORCHLJPNINIDARGNLDBELBGRGBRESPHRVITAIDNROUTURAUSPERSAURUSSou

102、rce:Nachtigall et al.(2022).Note:Climate action is measured as a combination of policy adoption and policy stringency on a scale from 0(no climate action)to 1(strong climate action).Policy mixes and the reliance on carbon pricing differ substantially across countries.While some countries rely more o

103、n carbon pricing,others rely more on standards and other regulations or on investment and other policies.Even within carbon pricing,countries differ in the extent to which they rely on implicit or explicit carbon pricing.Most countries use at least implicit carbon pricing,and 75 have moved to additi

104、onally pricing carbon explicitly.Figure 1.1 shows policy mixes for OECD countries and selected non-OECD countries relying on the OECDs Climate Actions and Policies Measurement Framework(CAPMF)(Nachtigall et al.,2022).3In recent years,explicit carbon pricing instruments expanded significantly whereas

105、 implicit carbon pricing schemes mostly stagnated,but sharply decreased in 2022.The decrease of implicit carbon pricing was mostly related to record-high fossil fuel subsidies when energy prices soared in 2022.Climate actionmeasured as a combination of policy adoption and increases in policy stringe

106、ncygrew strongly for standards and other regulations and somewhat for incentive-based policies and investment policies between 2010 and 2022(Figure 1.2).4 In 2010,most countries already had diverse policy mixes in place before ramping up explicit carbon pricing.This suggests that countries have ofte

107、n opted for policy sequences characterized by adopting other policy instruments before adopting and strengthening explicit carbon pricing schemes(Linsenmeier,Mohommad,and Schwerhoff,2022).Momentum is building for the adoption of explicit carbon pricing policies(carbon taxes and emissions trading pol

108、icies)globally.Currently,75 carbon taxes and ETSs are in operation worldwide(Figure 1.3),covering approximately 24 percent of global emissionsequivalent to almost 13 gigatons of CO2.This represents an increase of about 10 percentage points since 2020(Figure 1.4).While most of these policies are in h

109、igh-income countries,carbon pricing is also gaining traction in middle-income nations,albeit at lower price levels(Figure 1.4).However,the current coverage and stringency levels of explicit carbon pricing policies are not commensurate with pathways conducive to limiting global warming to well below

110、2C.Despite substantial growth in the coverage of emissions captured by explicit carbon pricing policies over the last five years,progress currently falls well short of the prices recommended to limit temperature rises to well below 2C,even as part of a broader policy mix.CARBON PRICING,POLICY SPILLO

111、VERS,AND GLOBAL CLIMATE GOALS 11Figure 1.2:Trends of climate policy instruments12345Climate action(0-10)Explicit carbon pricing2010201220142016Year201820202022Implicit carbon pricingIncentive-basedOther investmentStandardsSource:Nachtigall et al.(2022).Note:Climate action is measured as a combinatio

112、n of policy adoption and policy stringency on a scale from 0(no climate action)to 1(strong climate action).The figure displays the global average over 56 policies measured in 52 countries.Figure 1.3:Map of carbon taxes and ETSs around the worldIndonesiaSingaporeBruneiDarussalamNew ZealandKazakhstanP

113、akistanThailandTrkiyeChinaColombiaChileIsraelArgentinaUruguayOregonWashingtonPennsylvaniaMassachusettsQubecOntarioSaskatchewanAlbertaNorthwestTerritoriesBritish ColumbiaRGGINew YorkBrazilHawaiiAustraliaCanadaNorwayUKSwedenSpainPortugalPolandNetherlandsLithuaniaLatviaItalyIrelandGreeceGermanyFranceFi

114、nlandEstoniaDenmarkBelgiumLuxembourgLiechtensteinCataloniaSloveniaAustriaSwitzerlandHungaryMontenegroAlbaniaMaltaJapanRepublic of KoreaSakhalinTokyoSaitamaCzech RepublicRomaniaUkraineBulgariaCroatiaSlovak Rep.CyprusViet NamMalaysiaPhilippinesSouth AfricaBotswanaSenegalCte dIvoireMoroccoIcelandMexico

115、JaliscoColimaZacatecasState of MexicoYucatnGuanajuatoDurangoSan Luis PotosQuertaroNova ScotiaParaguayKenyaMauritaniaCalifornia ColoradoIndiaTamaulipasNew BrunswickNewfoundlandand LabradorManitobaMap of carbon taxes and ETSsETS and carbon tax implementedETS implementedCarbon tax implementedETS or car

116、bon tax under consideration or under developmentSource:World Bank State and Trends of Carbon Pricing 2024.Note:ETS=emissions trading system;RGGI=Regional Greenhouse Gas Initiative.WORKING TOGETHER FOR BETTER CLIMATE ACTION12For example,leaving aside that carbon pricing can be combined with other pol

117、icies,it is worth noting that only seven explicit carbon pricing instruments(which cover less than 1 percent of global greenhouse gas emissions)reached price levels high enough to limit temperature rises to well below 2C,and that no existing carbon prices are ambitious enough to limit warming to 1.5

118、C(Figure 1.5).1.3 Resilient low-emission development pathways deliver many benefits and can help promote economic growth,supporting the achievements of various SDGsReducing GHG emissions has several important benefits.Even in the short term,the World Banks Country Climate and Development Reports sug

119、gest that low-emission development pathways can generate similar or even higher economic growth by 2030 compared with current development trajectories,provided that policies are well-designed,synergistic,and take place within a supportive enabling environment(World Bank,2023b).For instance,promoting

120、 energy efficiency and the deployment of low-cost green technologies,such as solar power and e-mobility,can expand access to energy services and improve air quality.Shifting from carbon-intensive to carbon-sequestrating practices can maintain or increase agricultural productivity while reducing emis

121、sions and increasing ecosystem services.However,carbon-sequestration practices may not apply universally across all farming types.In a scenario consistent with the Paris Agreement mitigation objectives,the phasing out of explicit fossil fuel subsidies and increasing prices to internalize fossil fuel

122、related externalities,are estimated to raise 3.6 percent of GDP in revenue by 2030(Black,Parry,and Zhunussova,2023).These reforms also have valuable short-term health benefits,such as reducing local air pollution fatalities by 1.6 million per year.In the long run,climate action can contribute to kee

123、ping the potentially large costs of climate change limited.Carbon pricing can be an effective economic instrument that incentivizes reductions and generates government revenue that can be used to support a just transition in Figure 1.4:Global greenhouse gas emissions covered by explicit carbon prici

124、ng policies0%5%10%15%25%20%042681210Percentage of global emissions covered by ETSs and carbon taxesEmissions(GtCO2e)Carbon tax1990199219941996199820002002200420062008201020122014Year20162018202020222024OverlapETSTotal covered emissions(right axis)Source:World Bank State and Trends of Carbon Pricing

125、2024.Note:ETS=emissions trading system;GtCO2e=gigatons of carbon dioxide equivalent.CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 13Figure 1.5:Prices and coverage across explicit carbon pricing policies2030 carbon price levels consistent with limiting temperature rises to 1.5C.US$226-385

126、/tCO2e380240220160140120100806040200US$per tCO2eCarbon taxesETSsIndonesia ETS Ukraine CT Argentina CT Saitama ETS Kazakhstan ETS Japan CT Estonia CT Massachusetts ETS Guanajuato CT State of Mexico CT Fujian pilot ETS Mexico CT Tianjin pilot ETS Chile CT Hubei pilot ETS Chongqing pilot ETS Durango CT

