OECD Estimates Costs of Reducing Carbon Emissions

OECD4 November 2013: The Organisation for Economic Co-operation and Development (OECD) has published a book, titled 'Effective Carbon Prices,' which synthesizes a number of case studies on carbon prices in 15 selected countries and sectors. 

The book provides estimates of the costs to society of reducing carbon dioxide emissions in 15 countries using different policy instruments in five sectors: electricity generation; road transport; pulp and paper; cement; and households' domestic energy use. Based on the case studies, the book indicates that taxes and emission trading systems are the cheapest way for societies to reduce carbon dioxide emissions.

The book was developed using a methodology used in a report published in 2011 by the Australian Productivity Commission, titled 'Carbon Emission Policies in Key Economies,' and further expands the analysis to additional countries and sectors.

The book identifies ample variations in abating costs within and among countries and sectors, as well as across different policy instruments. For example, it indicates that market-based approaches, such as taxes and trading systems, proved to be more cost-effective than other instruments, while capital subsidies and feed-in tariffs were among the most expensive ways of reducing emissions. Moreover, the book shows that there is a great potential in improving policies to apply for cost-effective climate change mitigation. [Publication: Effective Carbon Prices]