Title page

Contents

Abbreviations 6

Acknowledgments 7

Executive Summary 8

ONE. Introduction 13

1.1. Direct and Indirect Carbon Pricing: Key Policy Instruments 14

1.2. Coexistence and Interaction of Direct and Indirect Carbon Pricing Instruments 19

1.3. Assessing Carbon Price Signals from Multiple Policy Instruments 21

TWO. Context and Description of the Total Carbon Price 23

2.1. Background and Purpose 24

2.2. The Total Carbon Price: Main Elements and Calculation Approach 25

THREE. Application of the Total Carbon Price 27

3.1. Approach to the Illustrative Total Carbon Price Calculations 28

3.2. Observations from Illustrative Total Carbon Price Calculations 32

FOUR. Conclusions and Next Steps 47

4.1. Findings, Conclusions, and Takeaways 48

4.2. Policy Implications 49

4.3. Next Steps and Future Work 51

Appendix A. Methodology, Coverage, Exclusions, and Data Sets 56

Appendix B. Supplemental Analyses and Figures 65

Appendix C. Comparison of Policies, Quantification Approaches, and Metrics 68

Bibliography 71

FIGURE 3.1. Illustration of Cost, Price, Tax, and Subsidy Scenarios 30

FIGURE 3.2. Global Nominal and Weighted Rate of Direct Carbon Pricing Instruments 32

FIGURE 3.3. Aggregate Total Carbon Price, Direct and Indirect Carbon Pricing 33

FIGURE 3.4. Evolution of Total Carbon Price Components 34

FIGURE 3.5. Total Carbon Price with and without Energy Subsidies 35

FIGURE 3.6. Total Carbon Price Components in Select Years 36

FIGURE 3.7. Evolution of Crude Oil Prices and Total Carbon Price 38

FIGURE 3.8. Global Trends Across Fuels in the Total Carbon Price and Its Components 39

FIGURE 3.9. Total Carbon Price Estimates by End-Use Sector 40

FIGURE 3.10. Global Trends Across Sectors in the Total Carbon Price and Its Components, Plotted Alongside Brent Crude Prices 42

FIGURE 3.11. Global Trends in the Total Carbon Price and Its Components by Country Grouping 44

FIGURE 3.12. Observations on Fuels, by Per Capita Income and Trading Status 46

TABLE A.1. Taxonomy of Pricing and Nonpricing Climate Instruments 59

TABLE A.2. Data for Total Carbon Price Components, Sources, and Approach 62

FIGURE B.1. Nominal versus Real Total Carbon Price 65

FIGURE B.2. Total Carbon Price Estimates for Natural Gas and Coal, Excluding Years with Data Uncertainty 66

FIGURE B.3. Evolution of Total Carbon Price across Sectors and Years 66

FIGURE B.4. Total Carbon Price Composition, Select Years 67

FIGURE C.1. Comparison of the Net Effective Carbon Rate and the Total Carbon Price 70

Appendix Boxes

BOX C.1. APPROACHES FOR QUANTIFYING ENERGY SUBSIDIES 68