127、 Korea ETS Colombia CT Guangdong pilot ETS Shenzhen pilot ETS Shanghai pilot ETS South Africa CT China national ETS Albania CT Beijing pilot ETS Zacatecas CT Latvia CT Spain CT RGGI Yucatan CT Singapore CT Slovenia CT Australia ETS UK CT Washington ETS Montenegro ETS Denmark CT New Zealand ETS Icela

128、nd CT Queretaro CT Tokyo ETS California ETS Quebec ETS Hungary CT UK ETS France CT Germany ETS Austria ETS Luxembourg CT Canadian ETSs(Federal and Provinces)Canadian CTes(Federal and Provinces)Switzerland ETS Ireland CT EU ETS Netherlands CT Norway CT Finland CT Sweden CT Switzerland CT Liechtenstei

129、n CT Uruguay CT 60%2030 price range recommended by the High-Level Commission on Carbon Pricesto limit temperature rise to well below 2C.US$63-127 per tCO2eSource:World Bank State and Trends of Carbon Pricing.the medium term,such as for funding sustainable and resilient infrastructure and green techn

130、ologies,and investing in retraining or compensating affected groups and regions.According to economic assessments on carbon pricing that the World Bank Group,the IMF,and the OECD have conducted in both developed and developing countries,a carbon charge can significantly reduce emissions and promote

131、structural change and diversification while forming part of a sustainable growth strategy.5 Moreover,by pairing carbon pricing with fiscal policies which reduce taxes on labor and capital through the increased revenues of carbon pricing,low-carbon structural changes and diversification away from fos

132、sil fuels can be combined with increased national economic development.WORKING TOGETHER FOR BETTER CLIMATE ACTION14ENDNOTES1 According to the IPCC(2022)in model pathways with no or limited overshoot of 1.5C,global net anthropogenic CO2 emissions decline by about 45 percent from 2010 levels by 2030(4

133、060 percent interquartile range),reaching net zero around 2050(20455555 interquartile range).For limiting global warming to below 2C,CO2 emissions are projected to decline by about 25 percent by 2030 in most pathways(1030 percent interquartile range)and reach net zero around 2070(20658080 interquart

134、ile range).Non-CO2 emissions in pathways that limit global warming to 1.5C show deep reductions that are similar to those in pathways limiting warming to 2C.2 Black,Parry,and Zhunussova(2023).In these IMF estimates,unconditional and conditional NDCs are averaged.3 The CAPMF provides information on c

135、limate action measured as a mix of the adoption and the stringency of a wide range of climate actions and policy instrument.Figure 1.1 shows the relative contribution of different instrument categories on countries climate action.4 Although climate action is not a measure of climate impact,there is

136、a positive association between climate action and emission reductions(Nachtigall et al.,2024).5 Relevant research by the World Bank Group is found in its CCDRs,which can be accessed at:https:/www.worldbank.org/en/publication/country-climate-development-reports.Relevant global,regional,and national r

137、esearch by the IMF can be accessed at:https:/www.imf.org/en/Topics/climate-change#indepth.Relevant research by the OECD on cross-country studies on climate change can be accessed at:https:/www.oecd.org/en/topics/policy-areas/climate-change.html.CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOA

138、LS 15The menu of policy toolsThe policy tools used to mitigate climate change must navigate market failures,fiscal implications,cross-border spillovers,distributional and political economy aspects,and other considerations such as implementation and enforcement costs.To this end,decarbonization requi

139、res a balanced and integrated policy mix with an important role for carbon pricing,national circumstances permitting.Achieving just transitions to a low carbon economy requires additional measures,such as social and redistribution policies.2WORKING TOGETHER FOR BETTER CLIMATE ACTION162.1 The choice

140、of mitigation instruments is ultimately guided by climate and non-climate goals,multiple market failures,fiscal implications,and other criteriaCarbon pricing addresses the primary market failure relating to the social cost of GHGs.Pollution is a byproduct of production processes and fuel consumption

141、 that causes real damages,which markets do not take into account on their own.Prices that do not reflect the social costs of emissions are a key impediment to mitigation(UNCTAD,2022;Four et al.,2023).Carbon pricing is the only incentive-based policy that directly tackles this market failure and impl

142、ements the polluter pays principle.1 This policy promotes cost-effective abatement and levels the playing field for clean alternatives.Various other policy instruments,however,are necessary to address other market failures and barriers to mitigation.Even with pricing policies creating incentives to

143、invest in emission reducing technologies,other pervasive market failures can hinder innovation and diffusion of clean technologies.For instance,knowledge spillovers and adoption externalities can hinder optimal investment in new technologies(Jaffe,Newell,and Stavins,2005).Innovating firms cannot ful

144、ly capture the benefits of their new technologies due to the public-good nature of knowledge.Early adopters create positive externalities by generating information about the technology for others.And long-term investments in green technologies depend on expectations on long-term carbon prices:since

145、governments cannot commit over the long term and because of the presence of perceived risks of policy reversal,additional incentives for projects with long-run returns are sometimes necessary.Imperfect information and the high initial costs of some new technologies can also slow their adoption,furth

146、er exacerbating the underinvestment problem.Addressing these market failures can require technology-specific approaches and well-designed subsidies.However,governments are unlikely to conceive of all the technologies and opportunities to subsidize,and they may not be able to afford large enough subs

147、idies for abatement.Carbon pricing has a role to play in overcoming these problems and facilitating the creation of markets for innovative clean technologies.This can magnify the impact of other specific policies in addressing market failures that hamper innovation.Unaddressed market failures,infras

148、tructure constraints,and other barriers can hinder the effectiveness of carbon pricing.For example,slow permitting processes for installing renewable energy infrastructure and other problems related to land use and zoning,compounded by lack of adequately trained labor can undermine mitigation effort

149、s.Lack of affordable and long term financing complicate the financing of profitable investments in low-carbon technologies(Stiglitz,2019).Demand-related market failures can also contribute to non-efficient market outcomes.Insufficient information about energy efficiency and product carbon footprints

150、 hinders the uptake of low-carbon goods.Behavioral biases can lead actors to favor status quo and traditional solutions and technologies,even in the presence of better alternatives.Finally,there are co-benefits of reducing emissions,such as improved health and biodiversity in addition to reduced con

151、gestion and road accidents,which are often also unpriced.Non-carbon-pricing policies can usefully complement carbon pricing by dealing with other market failures,which can make carbon pricing more efficient and acceptable politically.These policies include coordinating network effects,building neces

152、sary infrastructure,managing noncompetitive markets,and supporting R&D and new technology adoption.2 By providing alternatives and lowering abatement costs over time,technology-oriented policies can enhance the responsiveness of emissions to pricing,thus increasing carbon pricing effectiveness.As a

153、result,the same level of reduction in emissions will require a lower carbon price than would have been needed otherwise3 and non-price policies can be mobilized to start the transition and pave the way toward explicit carbon pricing(Rozenberg,Vogt-Schilb,and Hallegatte,2020)A balanced policy mix can

154、 distribute the administrative burden among different levels of governments,thus improving overall feasibility(OECD,2022a,2022b).However,policy combinations can be complex to design and administer.Standards and regulations are particularly useful when price signals alone are insufficient to drive th

