This is the first report of the Coalition published under the HP3 workstream. The report explores the main instruments available to countries wishing to pursue carbon pricing and builds on the discussions held in 2022 at Ministerial and Sherpa level.
Key observations from the report include:
• Carbon pricing is a key economic policy tool to address climate change; it can be part of each country’s policy mix - depending on country-specific circumstances and transition strategies.
• Multilateral and regional approaches to climate mitigation policies and ways to assess carbon leakage risks should be open, collaborative, and inclusive.
• National and international implications - such as carbon leakage and potential negative spillover effects - and distributional impacts should be carefully considered in designing such reforms.
• The political challenges of introducing carbon pricing and subsidy reforms, as shared by Member Countries in the discussions, underlined the importance of a comprehensive and adaptive approach, the need for different tools to be taken into account in designing reforms, and the importance of analyzing distributional and equity impacts involving relevant stakeholders.
Many thanks to all who contributed to the report and a special thanks to Tatiana Falcão for coordinating the release of the document.