The US doesn’t have a federal carbon pricing plan, but there are a handful of state-level initiatives. None of the regional initiatives are carbon taxes; they’re all emissions trading schemes.

Which country has the highest carbon tax?

Sweden taxes carbon emissions at $119 per metric ton, which is the highest in the world, according to the World Bank (pdf). Mexico’s lower limit, Poland, and Ukraine are the lowest carbon taxes at less than $1.

While it is informative to contrast the spread of prices between countries and policies, it should be noted that making direct comparisons can be tricky. Plans may differ by the industries and sectors they cover, how the fees are allocated, and whether or not there are specific exemptions.

Are carbon taxes effective?

Economists have enthusiastically backed the idea of pricing carbon for years. If you give companies a monetary incentive to reduce their emissions, they’ll do it. Or so the theory goes. And both researcher models and real-world examples confirm its efficacy. However, in practice, carbon taxes are a supporting player, and policies other than carbon pricing are still driving the majority of emissions reductions. Why is this?

🛢 Limited coverage. Only 20% of global emissions are covered by some form of carbon pricing.

📉 Low prices. Of those countries that do implement carbon pricing, most have fees that are set too low to have any significant impact on reducing emissions.

🗳 Political popularity. Carbon pricing isn’t popular with voters, as the fees often end up reflected in their own day-to day spending via increased utility bills, or hikes in gasoline prices. This keeps fees low, or prevents carbon taxes from becoming law altogether.

Ultimately, carbon pricing, whether in the form of a tax or as a cap and trade scheme, is a useful tool for policy makers looking to reduce harmful greenhouse gases. However, it hasn’t proven to be enough on its own.

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