155、e necessary changes.Potential users of a new technology need time to be convinced of its advantages,test it,and adapt it to their circumstances.This is the case,for instance,for energy efficiency in the residential sector for which support is needed to deploy new technologies(e.g.,heat pumps)due to

156、lack of information and capacity,lack of affordable and long-term financing,high risk aversion,and preference for the status quo.Innovators are making investments CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 17based on expectations of future market demand for clean products.Given uncert

157、ainties,carbon pricing alone may not generate sufficient confidence to accelerate this learning process enough to meet emission reduction goals.Standards and regulations can complement carbon pricing by mandating specific actions and helping overcome coordination failures.Distributional effects acro

158、ss countries,regions,industries,communities,workers,and consumers are important in designing an effective mix of mitigation instruments.Also,the political economy context and public acceptability are critical elements of successful policy design.Policies that align with public values and priorities

159、will be more durable.4 Additional considerations include the instruments ability to lower abatement costs in the short and medium-to-long term,the administrative costs involved in its implementation,its capacity to manage uncertainty affecting technological progress and other trends,as well as trade

160、 and environment agreements and other multilateral agreements.The effectiveness of climate policies to reduce emissions also depends on non-climate policies and regulations.For instance,a lower interest rate makes renewable energy and high-efficiency technologies more competitive because those techn

161、ologies are more capital intensive and have lower operational costs than fossil-fuel based technologies.The carbon price needed to make zero-carbon technology more competitive than fossil fuels is thus lower in low-interest rate environments.As a result,a capital market reform leading to a lower int

162、erest rate will increase the efficiency of carbon pricing,even if it is not motivated by a climate-related agenda.A countrys appropriate policy mix varies depending on the strength of market failures,industrial structures,social preferences,and administrative and political constraints.National circu

163、mstances significantly influence the effectiveness and acceptability of different policy instruments.In more advanced economies,explicit carbon pricing instruments might be more effective in sectors with high responsiveness to price signals.In sectors like agriculture,where emissions are harder to m

164、onitor and respond less to price signals and regulatory measures,changes to existing government policies might reduce emissions more.Furthermore,countries differ in administrative and institutional capacity,tolerance to taxation,and the degree of concerns regarding reallocation and distributional is

165、sues.Navigating political realities may require compromises and gradual implementation to build support and ensure successful policy adoption.A balanced climate policy mix will address the aforementioned challenges.Different policies play different roles in this mix and can be sequenced to build pol

166、itical support for an increasingly ambitious climate strategy(Meckling,Sterner,and Wagner,2017;Pahle et al.,2018;Hallegatte et al.,2023).2.2 Decarbonization calls for a package of coordinated and strategically sequenced climate change policies in which carbon pricing can play a central roleCarbon-pr

167、icing instruments are best suited for addressing the negative externality of GHG emissions because they can influence decisions of producers and consumers.This instrument creates an incentive to capture all opportunities to reduce emissions throughout an economy or a supply chain without requiring p

168、olicymakers to foresee and target all those opportunities individually.These incentives encourage the uptake of low-carbon technologies and the utilization of clean infrastructure,increasing the return to public investments supporting them,but also affecting consumption baskets to reduce their carbo

169、n content.Carbon pricing is the only abatement instrument that implements the Polluter Pays Principle.However,as the only abatement instrument that would ask polluters to pay for unabated emissions,carbon pricing can generate larger cost increases for polluters and,depending on the market structure

170、and pass-through to consumer prices,lead to larger consumer and competitiveness concerns than alternative policies.This potential impact complicates its use,especially in trade-exposed sectors and for essential goods(e.g.,fuel for residential heating).Different design options are available to addres

171、s these challenges,such as targeted rebates or production subsidies,but some may reduce the effectiveness of carbon pricing.Compared to carbon pricing,targeted subsidies,standards,and regulations often enjoy a higher level of social acceptability,because their impacts on energy prices and household

172、costs are less immediately apparent(Dechezleprtre et al.,2022).However,such perceptions may result from information barriers about the actual cost these instruments impose on producers and consumers via different channels,such as higher public expenditure limiting choices(Blanchard,Gollier,and Tirol

173、e,2023).Carbon pricing can be explicit or implicit.Explicit carbon pricing aims directly at the unpriced carbon WORKING TOGETHER FOR BETTER CLIMATE ACTION18externality.Implicit carbon pricing instruments,such as fuel taxes,create similar price incentives for decarbonization but do so indirectly and

174、often while pursuing other public policy objectives such as revenue mobilization or reducing local air pollution,congestion,and road accidents(Parry,Black,and Zhunussova,2022;Stavins,2022).Explicit carbon pricing can be implemented as a carbon tax or an ETS.A carbon tax sets a price on CO2 emissions

175、,influencing producers and consumers to determine the quantity of emissions.The central authority imposes the price,but the market determines the emission levels,leading to uncertainty in environmental outcomes due to factors like asymmetric information or consumer preferences.In a cap-and-trade sys

176、tem,the central authority sets the emission levels,and the market determines the carbon price.Other ETSs may set intensity standards or add flexibility mechanisms to the cap,including to stabilize emissions prices.Trading systems entail price volatility,and uncertainty can influence firms long-term

177、investment decisions.Emissions trading requires specific regulations and a dedicated administrative structure to manage emissions allowances,monitor compliance,conduct auctions,and prevent fraud.In a trading system,complementary policies to support emission reductions may depress carbon pricing and

178、therefore the emission reduction incentive,requiring coordination across instruments.Implicit and explicit carbon pricing can serve as efficient tools to generate revenues.Revenues from implicit and explicit carbon pricing can support various policy objectives,enhance fiscal space,and improve debt s

179、ustainability.These revenues are raised in a relatively efficient way,by taxing something bad for society,compared with alternative highly distortionary taxes on productive inputs(Marten and Van Dender,2019;World Bank,2019).They can also help fund complementary policies for the transition,such as in

180、centives for green R&D or social policies like transfers to households negatively affected by mitigation policies(DArcangelo,Levin,et al.,2022)and lessen or neutralize the impact of mitigation strategies on public budgets(DArcangelo,Pisu,et al.,2022).For a variety of reasons,carbon prices may differ

181、 across sectors.Targeting emissions reduction in the sectors that are the least expensive to decarbonize is often seen as the best initial strategy because it requires lower carbon prices or minimizes budgetary expenditures on complementary investments.However,considering the time and investment req

182、uired for reducing emissions in long-lived goods and assets,the best strategy may also call for immediate action in sectors with the highest abatement costs.This approach may involve investing in higher-cost options rather than opting only for the alternatives with the lowest abatement costs(Vogt-Sc

183、hilb,Meunier,and Hallegatte,2018).Also,differences in the strength of knowledge spillovers and the potential for learning-by-doing across sectorswhen not addressed separatelycan be a reason for differences in carbon prices.2.3 Achieving just transitions to a low-carbon economy and maintaining politi

184、cal support requires additional policiesPolicies to address the broader economic and social dimensions of decarbonization are needed.Such policies can be identified in the context of a just transition that aims to ensure that the advantages and costs of moving to a decarbonized and green economy are

185、 shared fairly nationally and internationally.This approach involves providing support to those who may face economic challenges during the transition,including countries,regions,industries,communities,workers,and consumers.5 For example,carbon-pricing policies may affect relatively smaller firms mo

