45
additional carbon taxes of €30/tCO2 Figure 6.2: CO2
1% 2% 3% 4% 5% 6% 7% 8%
0%
reductions (relative to baseline) and revenues (relative to gross domestic product (GDP)) generated from and €60/tCO2
, 2030. € 30 carbon tax Revenues € 60 carbon tax
0%
–10% –20% –30% –40% –50%
CO2
emissions
Source: Parry et al. (2018). Note: Calculations assume that carbon prices are implemented in addition to existing measures. Revenue calculations account for induced changes in
revenues from pre-existing excise taxes, but not from the broader fi scal system (i.e. income taxes). The original paper refers to carbon taxes of US$35/tCO2 [€30/tCO2
] and US$70/tCO2 [€60/tCO2 ]. For comparability with section 6.2, these prices were converted to Euros.
tCO2
considerably; Sweden has increased rates to €120 per tCO2
increased carbon taxes over time: the carbon tax in France amounts to €44.60 per tCO2
by 2021. Other countries have also substantially and is set to rise
ETS industry exemptions this year; and Switzerland has increased rates to CHF96 [€85] per tCO2
in 2018 and is also abolishing non-European Union in 2018). Future
price increases could also be rule-based, with carbon prices increasing more signifi cantly if emissions turn out to be higher compared with a benchmark (Murray et al., 2017; Hafstead et al., 2017). Energy taxes can also help refl ect other external costs, including air pollution and, to some extent, traffi c congestion.
2030 could lead to emission reductions of more than 10 percent in many countries. According to the High-Level Commission on Carbon Prices (2017), a carbon price of €60/tCO2
Based on International Monetary Fund estimates (Parry et al., 2018), an additional carbon price of €30/tCO2
by by 2030 is at the lower end of the spectrum
in terms of prices needed to close the emissions gap in order to meet the 2°C target. A price of €60/tCO2
is
estimated to cut emissions by just over 10 percent to more than 40 percent, depending on the country (fi gure 6.2).
As the presence of fossil fuel subsidies can undermine carbon pricing efforts, subsidy reform is an important complement to carbon pricing. Phasing out fossil fuel support could reduce global emissions by between 1 percent and 11 percent by 2020–2030, although regional emissions reductions, e.g. for the Middle East and North Africa, may be substantially larger (Burniaux and Chateau, 2014; IEA, 2015; Merrill et al., 2015; Gerasimchuk et al., 2017; Jewell et al., 2018). Emission reductions are strongest for oil and natural gas use. Since fi nancial support for coal use is relatively low, subsidy removal has only a small impact on coal consumption, which would be more strongly affected by carbon pricing.
Percent CO2 reduction relative to baseline in 2030
Revenues in percent of GDP
Argentina Australia Brazil
Canada
China France
Germany India
Indonesia Italy
Japan Korea
Mexico Russia
Saudi Arabia South Africa Turkey
United Kingdom
United States of America
Simple Average Emissions
Weighted Average
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