Climate policies around the world
How do climate change mitigation approaches vary across countries?
Many countries around the world have identified climate change as a serious issue. But their levels of ambition and approaches to solving the problem have been widely divergent.
In a paper in the Journal of Economic Perspectives, authors Kimberly A. Clausing and Catherine Wolfram explore global variation in climate change mitigation policies and how countries can coordinate their responses.
Figure 1 from the authors’ paper gives a snapshot of the coverage of a widely used climate policy: carbon pricing.
Figure 1 from Clausing and Wolfram (2023)
The x-axis indicates the share of carbon—or the carbon-equivalent of other greenhouse gasses—emitted in each jurisdiction. The y-axis indicates the carbon price per ton of CO2. The size of each circle is proportional to the share of global carbon emissions from that jurisdiction, and the colors indicate the continent where the emissions occurred.
The chart shows that carbon prices range from over $100 per ton in Switzerland and Uruguay to under $15 in Japan and China. The share of emissions varies as much as carbon prices. Worldwide, 23 percent of greenhouse gas emissions are covered by a pricing regime. But that number is over 80 percent for several countries, such as Germany. While in the United States, coverage is less than 10 percent of total emissions.
The authors also provide data on countries that are subsidizing clean instead of taxing dirty production. The United States, particularly after the enactment of the Inflation Reduction Act, is primarily taking a subsidy-based approach to climate mitigation. Other countries have not yet taken steps to limit greenhouse gas emissions.
The authors describe why such a disjointed approach to tackling climate change globally can lead to inadequate climate policies overall. Countries with ambitious policies may feel that other countries are free riding or that the mitigation costs are putting them at a competitive disadvantage. Proposals, such as “carbon border adjustments” and “climate clubs,” while not without drawbacks, attempt to address these concerns and may provide tools for harmonizing policy responses.
“Carbon Border Adjustments, Climate Clubs, and Subsidy Races When Climate Policies Vary” appears in the Summer 2023 issue of the Journal of Economic Perspectives.