186、re severely if they face financing constraints for investment in clean technologies and production processes.Additional economic,social,and labor policies are also needed to manage adverse distributional and regional effects of mitigation policies.At a national level,policies such as cash transfers

187、and progressive tax shifts can counteract distributional impacts of mitigation measures fostering social and political support for decarbonization efforts.6 Labor market and reskilling policies are essential for assisting workers in transition.These policies can help mitigate the impact of decarboni

188、zation on jobs in emission-intensive industries and regions while facilitating hiring and expansion in low-carbon sectors.7 Assessing and anticipating emerging skill needs is key to sustaining and accelerating the green transition,helping households and individuals to transition from highly pollutin

189、g to less polluting jobs,and building public support for the green transition.8 For developing countries with limited fiscal and institutional capacity,these options are limited and will require international cooperation and climate finance,to ensure ambition in the context of the CBDR-RC.CARBON PRI

190、CING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 19Supporting people and firms can also minimize the macroeconomic costs and maximize the benefits from the transition.Emission reductions will eliminate jobs in carbon-intensive sectors,such as coal mining,but also create new employment opportunities i

191、n other sectors,such as renewable energy or forestry.The ability of workers to shift from carbon-intensive sectors to the sectors that will benefit from the transition is one of the key drivers of the macroeconomic costs of the transition.Many developing countries dependent on fossil fuels will be d

192、isproportionally affected both in terms of exports and job losses.Investment in reskilling or labor market policies can enhance efficiency and generate large macroeconomic and fiscal gains,above and beyond the distributional or fairness objectives(Hallegatte et al.,2024).Similar benefits would be ex

193、pected from policies that facilitate the reallocation of assets and productive capital across sectors to avoid stranding assets and ensure their productive use.Socially responsive program design and effective communication campaigns are critical to increase public understanding and acceptance of inc

194、entive-based climate policies.Despite empirical evidence,many people are not convinced of the incentive mechanism of carbon pricing and its ability to reduce emissions on its own,rather than primarily through the use of its revenues.9 Combining emission pricing with other policy interventions,such a

195、s strengthening public transport and public infrastructure,can bolster the public acceptability of emission pricing.10 Making benefits visiblesuch as an identifiable“climate dividend”check or compensatory cash transfercan also strengthen social support for carbon pricing and fuel subsidy reforms(Cal

196、vin et al.,2023).Evidence shows that support to policy reforms,including fossil fuel subsidy reform and carbon pricing,can increase over time as the benefits of the reform materialize,making it essential to design reforms such that they generate visible early benefits(World Bank,2023b).More generall

197、y,clear,transparent,and independent governance can help build trust,coordinate policy choices,monitor progress,and adjust strategies as needed.This type of governance includes conducting regulatory impact assessments,pilot projects,and consultations with experts and stakeholders.Phasing in carbon pr

198、icing coverage and levels can aid social learning(Carattini,Carvalho,and Fankhauser,2018).Active engagement with stakeholders,including businesses,trade unions,civil society,and the public,ensures that policies are well-informed and broadly supported.Active engagement can help mitigate opposition an

199、d build trust in the policy process.WORKING TOGETHER FOR BETTER CLIMATE ACTION20ENDNOTES1 Principle 16 of the Rio Declaration on Environment and Development(1992).2 This approach follows the Tinbergen(1952)rule,emphasizing the need to align the number of policy goals with the number of policy instru

200、ments.This ensures that each issue receives adequate attention,without relying on a single instrument to address multiple and possibly conflicting problems concurrently.3 DArcangelo and others(2022)offer illustrative simulations on the effects of emission prices on emissions assuming different level

201、 of responsiveness to emission prices.4 For a discussion of political acceptability of climate policy and approaches to align climate and other policy objectives,see Hallegatte et al.(2023)and Dechezleprtre et al.(2022).5 Katowice Committee on Impacts(KCI),2022 offers a conceptual discussion and pra

202、ctical country experiences.See also OECD et al.(forthcoming).6 Carattini et al.(2019)and Dechezleprtre et al.(2022)use international surveys spanning several countries to show that emission charges could gain popularity if the revenues were returned to citizens.7 ILO(2022)offers a detailed assessmen

203、t of skills at risk and in demand.Causa and others(2024)use individual-level labor force data for a large sample of European countries to describe the distribution of green and high-polluting jobs across socioeconomic groups and rural/urban areas.8 OECD(2023a)offers an in-depth review of practices i

204、n five countries(Australia,Austria,France,Norway,and Sweden)to identify best practices on how to feed information on changing skill needs into policies,notably in the areas of employment,career guidance,education,and adult learning.9 Several studies(Ewald,Sterner,and Sterner,2021;Douenne and Fabre,2

205、020)have shown that there was a lack of conviction about the Pigouvian mechanism of carbon taxes.This lack of conviction is an important motivation for protesters opposition to the policy instrument.10 Dechezleprtre et al.(2022)offer empirical evidence based on surveys in several countries.CARBON PR

206、ICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 21Carbon pricing metricsCarbon pricing metrics inform on the extent and scale at which explicit and implicit carbon pricing shift incentives toward decarbonization and inform cross-country variation in average carbon price levels,which determines thei

207、r competitiveness effects.They measure the price that people and firms who emit GHG have to pay for these emissions,either in the form of a tax or fee or by buying permits.They can measure average or marginal prices,and can consider only explicit carbon pricing or also implicit or indirect pricing.M

208、ore granular data at the product level and embedded carbon pricing metrics are needed to determine competitiveness effects more accurately.Metrics measuring the impact of pricing policies and broader climate policies on emissions are helpful in scaling up climate action.These metrics consider the be

209、havioral responses of pricing and non-pricing policies and thus require assumptions on these responses.3WORKING TOGETHER FOR BETTER CLIMATE ACTION223.1 The task force builds on existing metrics introduced by its participating international organizations,leveraging commonalities across the metricsCar

210、bon pricing metrics can focus on explicit carbon pricing instruments or incorporate implicit carbon pricing(such as fossil fuel taxes and subsidies).Explicit(or direct)carbon pricing measures include carbon taxes and permit prices in ETSs.1 Explicit carbon prices are directly applied to(or to a unit

211、 proportional to)CO2,and sometimes other GHGs,in terms of a monetary unit per ton of CO2(or CO2-equivalent in the case of non-CO2 GHGs).The carbon tax rate and the ETS permit price reflect the marginal carbon price of the instrument.Other policy design aspects,such as the extent of free permit alloc

212、ation in ETSs or other rebates will effectively reduce the average carbon price of an instrument,creating a wedge between marginal and average prices(OECD,2023b).Explicit carbon pricing metrics are particularly important in power and industrial sectors,as they are the dominant carbon pricing instrum

213、ents in those sectors and sectors exposed to international spillovers(Section 4).Incorporating implicit carbon pricing is relatively simple and provides a more comprehensive assessment of the carbon price incentive.Implicit(or indirect)carbon pricing measures,such as fuel excise taxes and fossil fue

214、l consumption subsidies(which may include preferential value-added tax rates),also influence the carbon price signal in an economy.Positive implicit carbon prices via fuel excise taxes and negative implicit carbon prices via fossil fuel subsidies can be easily integrated into carbon pricing measures

215、 and can be converted in straightforward ways as they are often related to a fuel base that is directly proportional to GHG emissions.Even though implicit carbon pricing policies may be driven by other policy objectives(for example,revenue-raising or to address other externalities like air pollution

