Implicit_carbon_prices
Implicit carbon prices
Indirect costs of climate change measures
Implicit carbon prices arise from measures which impact on the marginal cost of emitting greenhouse gas (GHG) emissions without targeting GHG emissions or the carbon content of fuel directly.[1] As such, they contribute to climate change mitigation. Examples of these instruments include fuel taxes applied to reduce local pollution and the removal of subsidies for fossil fuel consumption.[2]
This article may be too technical for most readers to understand. (May 2023) |
In contrast to implicit carbon prices, explicit carbon prices are measures designed specifically to target GHG emissions or the carbon content of fuel. Measures such as carbon taxes or emissions trading schemes put an explicit price on GHG emissions.[1]
The sum of implicit and explicit carbon prices is referred to as the effective carbon price.[1][3][4] Considering both the implicit and explicit carbon prices can contribute to a better understanding of a country's progress on tackling emissions. It can also lead to better policy alignment and reduce inconsistencies in the fiscal system—such as when subsidies for fossil fuel consumption are combined with carbon taxes.[3]