How Much Carbon Pricing is in Countries' Own Interests? The Critical Role of Co-Benefits

35 Pages Posted: 22 Oct 2014  

Ian Parry

International Monetary Fund (IMF)

Chandara Veung

International Monetary Fund (IMF)

Dirk Heine

Erasmus University Rotterdam (EUR) - Rotterdam Institute of Law and Economics; University of Hamburg - Institute of Law and Economics; University of Bologna - Department of Economics

Date Written: October 21, 2014

Abstract

This paper calculates, for the top twenty emitting countries, how much pricing of carbon dioxide (CO2) emissions is in their own national interests due to domestic co-benefits. On average, nationally efficient prices are substantial, $57.5 per ton of CO2 (for year 2010), reflecting primarily health co-benefits from reduced air pollution at coal plants and, in some cases, reductions in automobile externalities (net of fuel taxes/subsidies). Pricing co-benefits reduces CO2 emissions from the top twenty emitters by 13.5 percent. However, co-benefits vary dramatically across countries (e.g., with population exposure to pollution) and differentiated pricing of CO2 emissions therefore yields higher net benefits (by 23 percent) than uniform pricing.

Keywords: carbon pricing, co-benefits, air pollution, fuel taxes, top twenty emitters

JEL Classification: H23, Q48, Q54, Q58

Suggested Citation

Parry, Ian and Veung, Chandara and Heine, Dirk, How Much Carbon Pricing is in Countries' Own Interests? The Critical Role of Co-Benefits (October 21, 2014). CESifo Working Paper Series No. 5015. Available at SSRN: https://ssrn.com/abstract=2512804

Ian Parry (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Chandara Veung

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Dirk Heine

Erasmus University Rotterdam (EUR) - Rotterdam Institute of Law and Economics ( email )

Burgemeester Oudlaan 50
PO box 1738
Rotterdam, 3000 DR
Netherlands

University of Hamburg - Institute of Law and Economics ( email )

Johnsallee 35
Hamburg, 20148
Germany

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Paper statistics

Downloads
138
Rank
171,475
Abstract Views
532