XXII EMISSIONS GAP REPORT 2018 – EXECUTIVE SUMMARY


Figure ES.6: Key issues for making fi scal reforms politically viable (upper part) and solutions and measures to address them (lower part).


Key issues


Support households and firms


Solutions and


measures


Affected industry support: targeted compensation (firms & workers)


Carbon tariffs and border-carbon adjustment (BCA)


Ensure equitable distribution of costs:


Alleviate effect of unilateral policies:


Tackle carbon leakage


Foster public support:


Political and behavioral enablers to higher energy prices or taxes


Establish trust in governments


Avoid solution aversion


Information and communication about impacts


Investments fostering structural change (energy, infrastructure)


Appropriate timing and sequencing


Affected industry support: trade-exposed industries


Consider wording and framing


Reduce income taxes


Cash transfers for households/consumers


Climate projects, low- carbon investment


Use revenues appropriately Note: The green arrows show different ways to use revenues from carbon pricing. Measures that are related to fi nancial fl ows have a green mark.


trading systems. Coverage of explicit carbon pricing policies increased to about 5 percent of global GHG emissions between 2005 and 2010, primarily because of the introduction of the European Union’s Emissions Trading System. Between 2010 and 2018, coverage rose to about 15 percent of global emissions, with 51 carbon pricing initiatives now in place or scheduled. If China implements carbon pricing as announced, coverage would rise to about 20 percent of global GHG emissions.


However, in most countries, fi scal policy is currently not yet geared towards delivering the required transition to a low-carbon economy. Effective carbon prices are too low and inconsistent, and the broader fi scal policy framework is often poorly aligned with climate policy goals. Besides carbon pricing, many governments levy specifi c taxes on energy use—partly to collect additional revenues. Even when considering energy-specifi c taxes together with


explicit carbon pricing policies, half of the emissions from fossil fuels are not priced at all, and only 10 percent of global emissions from fossil fuels are estimated to be priced at a level consistent with limiting global warming to 2°C.


to existing measures could reduce emissions from just above 10 percent in some countries to more than 40 percent in other countries. Furthermore, in developing and emerging economies, an additional carbon tax of this order could raise the equivalent of 2 percent of gross domestic product (GDP) in public revenue.


Studies show that a carbon tax of US$70/tCO2


Fiscal policies are used for different purposes and many countries actually subsidize fossil fuels for various economic and social reasons. If all fossil fuel subsidies were phased out, it would lead to a reduction of global carbon emissions of up to about 10 percent by 2030.


in addition


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