Pricing Carbon

Some form of carbon pricing or cap-and-trade scheme is currently in place in 46 national jurisdictions, covering about 23 percent of global greenhouse gas emissions.

Although carbon pricing remains a controversial public policy issue, more than 5,000 economists recently signed two high-level statements to that effect. Still, the question remains: at what level should the carbon price be set? 

A recent paper reports on a survey of more than 400 experts across almost 40 countries. The main results can be summarized in the figure below, which refers to the recommended price of carbon emissions, in US$ per ton, in the years 2020, 2030, and 2050. 

The orange, green, and blue bars represent the interquartile ranges corresponding to three different years (2020, 2030, 2050). These interquartile bars measure the range of the answers once we exclude the bottom 25 and the top 25 percent values. In terms of mean and median values, respectively, the survey values are $50 and $40 in 2020; $92 and $70 in 2030; and $224 and $100 in 2050.

It should be noted that the current weighted average of carbon prices is $3, lower than the values recommended by 98 percent of the experts. One can thus conclude that there is a strong consensus among experts that a uniform global carbon price should be higher than the current global average carbon price.

Moritz A. Drupp, Frikk Nesje, Robert C. Schmidt

Pricing Carbon: Evidence from Expert Recommendations

American Economic Journal: Economic Policy vol. 16, no. 4, November 2024