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Rates 2023
INTRODUCTION
Introduction
Effective Carbon Rates 2023 is the most detailed and This fourth edition of Effective Carbon Rates sheds light
most comprehensive account of how 72 countries, which on the state of carbon pricing as of 2021, with updates
collectively emit around 80% of global greenhouse gas reflecting developments up to 2023. It provides an
(GHG) emissions, price GHG emissions. The effective in-depth analysis of emissions trading systems (ETSs)
carbon rate (ECR) is the sum of tradeable emission in 2021 as well as of two common features of this
permits, carbon taxes and fuel excise taxes (Figure 1), carbon pricing instrument: free allocation and price
all of which result in a price on GHG emissions. They stability mechanisms. In addition, given the effect of
directly increase the cost of emitting GHGs, thereby the energy crisis and high inflation rates on the recent
stimulating the uptake in production, consumption and policy landscape, the report discusses the evolution of
investment choices of low- or zero-carbon alternatives. emissions trading systems, as well as fuel excise taxes
This brochure summarises the main results of the OECD and carbon taxes in the road transport sector in 2022
report Effective Carbon Rates 2023. and 2023.
Figure 2: Carbon pricing instruments and share of GHG emissions by sector, 2021
90 100
Effective carbon rates (in 2021 EUR/tCO2e)
80
40
30
20
0 0
rt
ity
ry
gs
rt
s
rie
HG
po
po
st
in
ric
he
du
rG
ild
ns
ns
ct
fis
In
tra
tra
Bu
e
he
El
&
Ot
ad
ad
re
Ro
-ro
tu
ul
Off
ric
Ag
Permit prices from ETS Carbon taxes Fuel excise taxes Share in total emissions
Minimum share Median share Maximum share
Note: The left-hand side bars of this graph show ECR components and levels by sector. Together, emissions from the road transport, electricity, industry, buildings, off-road
transport and agriculture and fisheries sectors make up CO2 emissions from energy use. Other GHG emissions cover CH4, N2O and F-gas emissions as well as CO2 emissions
from industrial process. The right-hand side axis presents shares of emissions from these sectors in total emissions, as well as their variation across countries. “Minimum
share” (resp. “Maximum share”) indicates the minimum share this sector may represent in a country’s total GHG emissions. “Median share” is the median of such shares across
countries. For instance, the median share in the road transport sector indicates that half of countries in the sample have a road transport sector that accounts for more than
17.5% of national GHG emissions.
Table 1: Evolution of coverage and rates of explicit carbon pricing instruments between 2018 and 2021
Note: The marginal explicit carbon rates presented in this table are the emissions-weighted averages of marginal carbon rates on emissions priced by the instrument
considered. Prices and tax rates were converted into (constant) 2021 EUR using the latest available OECD exchange rate and inflation data.
Source: OECD (2023), Effective Carbon Rates 2023.
Between 2018 and 2021, several ETSs were introduced the introduction of the federal carbon pollution pricing
and others entered new phases. In 2021, China and backstop system. In 2020, Mexico launched the pilot
Germany implemented nation-wide sectoral ETSs, while phase for a national ETS, with the operational phase to
several Canadian provinces adopted ETSs in response to commence in 2023.
In 2021, ETS coverage of CO2 emissions from energy disparity arises from the free allocation of allowances,
use varied across countries, reaching about 99% in which can have implications for investment incentives
New Zealand. and the revenue raised.
ETSs commonly mostly cover emissions generated The share of free allocation of allowances in verified
by the electricity and industry sectors; however, an emissions ranges from 19% to 100% across the
increasing number of new ETSs apply upstream (i.e. to countries covered in this report, with an average of
fuel suppliers) and cover emissions from the buildings 55% (Figure 3). The variation in shares can be attributed
and transport sectors. to countries’ diverse industrial compositions, the
maturity of their ETSs, political constraints, national
The free allocation of allowances undermines investment preferences and other factors. In the EU ETS, industrial
incentives in low-emissions technologies and limits the sectors deemed most at risk of carbon leakage receive
amount of revenue raised the largest shares of free allocation. The Regional
Greenhouse Gas and Massachusetts initiatives, which
Contrary to most carbon and fuel taxes, marginal cover electricity sector emissions, provide minimal or no
and average price signals often diverge in ETSs. This free permits.