216、 or sector funding needs),they can help achieve climate(and fiscal,economic,and development)objectives.Several jurisdictions implement carbon taxes as part of their fuel excise tax systems,creating a strong link between the two instruments.Translating implicit carbon pricing measures,such as a fuel

217、excise tax,into a carbon price is a straightforward unit conversion,using emission intensity factors based on the carbon content of various fuels.The translation of other implicit carbon pricing policies is also conceptually straightforward but requires more data.For instance,fossil fuel subsidies t

218、hat lower pre-tax prices can require additional information on the budgetary transfers induced by such measures,which is not available in all countries.Current data availability poses some challenges and trade-offs for calculating carbon pricing.Estimates of the components of carbon pricing may foll

219、ow top-down or bottom-up approaches.The bottom-up approach uses official documents within a jurisdiction,including laws and policies,to determine and record the official carbon tax rates,fossil fuel tax rates,and tradable permit prices.A top-down approach infers carbon prices from differences betwee

220、n supply costs and retail prices(price-gap approach).While less accurate than a bottom-up approach,a top-down approach can help produce carbon pricing estimates for jurisdictions,fuels,and sectors for which resources are not available to collect data using a bottom-up approach.A top-down approach ca

221、n also more easily provide estimates over a longer time frame,which can provide useful insights to policymakers and more easily allow time series analysis.Bottom-up and top-down approaches are complementary,with the appropriate approach dependent on data availability since observed or legislated tax

222、es and prices in a jurisdiction are not always readily available,creating a trade-off between precision and resource requirements.Explicit and implicit carbon pricing measures are not always uniform across fuels and sectors,but can be aggregated using emissions-based weighting to calculate an averag

223、e carbon price.These metrics can be calculated within and across specific sectors or fuels.This calculation entails using data from the legal bases and quantifying the specific emission coverage of each carbon pricing instrument across sectors and fuels in each country.However,carbon pricing metrics

224、 aggregated to the national or global level should be treated with caution when making comparisons between countries,for two reasons.First,they mask the heterogeneity in effective(or total)carbon pricing across fuels,sectors,activities,and products(Figure 3.1).In particular,differences between count

225、ries average effective carbon price could reflect differences in fuel shares as much as the differences in prices applying to each fuel.2 Sector and fuel specific average effective carbon prices can reveal this heterogeneity across countries and thus may be preferred indicators of the economic incen

226、tives for decarbonization.Second,carbon pricing metrics aggregated to the national level cannot be employed as a measure for the emission reduction potential of carbon pricing policies of countries.CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 23The existing metrics have commonalities in

227、 scope and approaches.Several international organizations track carbon pricing initiatives across countries.Table 3.1 provides an overview of the different carbon pricing metrics,highlighting similarities and differences in scope and methodology.The World Banks Carbon Pricing Dashboard covers only e

228、xplicit carbon prices in the form of carbon taxes and ETS permit prices thus far implemented across 89 jurisdictions,of which 50 are at the national level.The OECD has calculated effective carbon rates(ECR),with bottom-up reviews of explicit carbon prices and fuel excise taxes,including reduced rate

229、s and exemptions.The OECDs net ECR adds fossil fuel subsidies that lower pre-tax fuel prices.Both OECD metrics are provided for 2012 2015,2018 2021 and soon for 2023 at the sector and fuel level for almost 80 countries(OECD+G20 less Saudi Arabia and 35 developing economies),covering 82 percent of gl

230、obal GHG emissions.3 The total carbon price(TCP)elaborated in Agnolucci et al.(2023)also accounts for value-added tax differentials,since different tax rate reductions on specific fuels amount to important price reductions in certain countries.Using alternative data sources to infer policy intervent

231、ions(drawing on IMF work on fossil fuel pricing),over 140 countries can be covered for the 30-year period from 19912021.While each indicator covers a different set of instruments,areas of overlap highlight opportunities for greater convergence across the indicators and inter-operable data collection

232、.4The task force proposes unifying data collection focusing on the commonalities across existing metrics but recognizes the need for flexibility and pragmatism.The carbon pricing metrics discussed above include explicit and implicit pricing instruments that put a price directly on GHG emissions or i

233、ndirectly via a base that is proportional to GHG emissions(for example,liters of diesel or tons of coal):carbon taxes,ETSs,fossil fuel taxes,and fossil fuel subsidies that lower pretax fuel prices.These Figure 3.1:Carbon pricing instruments and share of greenhouse gas emission by sector0.0030.0060.0

234、090.00100806040200Effective Carbon Rates(in 2021 EUR/tCO2e)Share of GHG emissions(percent)Permit prices from ETSRoadtransportElectricityIndustryBuildingsOff-roadtransportAgriculture&fisheriesOtherGHGsCarbon taxesFuel excise taxesMinimum shareMedian shareMaximum shareShare in total emissionsSource:OE

235、CD Effective Carbon Rates 2023.Note:The left vertical axis shows Effective Carbon Rate(ECR)components by sector.Together,emissions from the road transport,electricity,industry,buildings,off-road transport,and agriculture and fisheries sectors make up CO2 emissions from energy use.Other GHG emissions

236、 cover CH4,N2O,and F gas emissions and CO2 emissions from industrial process.The right vertical axis presents shares of emissions from these sectors in total emissions,and their country-level variation.“Minimum share”(resp.“Maximum share”)indicates the minimum share this sector may represent in a co

237、untrys total GHG emissions.“Median share”is the median of such shares across countries.For instance,the median share in the road transport sector indicates that half of the countries in the sample have a road transport sector that accounts for more than 17.5 percent of national GHG emissions.Other G

238、HG emissions data are from CAIT(Climate Watch,2022)while the data on CO2 emissions from energy use are based on the International Energy Agency(IEA)World Energy Balances(IEA,2024).WORKING TOGETHER FOR BETTER CLIMATE ACTION24metrics can either be calculated using a bottom-up methodology(which aligns

239、with the OECDs ECR),a top-down methodology(similar to the World Banks total carbon price using the IMFs price-gap approach),or a combination of the two(Figure 3.2).In this way,results can be comparable across methodologies,allowing for the use of more accurate observed data but adopting a pragmatic

240、approach to infer or estimate the carbon pricing metric where observable data is not readily available or not feasible.Importantly,these carbon pricing metric approaches can provide country-sector or subsector(when feasible)level averages using information on emissions coverage of included instrumen

241、ts.However,while the resulting metrics are useful,further disaggregation would be needed for assessing the level and coverage of carbon prices applied to specific subsectors or products.3.2 More granular data are needed to improve the accuracy and coverage of carbon pricing metrics and evaluate the

242、international competitiveness impacts of carbon pricingCarbon pricing metrics are needed at a granular level since competitiveness effects occur at the level of narrow sectors(such as steel,aluminum,cement)or even at product levels.Product-level carbon pricing metrics are especially useful when calc

243、ulating the amount of payment required to comply with border adjustments,such as the European Union(EU)and United Kingdom(UK)Carbon Border Adjustment Mechanisms.Necessary information for such a calculation includes the following:quantity of imports,nomenclature code of the products,country of origin

244、 of the products,firms(or facilities)where the goods were produced,production methods,direct and indirect embedded emissions pertaining to the goods imported,and the carbon price due in the country of origin,including the quantity of emissions covered by any free allocations,rebates,or other forms o

