Carbon Pricing Case Studies from GTSI
Past experience in the development and implementation of carbon pricing instruments around the world can provide critical insights and lessons for future applications. The Gnarly Tree team regularly develops case studies to help our clients and the global policymaking community learn from this experience and identify critical economic, institutional, political, and legal considerations that may affect the selection, design, analysis, implementation, and evaluation of such instruments in their own countries.
Preparing for Carbon Taxes in Africa (2021)
In collaboration with the Eastern Africa and West African Alliances on Carbon Markets and Climate Finance, the United Nations, and St. Georges University (Grenada), GTSI developed a training course to build capacity to develop carbon taxes in Africa. The course engaged policy analysts from over 20 African nations and is now offered as an online course.
Six case studies provided a key element of the course design. The cases were chosen to illustrate specific concepts and to encourage comparison to the course participants’ own country circumstances and goals.
- South Africa’s carbon tax. South Africa’s relatively complex carbon tax system illustrates both a lengthy political process and strong influence from key stakeholders, leading to a number of concessions on tax liability in early years.
- British Columbia’s carbon tax. British Columbia’s carbon tax illustrates a system that was designed to closely resemble the theoretical ideal – relatively high tax rates, broad coverage, and revenue neutral. It also illustrates, however, the vulnerability of a carbon tax to political shifts, undermining the effectiveness and revenue neutrality of the tax in the long run.
- Kazakhstan’s emissions trading. Kazakhstan failed to reduce greenhouse gas emissions with a phased emissions trading approach due to the overallocation of allowances granted to existing facilities in the early years of the program; other criticisms included inconsistent application of the program, industrial pushback, the ability for industries to self-report, and inconsistent baseline years in each phase.
- Colombia’s carbon tax. Designed to fund environmental protection activities, Colombia’s carbon tax failed to generate projected revenues in early years and faced criticism regarding the exemptions for coal and the diversion of revenue.
- Chile’s carbon tax. Chile’s carbon tax illustrates a system that emerged from multiple goals – lowering emissions of both local pollutants and greenhouse gases and raising revenue to fund higher education. While the initial phase did not financially motivate the power sector to switch to a cleaner source, it strengthened institutional mechanisms within the Chilean government to monitor, report, and verify emissions which strengthened the next phase of the tax.
- Argentina’s carbon tax. Argentina’s carbon tax covers 20 percent of national greenhouse gas emissions; however, the nation faces criticism as the tax is not complemented by the removal of fossil fuel subsidies, is too low to drive significant technological or behavioral change to reduce emissions, and does not extend to emissions from heavily utilized natural gas.
Each case study included a section on jurisdictional context and background to emphasize how important specific circumstances are to the design, feasibility, and effectiveness of carbon pricing instruments.
World Bank’s Partnership for Market Readiness Carbon Tax Guide (2017)
In 2017, GTSI spearheaded the development of 17 detailed carbon tax case studies as part of our work on the World Bank’s Carbon Tax Guide. Each of these case studies was based on extensive desk review, personal interviews with in-country experts, and in-country expert review and comment on draft case studies. The resultant case studies provide readers with comprehensive information regarding each policy’s objectives, rate, covered sectors, point of regulation, methodology, measures to address leakage and cost containment, approach to implementation and enforcement, use of tax revenues, challenges, and outcomes.
- Australia Carbon Pricing Mechanism (2012–14)
- British Columbia Carbon Tax (2008)
- Chile Carbon Tax – Law No. 20780 (2014)
- Denmark Carbon Tax (1992) & Green Energy Package (1996)
- Finland Hiilidioksidivero CO2 Tax (1990)
- France Domestic Consumption Tax on Energy Products (2013); Law on the Energy Transition to Green Growth (2015)
- Iceland Carbon Tax on Carbon of Fossil Origin (2010)
- India Clean Environment Cess
- Ireland Carbon Tax – Budget and Finance Act (2010)
- Japan Tax for Climate Change Mitigation (2010)
- Mexico Carbon Tax (2014)
- Norway Act Concerning Sales Tax (1933); Act Relating to Tax on Discharge of CO2 in the Petroleum Activity on the Continental Shelf (1990)
- Portugal Carbon Tax and Green Taxation Reform – Law No. 82-D (2014)
- South Africa Carbon Tax (proposed)
- Sweden CO2 Tax (Koldioxidskatt) (1991)
- Switzerland CO2 Levy – Federal Act on the Reduction of CO2 Emissions (2008)
- United Kingdom Carbon Price Floor/Carbon Price Support (2013)
The case studies provide background data on the subject jurisdictions, including demographics, economics, emissions, and governance capacity. The cases then describe the stated objectives for the carbon taxes, their basic design characteristics (including their coverage, point of application, tax rates, mechanisms to address leakage and cost-effectiveness, monitoring and enforcement provisions, use of revenues, and links to other policy instruments), and an evaluation of their effects on emissions.
The 17 studies, developed in collaboration with project partner Climate Focus, presented the most comprehensive set of case studies available and provided foundational insight for the Carbon Tax Guide. They were further used in developing the World Bank and United Nations e-course on carbon taxes.