Comparative Analysis of Carbon Pricing Mechanisms Across Developed Economies

Abstract

Carbon pricing has become the centrepiece of climate mitigation policy across developed economies, yet
jurisdictions differ enormously in price level, sectoral coverage, and how carbon revenue is used, and the extent to
which these design choices explain differences in realised emissions reductions remains contested. Here we
assembled a panel of twelve carbon pricing instruments operating across ten OECD jurisdictions between 2013 and
2023 (including the EU Emissions Trading System, the Swedish and Finnish carbon taxes, the UK Emissions
Trading Scheme, California's cap-and-trade programme, the Regional Greenhouse Gas Initiative, British
Columbia's carbon tax, the Swiss carbon levy and emissions trading system, and the New Zealand, Korean, and
Tokyo trading schemes), and combined publicly reported carbon price series, legislated sectoral coverage, and
revenue allocation rules with sector-level CO2 emissions data to estimate scheme-specific abatement effects using
a panel fixed-effects and synthetic control design, benchmarking each priced jurisdiction's covered-sector
emissions trajectory against a weighted composite of comparable unpriced or lower-priced jurisdictions. Across the
panel, 2023 nominal carbon prices ranged from under USD 10 per tonne CO2 (Tokyo, Korea) to USD 130 per tonne
CO2 (Sweden, Switzerland), and covered emissions shares ranged from 20% (Tokyo, large buildings only) to 85%
(British Columbia, economy-wide). Schemes sustaining a price above approximately USD 40 per tonne CO2 for at
least five consecutive years were associated with covered-sector abatement effects averaging 6.6% per year
beyond matched synthetic controls, compared with 2.4% per year among schemes priced lower or for a shorter
sustained period, a difference that was robust to alternative comparator weighting. Sectoral coverage breadth was
not independently associated with abatement magnitude once price level was accounted for. Revenue recycling
design was not significantly associated with abatement magnitude but was associated with scheme durability:
schemes returning revenue directly to households or firms through dividends or tax shifts experienced no legislative
rollback attempts over the study period, compared with three such attempts among schemes directing revenue to
general government funds. Sustained price level, more than coverage breadth or revenue design, is therefore the
strongest predictor of near-term abatement effectiveness among developed-economy carbon pricing instruments,
while revenue recycling appears to matter primarily for political durability.