It is common knowledge among economists that the most efficient instrument to mitigate climate change is a price on carbon. However, current carbon prices around the world are too low to reach global climate targets. This essay assesses the difficulties in designing successful carbon pricing reforms. It discusses how to overcome these difficulties by combining traditional public economics lessons with findings from behavioral and political science. We stress insights from public finance about the “second-best” nature of pricing carbon reforms. Further, we highlight how framing a carbon tax reform around tangible benefits can enhance political support. Finally, we explain how certain countries were successful at introducing high carbon prices and what can be learned from these cases for making progress with climate change mitigation.
Klenert, D. & Mattauch, L. (2019). 'Carbon Pricing for Inclusive Prosperity: The Role of Public Support". Econonomics for Inclusive Prosperity Network. Policy Brief 16. Retrieved from: https://econfip.org/policy-brief/carbon-pricing-for-inclusive-prosperity-the-role-of-public-support/#