Research Highlights Featured Chart

November 13, 2024

Carbon pricing

What do scholars recommend?

Tyler Smith

Source: kodda

Economists generally see carbon pricing as a critical tool for combating climate change. But there is a wide range of recommendations on what the price for emitting a metric ton of CO₂ should be.

In a paper in the American Economic Journal: Economic Policy, authors Moritz A. Drupp, Frikk Nesje, and Robert C. Schmidt conducted the largest-to-date global survey of experts who have published on carbon pricing. They found that there is a strong consensus that a uniform global carbon price should be higher than the existing global average.

The researchers drew their results from a sample of 445 responses on carbon price recommendations from a population of 2,106 scholars. In one of the survey questions, respondents were asked to choose a uniform global carbon price under the assumption that a “world government” exists and seeks to maximize the well-being of all present and future people.

Figure 1 from the authors’ paper shows the global price recommendations for the years 2020, 2030, and 2050.

Figure 1 from Drupp et al. (2024)

Panel A of the chart shows raincloud plots of global carbon price recommendations for the years 2020 (orange), 2030 (green), and 2050 (purple), cropped at $300 per metric ton of CO₂. Panel B shows recommendations for 2050, cropped at $1,000. Raincloud plots consist of a density plot (represented by the solid-filled curves) and a box plot (represented by the transparent-filled rectangular boxes). The black line within the box plots indicates the median recommendation, the mulitplier sign indicates the mean, and the box itself represents the interquartile ranges (the 25th to the 75th percentile of price recommendations). 

The chart shows substantial variation in price recommendations. Roughly 90 percent of recommendations are between $10 and $100 in 2020, while in 2030, 90 percent are between $20 and $250. The median recommendation in 2020 was $40, which increases to $70 in 2030 and $100 in 2050. 

Overall, 98 percent of experts recommended a 2020 global carbon price that was higher than $3, the globally prevailing emission-weighted carbon price in 2020. 

The authors find a strong consensus among experts that carbon pricing should be more ambitious. 

Their work, which also includes recommendations on unilateral carbon prices across almost 40 countries, helps provide a systematic and more representative understanding of the range of appropriate carbon prices. These findings may serve as useful inputs to climate–economy models and the climate policy debate more broadly.