Working together for better climate action: Carbon pricing, policy spillovers, and global climate goals

First, it reflects on a common understanding of carbon pricing metrics, highlighting the incentives to decarbonize and cross-country variation in carbon prices, a key determinant of international spillover effects and competitiveness concerns. Second, the report analyzes the appropriate mixes of climate change mitigation policies, emphasizing the pivotal role of carbon pricing as the only policy implementing the polluter pays principle while generating revenues.

Third, it analyzes how international organizations can support the coordination of policies to maximize positive and limit negative cross-border spillovers from climate change mitigation policies. Finally, it discusses how such coordination can help to scale up climate action by closing the transparency gap (by countries agreeing on enhanced reporting and transparency of their policy and economic environment related to climate change mitigation), the implementation gap (by countries agreeing to implement certain policies and policy instruments, such as fossil fuel subsidy reform) and the ambition gap (by countries coordinating on enhanced levels of ambition, ideally along with the policies to achieve these goals).

Published in 2024.

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