Effective Carbon Prices and Sub-Global Climate Cooperation

Posted: 9 Dec 2020 Last revised: 27 Jan 2021

See all articles by Goran Dominioni

Goran Dominioni

Dublin City University- School of Law and Government

Date Written: November 17, 2020

Abstract

Scholarly and policy interest in carbon pricing coalitions is growing. Existing research analyzes design features that can increase the environmental effectiveness and political resilience of coalitions centered around carbon taxes and carbon markets (i.e. explicit carbon pricing). This article is the first that analyzes the advantages and disadvantages of building carbon pricing coalitions around effective carbon pricing compared to the standard design that focuses on explicit carbon pricing. Measures of effective carbon prices include carbon prices implemented via carbon taxes, carbon markets, fuel taxes, and fossil fuel subsidies reforms. The article describes four design options to build carbon pricing coalitions - three built on measures of effective carbon pricing and one that focuses exclusively on explicit carbon pricing - and benchmarks them against five criteria. The key results are that building carbon pricing coalitions around effective carbon prices has various advantages over the most common alternative discussed in the literature. These advantages include higher transparency, potential greater breadth and legitimacy of the coalition, and a more substantial involvement of Finance Ministries in climate change mitigation. These advantages might translate in comparable or even higher environmental effectiveness than coalitions that focuses exclusively on explicit carbon pricing.

Keywords: Carbon Pricing; Climate Clubs; Effective Carbon Pricing; Sub-Global Cooperation

JEL Classification: K32, K33, F13, Q50

Suggested Citation

Dominioni, Goran, Effective Carbon Prices and Sub-Global Climate Cooperation (November 17, 2020). Available at SSRN: https://ssrn.com/abstract=3732423 or http://dx.doi.org/10.2139/ssrn.3732423

Goran Dominioni (Contact Author)

Dublin City University- School of Law and Government ( email )

Ireland

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