245、f compensation.Embodied carbon pricing measures consider the full extent of carbon prices paid at a product level,including on imported goods.They measure the extent to which the carbon costs of embodied emissions are imposed and passed through to product prices,giving an indicator of the degree of

246、competitiveness and leakage pressure that the pricing policies create.Calculating embodied carbon pricing requires a measure of embodied emissions at the product level and measuring the relevant carbon prices paid,net of free allocation.Specific BCAs will look for comparable carbon pricing policies

247、and coverage.For instance,if the BCA includes indirect emissions,the measure of embodied carbon pricing should include carbon prices in the electricity sector that affect the costs of products produced using electricity.Unlike measures of marginal carbon prices,which measure the incentive to reduce

248、emissions,embodied carbon pricing measurement also requires data on average free allocation,which reduces the net carbon payments to be passed along.For example,a cap-and-trade system with auctioned allowances requires producers to pay for all of their emissions;by contrast,a tradable performance st

249、andard can lead to a common marginal price for emissions across producers,but the benchmark allocations reduce the average carbon payments by producers,often to zero.The OECD ECR already collects information on free allowances to calculate an effective average carbon rate(EACR),which accounts for fr

250、ee allowances.In some circumstances,a broader metric of embodied carbon and embodied carbon pricing can be useful,such as to understand and compare lifecycle carbon costs.In this case,carbon prices charged in the production of upstream intermediate inputs(for example,steel)used in downstream product

251、ion(such as cars)should also be accounted for in the embodied carbon pricing of the downstream production.In some instances,the inputs and energy in the upstream sectors are provided across borders,which implies measuring carbon prices linked to consumption-based emissions to reflect emissions embod

252、ied in final demand as opposed to territorial emissions(using environmentally extended input-out tables).The OECD is developing relevant indicators of consumption-based embodied carbon prices to reflect the value chain effects of carbon prices(Smith,et al.,forthcoming).3.3 Other metrics measure the

253、impact of carbon pricing and other policies on emissionsThe impact of carbon pricing on emissions can be gauged ex post employing econometric approaches or ex ante based on modeling approaches that consider behavioral responses.The econometric approach shows varying estimates of the impact on emissi

254、ons.One recent OECD study based on its effective carbon rate measure reports CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 25that a EUR 10 increase in carbon pricing decreases CO2 emissions from fossil fuels by 3.7 percent on average in the long term.Carbon-related government revenues wo

255、uld triple on a global level,although over time they are expected to dwindle as additional increases in carbon pricing result in further reductions in emissions.Broadening carbon pricing to currently unpriced emissions contributes to two-thirds of the effects on emissions and revenues(DArcangelo,Pis

256、u,et al.,2022).Calculations based on estimated elasticities or economic models can be employed to assess the emissions impact of pricing policies ex ante.Calculations based on estimated elasticities can take into account explicit and implicit carbon prices and other climate policies that are usually

257、 considered“price-based policies,”such as feed-in tariffs(FiTs)or tradable renewable portfolio standards.They calculate the emissions impact of pricing policies employing estimated elasticities derived from econometric analysis,which vary by country,sector,fuel,and time frames and depend on the natu

258、re and magnitude of the price change(for example,geopolitical shock versus policy-driven).A second approach is based on economic models,which simulate ex ante impacts of planned or proposed future climate policies(price and non-price policies)based on a consistent model considering changes in behavi

259、ors and technologies,and sometimes general equilibrium effects.Both approaches necessarily rely on assumptions,models,and unobservable responses to be able to project emission effects,implying that they are necessarily uncertain.The projected emissions impact of climate policies can be expressed as

260、emissions reduction or as a homogeneous carbon price generating the same emissions reduction.An example of an elasticities-based approach generating a homogenous economywide metric of the effects of price-based mechanisms is the IMFs Effective Carbon Price(ECP).The ECP calculates the explicit carbon

261、 pricing level required to generate the same degree of emissions reductions delivered by all pricing policies in place(for instance,including explicit and implicit,but also other price-based policies such as FiTs,tradable renewable portfolio standards,and low-carbon fuel standards).To facilitate suc

262、h conversions,a range of additional data and assumptions are required.For example,to estimate the impact of subsidies to support decarbonization,such as FiTs and renewable energy certificates,and convert these policies into an equivalent carbon price requires information on the renewable energy cert

263、ificates prices and FiTs price premiums and the emission intensity of power generation at the country level.Furthermore,such Figure 3.2:Methodology for data collection of carbon pricing instruments and calculation and aggregation of carbon pricing metricsCountry,sector,fuel-level time series of carb

264、on pricingEmissions and sector contributionCountry-specific policy documentsPolicy databasesEnergy use and economic data*Emission inventory database*Country,sector,fuel-level time series of carbon pricingRetail fuel price data*Supply cost data*Energy use and economic data*Emission inventory database

265、*Emissions and sector contributionCountry,sector,fuel-level time series of carbon pricingCountry,sector,fuel-level time series of carbon pricingCountry,sector,fuel-level time series of carbon pricingCountry,sector,fuel-level time series of carbon pricingNon-policy specific(inferred)carbon pricingPol

266、icy-specific carbon pricingTop-down pricing dataBottom-up pricing dataEmissions weighting dataEmissions weighting dataSource:own elaboration by staff of the IMF,OECD,UNCTAD,WB,and WTO.Note:*The top-down approach infers the tax rate based on the gap between supply costs and retail prices as a substit

267、ute for actual rates included in policy documents.The Total Carbon Price(TCP)largely uses a top-down approach,but incorporates bottom-up explicit carbon pricing data.The bottom-up approach uses official documents within a jurisdiction,including laws and policies,to determine and record the official

268、carbon tax rates,fossil fuel tax rates,and tradable permit prices.This is the OECDs(net)Effective Carbon Rates approach.*Energy,economic,and emissions data must include policy coverage information to allow pricing data to be appropriately allocated to sectors and fuels and aggregated to a country-le

269、vel.WORKING TOGETHER FOR BETTER CLIMATE ACTION26estimates also require assumptions on the behavioral responses to measure the responsiveness of economic activity to pricing policies.For example,responses are assumed to be linear and elasticities constant.Other metrics can be used to express the esti

270、mated impact on emissions of a combination of carbon pricing with other pricing and non-pricing policies and measures.Climate policies other than carbon pricing also reduce emissions,which is particularly relevant because in many countries,non-pricing policies are the dominant mitigation policy.To a

271、ssess the total effect on consumers and firms choices and investments incentives that consumers and firms face to switch from GHG-emitting energy sources,these other policies need to be considered.They may not directly influence the net prices of fossil fuels but nonetheless increase the relative co

272、sts of carbon-intensive production and consumption through imposing compliance costs.Metrics comparing the emission reduction potential of climate policies across countries offer valuable additional information over simple average carbon pricing metrics.However,they need to be treated with some caut

273、ion.Their estimates of reduction(or carbon pricing equivalence)rely on the validity of the model underlying the metric and are less transparent than carbon pricing metrics based on observable data.Any model requires assumptions and calibration.The employed elasticities may be based on empirical esti

274、mates that are uncertain or unavailable for all countries,fuels,and sectors.The extent to which models capture secondary(general equilibrium,macroeconomic,or trade)effects of pricing policies on behavior can vary.It can be challenging for economic models to represent the details of non-pricing polic

