No. 2017-11 - Making Carbon Pricing Work

Date: 29 August 2017

Carbon-pricing initiatives are spreading at an unprecedented rate, but a considerable gap remains between actual prices and those required to achieve ambitious climate change mitigation. This perspective shows that much of this gap could be closed by enhancing the public’s acceptance of carbon pricing through the effective use of the substantial revenues raised. We synthesize findings regarding the use of carbon revenues both from recent behavioral and political studies as well as from economic analyses of equity and efficiency. We then compare real-world carbon pricing regimes with insights derived from theory. We find that uniform lump-sum recycling of carbon revenues to citizens is favored among behavioral and political studies that emphasize the importance of distributional fairness, revenue salience, political trust, and policy stability amid partisan changes in government.

Cameron Hepburn Nicholas Stern Linus Mattauch David Klenert Ottmar Edenhofer Emmanuel Combet Ryan Rafaty

Economics of Sustainability

Economics of Sustainability

Making Carbon Pricing Work

Type: inet-working-paper

Klenert, D., Mattauch, L. et al. (2017) 'Making Carbon Pricing Work'. INET Oxford Working Paper No. 2017-11.

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