Putting a Price on Carbon

There are many schools of thought regarding which policies will be most effective in reducing carbon emissions. One of the more widely discussed methods is to monetize, or put a price on, carbon emissions. Potential pricing mechanisms include carbon taxes and emission trading systems (e.g. auctions). On September 20, the World Bank Group and its partners released two reports related to carbon pricing:

State and Trends of Carbon Pricing 2015, prepared jointly by the World Bank and Ecofys, provides an annual update on the use of carbon pricing mechanisms around the world. The report notes that the number of carbon pricing instruments that have been implemented or are scheduled to be implemented has almost doubled since 2012. It also notes that currently 39 countries and 23 regions, states, and local governments have implemented a carbon pricing mechanism and that these pricing instruments collectively cover about 12% of annual global greenhouse emissions.

The FASTER Principles for Successful Carbon Pricing: An Approach Based on Initial Experience was prepared jointly by the World Bank and the Organization for Economic Cooperation and Development (OECD). This report lays out six principles, called the FASTER principles, for governments and businesses to consider when developing carbon pricing mechanisms, and provides case studies of how these principles have been implemented. The principles are: Fairness, Alignment with Existing Policies, Stability and Predictability, Transparency, Efficiency and Cost-effectiveness, and Reliability and Environmental Integrity.

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