Figure 3: Share of free allocation of allowances in total verified emissions, by country, 2021
100
Freely allocated allowances (percentage)
80
60
40
20
0
L
L
L
L
A
Sc G A
s
D
R
P
R
N
E
E
X
N
U
T
N
ou RC
U
Z
rie
IR
PO
NZ
IS
BE
FR
LV
US
IT
ES
KO
GB
CY
NO
SW
CH
CZ
AU
PR
ES
NL
SV
DN
KA
LU
LT
DE
JP
CH
CA
FI
HU
SV
nt
ET
EU
Free allocation weakens the average carbon price sector. However, given that China’s electricity sector
signal especially in the electricity and industry sectors, emissions covered by the national ETS represent
where carbon pricing mostly arises from ETSs. Even around 80% of total electricity sector emissions
though permit prices in the electricity and industry covered by all ETSs, the total share of free allocation in
sectors are respectively of EUR 11.5 per tonne of CO2 and the electricity sector ends up being higher than in the
EUR 27.1 per tonne of CO2 on average, these sectors are industry sector.
allocated respectively 88% and 84% of their allowances
for free (Table 2), hence muting average carbon price Permit prices can experience significant volatility
signals in these sectors. Contrary to taxes, permit prices can experience
significant volatility even over the course of a single
In most countries, the share of free allocation in the year. This volatility can hinder sustained investment in
electricity sector is actually lower than that in the low and zero-carbon technologies.
industry sector. In China, Japan, Kazakhstan and Korea,
the share of free allocation in both sectors is equal or Price stability mechanisms exist in many systems,
close to 100%. In all other countries, the share of free either through direct approaches (e.g. through price
allocation ranges from 0% to about 59% in the electricity floors or ceilings), indirect approaches (e.g. through
sector and from 42% to about 91% in the industry market stability reserves), or a combination of both.
Table 2: Total share of free allocation and average permit price in sectors across countries subject to ETSs, 2021
Share of free Average permit price Share of free allocation Average permit price
Sector allocation (in EUR/tCO2) excl. China (in EUR/tCO2)
excluding China
In most countries,
the share of free
allocation in the
electricity sector is
lower than that in the
industry sector.
Figure 4: Evolution of effective carbon tax rates in the road transport sector since 2021
IDN ZAF
HUN USA
GRC TUR
GBR SWE
FRA SVN
FIN SVK
EST PRT
ESP POL
DNK NZL
DEU NOR
CZE NLD
CRI MEX
COL LVA
CHN LUX
CHL LTU
CHE KOR
CAN JPN
BRA ITA
BEL ISR
AUT ISL
AUS IRL
ARG IND
-100 -50 0 50 -60 -40 -20 0 20
Percentage change Percentage change
2021-2022 2021-2023
Note: Percentage changes between 2021 and 2022 as well as between 2021 and 2023, in constant 2021 LCU.
Source: OECD (2023), Effective Carbon Rates 2023.
JPN ISR
ZAF PRT
LUX MEX
DEU MAR
KOR AUS
BEL LTU
NLD DOM
AUT LVA
JAM LKA
CZE KGZ
USA IDN
SVK PHL
CHN ECU
KAZ ISL
ITA PER
FIN IRL
POL PAN
CHL ARG
EST CRI
SVN GTM
CAN COL
NOR CIV
GBR BRA
CHE BGD
TUR NZL
SWE NGA
MYS GHA
HUN RWA
ESP KEN
CYP URY
FRA PRY
UKR BFA
IND MDG
EGY UGA
GRC ETH
DNK
0 20 40 60 80 100 0 20 40 60 80 100
percent percent
CO2 emissions from energy use Other GHG emissions
Note: Other GHG emissions stand for emissions from CH4, N2O, F-gases and process CO2 emissions.
Source: OECD (2023), Effective Carbon Rates 2023.
https://oe.cd/il/5jw
Taxing Energy Use 2019
TURNING CLIMATE TARGETS INTO CLIMATE ACTION
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EFFECTIVE CARBON
CARBON RATES 2021 . 11
RATES 2023
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