275、ies and the other market failures and barriers they may be designed to address.Sensitivity analysis can help users understand the robustness of the comparisons.Multiple approaches exist to estimate the emissions impact of climate policies using empirical and modeling approaches,including:The OECDs I

276、FCMA approach links bottom-up sectoral models with a computable general equilibrium model to estimate the net economy-wide effects of mitigation policy instruments or policy packages on emissions.In the IFCMA approach,sectoral models are used in an initial step that allows a detailed assessment of t

277、he direct impacts of various policy instruments.In a second and final step,the general equilibrium analysis allows one to pull together effects in various sectors and also consider indirect effects throughout the economy.Overall,the IFCMA approach allows one to calculate the effects of climate polic

278、y instruments and packages on emissions,net of indirect effects throughout the economy.To capture the nonmarginal nature of ambitious climate policies,the role of technologies,and the interaction across climate and non-climate policies,the World Bank Groups CCDRs have adopted a hybrid modeling appro

279、ach explained in detail in Hallegatte et al.(2024).Specifically,sectoral techno-economic models are employed to construct(resilient and)low-emission development trajectories in key sectors.The macroeconomic and emissions implications of these sectoral transitions are then assessed with macroeconomic

280、 models.This approach allows one to consider multiple market failures,beyond the emissions externality;analyze price and nonprice policies and their interactions;represent explicitly the replacement of assets and infrastructure;and assess the macroeconomic feasibility of the transition.This approach

281、 is then used to simulate the impact of policy packages,including carbon pricing,on GHG emissions and on broader development goals.One of the key findings is the role of carbon pricing as an efficient tool for domestic resource mobilization,which helps fund the required investments and additional sp

282、ending to facilitate the transition and protect the poor and vulnerable.Results are expressed as GHG emissions over time and also key macroeconomic and microeconomic variables(for example,GDP,consumption,distributional impacts,and public debt).The IMFs Carbon Price Equivalent(CPE)is aimed at estimat

283、ing the equivalent explicit carbon pricing level required to generate the same amount of emissions reductions that is expected to be delivered by all climate mitigation policies(Black et al.,2022).The calculation relies on modeling and can accommodate projections of future policy commitments.Importa

284、ntly,this metric does not measure“carbon pricing,”but rather the broader set of climate policies(expressed in the form of an equivalent carbon price).The CPE differs from the ECP since it considers all climate policies and not only pricing policies.CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE

285、 GOALS 27Table 3.1:Overview of existing carbon pricing and climate policy impact metrics by international organization,scope,granularity,approach and methodologyScopeGranularity(product,sector,aggregate)Approach(observed,modelled)MethodologyIndicatorHosting institution/initiativeExplicit carbon pric

286、ingImplicit carbon pricingOther climate policiesCarbon taxETS permit priceFuel excise taxesFossil fuel subsidiesValue-added tax differentialsFeed-in tariffs,and so on.Regulations,investments,non-climate policiesExplicit carbon priceIMF,World BankAggregateObservedCollection of explicit carbon price a

287、s reflected in carbon tax or ETS permit pricesEffective carbon ratesOECDSector,subsector,fuelObservedBottom-up approach based on legal and policy documents stipulating rates and base.Conversion based on emission intensityNet effective carbon ratesOECDSector,subsector,fuelObservedBottom-up approach b

288、ased on legal and policy documents stipulating rates and base.Conversion based on emission intensityTotal carbon priceWorld BankAggregate,sector,fuelObservedTop-down approach using differences between market and economic prices(price-gap approach).Top-down approach to increase coverage for low-and m

289、iddle-income countries without bottom-up data Conversion based on emission intensityEmission reductionsOECD/IFCMASector and aggregateModeledBottom-up approaches,done country per country.Hybrid modelingEmission reductionsWorld Bank/CCDRSectorModeledBottom-up approaches,done country per country.Hybrid

290、 modelingEmissionreductionsIMF/Article IV reportsAggregateModeledTop-down approaches using CPAT and other modelsEstimated effective carbon priceIMFAggregateModeledTop-down approach using global databases and elasticitiesCarbon price equivalentIMFAggregateModeledTop-down approach using global databas

291、es and elasticitiesSource:Own elaboration by staff of the IMF,OECD,UNCTAD,WB,and WTO.Note:This table provides an overview of metrics calculated by the international organizations part of the joint task force.Academic studies also discuss carbon pricing metrics based on econometric estimates of emiss

292、ion effect of carbon policies.IFCMA=Inclusive Forum on Carbon Mitigation Approaches;IMF=International Monetary Fund;OECD=Organisation for Economic Co-operation and Development;CCDR=Country Climate and Development Reports.WORKING TOGETHER FOR BETTER CLIMATE ACTION28ENDNOTES1 ETSs consist both of mass

293、-based ETSs,including cap-and-trade systems with different allocation mechanisms,and rate-based ETSs,including tradable emission performance standards and output-based pricing systems.2 For example,Country A and Country B may both tax road fuels relatively high and coal relatively light and thus hav

294、e similar tax rates across fuels(for example,road fuel and coal).However,the average effective rate for Country A could be far higher than for Country B if road fuels(highly taxed in both)represent a relatively larger share of total emissions than coal(lightly taxed in both)given that Country A uses

295、 less coal than Country B.3 The OECD Carbon Pricing and Energy Taxation database with 2023 net Effective Carbon Rates will be released in Q4 2024.4 Other carbon pricing data repositories exist including International Carbon Action Partnership(ICAP),Carbon Barometer,and the World Carbon Pricing Datab

296、ase.CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 29Spillover effects of climate policiesClimate policies generate a number of cross-border spillover effects on the climate and economic outcomes beyond the jurisdiction where they are implemented.A distinction can be made between generic

297、cross-border spillover effects of all types of climate change policiessuch as the development and dissemination of green technologies to other countriesand the spillover effects of cost-increasing carbon policies(for example,carbon pricing)and cost-reducing policies(for example,subsidies to foster d

298、ecarbonization).Cost-increasing carbon policies can lead to carbon leakage,which countries are increasingly looking to address with policies like BCAs.4WORKING TOGETHER FOR BETTER CLIMATE ACTION304.1 A countrys climate change policies generate five generic types of cross-border spillovers on other c

299、ountries with mixed effects on their economic and climate outcomesThe first positive cross-border spillover of climate policies is the primary objective of such policies,that is,reduced GHG emissions and less global warming.This positive spillover occurs for all climate actions and its size depends

300、on the effectiveness of policies in reducing emissions.The positive spillover will be most pronounced in countries facing the largest projected losses from climate change,including many middle-and low-income countries.A second positive spillover is that climate policies promote the development and d

301、issemination of green technologies,reducing climate transition costs in other countries.Climate change policies ranging from carbon pricing to green research and development(R&D)can foster the development of green technologies in the economy implementing these policies.Other countries can benefit fr

302、om these efforts by reducing the costs of their climate transition,either through the direct transfer of technologies or through the imports of technology embodied in intermediates and capital goods.As an example,recent evidence shows that trade in wind turbines provides access to technologies with

303、a level of efficiency that cannot be replicated domestically in importing countries(Garsous and Worack,2021).Furthermore,a simulation study indicates that cutting trade barriers on solar cells and modules by half could reduce global emissions by 412 gigatons between 2017 and 2060,a cumulative reduct

304、ion of global emissions of 0.30.9 percent(Wang et al.,2021).This spillover is particularly important for low-income countries not at the technology frontier and thus importing most of the new green technologies.A third positive spillover is that climate policies in one country can make the introduct

305、ion of climate policies in other countries more likely.For example,countries building experience with climate policy approaches can inspire other countries to follow the example and implement their own policies.Empirical research shows that the likelihood of increasing carbon pricing in trade-expose

306、d sectors in a country rises if trading partners and countries close to them raise their carbon prices(Linsenmeier,Mohommad,and Schwerhoff,2023).A fourth spillover is that climate policies shift demand from fossil fuels and emission-intensive goods to low-emission goods and energy-related environmen

307、tal goods.Climate change policies of all types will reduce the demand for fossil fuels and raise the demand for raw materials and intermediates employed in the production of renewable energy(energy-related environmental goods).Furthermore,these policies will lead to a demand shift from emissions int

308、ensive goods to low-emission goods that will affect economic,climate,and environmental outcomes in other countries.The shift will have mixed environmental effectsreducing local pollution from the extraction of fossil fuels,but raising environmental pressures because of the mining of critical raw mat

309、erials needed to produce equipment employed to generate renewable energy.While mining for critical raw materials will remain much smaller in aggregate than mining for fossil fuels,it can nevertheless cause large local damage.1 However,the economic effects will also be mixed between and within econom

310、ies and time horizons.The shift in demand away from fossil fuels will also alter trade patterns and reduce the amount of energy traded,with the extent depending on decarbonization scenarios.Trade in raw materials will shift from fossil fuels to critical raw minerals needed for clean technologies(and

311、 digital transitions).As energy reliance shifts toward increased electrification,produced with renewable sources of energy,aggregate trade in energy goods(fossil fuels and electricity)will also decline because electricity is less traded.Meanwhile,trade in renewable energy technologies and certain lo

312、w-carbon fuels,such as green hydrogen,could take a more prominent place in the future(Yilmaz et al.,forthcoming).However,this trade is difficult to predict due to the uncertain outlook for future demand and cost declines.The extent of the shift in trade away from fossil fuels depends upon decarboniz

313、ation pathways.For instance,Yilmaz et al.(forthcoming)project that trade in fossil fuels declines from 11 percent of global trade in 2022 to 3 percent in 2050 under ambitious climate scenarios and,even with limited additional climate policies,falls by about one-third.The shifts in demand are project

314、ed to reduce the trade to GDP ratio with variation across countries reflecting initial specialization patterns.Trade volumes are projected to contract more substantially than GDP because renewable sources of energy rely more on domestic energy sources(World Bank staff estimates).Exports are projecte

315、d to fall less in high-income countriesin a range of 0.7-2.9 percent in 2050.This range can be compared to low-and middle-CARBON PRICING,POLICY SPILLOVERS,AND GLOBAL CLIMATE GOALS 31income countriesin a range of 1.6-5 percentdue to the current trade structure,with low-and middle-income countries bei

316、ng more reliant on exports of fossil fuels and energy intensive trade exposed(EITE)goods.2Falling demand for fossil fuels because of global decarbonization will be a major negative economic shock but provides opportunities for diversification.Global decarbonization policies will reduce the demand fo

317、r fossil fuels and can thus adversely affect fossil fuel producers,especially in the short run.However,it also provides opportunities to diversify the economic structure away from sectors with a high degree of price volatility toward more sophisticated sectors with more growth potential,which can he

318、lp promote economic development(Yilmaz et al.,forthcoming).Policy interventions to promote diversification can help to make it more likely that this shift is growth-promoting(Peszko et al.,2023).Economies producing critical raw materials employed in renewable energy equipment,such as batteries,solar

319、 panels,and wind turbines,can benefit from increased demand for their exports,which can be particularly beneficial if they manage to add domestic value added before exporting the raw materials.Global climate policies provide opportunities for producers of low-emission goods.Regions with a natural co

320、mparative advantage in equipment for renewable energy and greener energy grids can benefit from the increased global demand for renewable energy.Further,producers able to comply with regulations to limit emissions can extend market shares.Empirical evidence shows that the stringency of environmental

321、 regulations positively affects countries specialization in environmental goods and services meant for preventing and abating pollution(Sauvage,2014).Generally,the introduction of decarbonization policies creates opportunities to exploit the benefits from specialization according to green comparativ

322、e advantage.Such specialization occurs when producers that are relatively better at producing with low emissions gain market share relative to more polluting producers(Rosenow and Mealy,2024).Trade can deliver a sizeable contribution(up to one-third)to emissions reductions when carbon pricing is int

323、roduced through specialization according to green comparative advantage(Le Moigne et al.,forthcoming).Examples of countries specializing according to green comparative advantage are those with low-cost availability of wind or solar energy gaining market share in energy and energy intensive products.

324、The biggest changes in specialization patterns are projected on average for low-and middle-income countries due to their higher average reliance on fossil fuel exports.In the most ambitious climate mitigation scenario in World Bank staff calculations,the shares of fossil fuels in total trade are pro

325、jected to fall by 0.8-3.7 percentage points(Figure 4.1),while the shares of exports of transport,light manufacturing,and other services increase.In general,looking across countries and scenarios,impacts on trade are more substantial under higher mitigation ambition.A fifth spillover of climate polic

326、ies is related to the potential national security effects of climate policies.Climate change policies affect the way energy is produced.Since energy can be considered an essential good,many jurisdictions consider the repercussions for national security of climate policies.For example,multiple jurisd

327、ictions have introduced policies,such as local content requirements,to secure and diversify the production of inputs for renewable energy to limit dependency on one or a limited number of producers of such goods,increasing the resilience of supply to shocks.These policies can affect national securit

328、y in other countries by limiting or creating dependencies.However,these policies are not further considered in this report.4.2 Cost increasing climate policies,such as carbon pricing,generate both positive and negative cross-border spillover effects,depending on their designThe cross-border spillove

329、r effects outlined in this section can hold for all types of climate change policies.However,specific cross-border spillovers occur for cost-increasing climate change policies.A distinction can be made between production-related policies,which increase the costs only for domestic polluters,such as c

330、arbon pricing and producer-related regulations,and consumption-oriented policies,which drive up costs for domestic and foreign pollutersfor example,global supply-chain standards.Carbon pricing accompanied by BCAs is another example.Import-based BCAs seek to impose the same carbon price per ton of CO

331、2 on imported goods as domestic goods.As such,the introduction of BCAs leads to a shift from production-based carbon pricing towards consumption-based carbon pricing(Kortum and Weisbach,2017).This shift is only partial though,as BCAs generally do not provide rebates for WORKING TOGETHER FOR BETTER C

332、LIMATE ACTION32Figure 4.1:Changes in total trade for various mitigation scenarios and country groups and the reallocation of export shares across sectors in 2050(deviations from baseline)-40231(a)Low-and middle-income countries4Change in the share of trade across sectors,ppChange in macro indicators

333、,%Other servicesTransportLight manufacturingTradeEnergy-intensive manufacturingFossil fuelsFood and agriculture-2-1-3-804628-4-2-6-40231(b)High-income countries4Change in the share of trade across sectors,ppChange in macro indicators,%-2-1-3-804628-4-2-6NDC2CNDC2CSources:World Bank staff calculations.Note:The nationally determined contribution(NDC)scenario includes a translation of unconditional N