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BeyondMitigation:QuantifyingtheDevelopmentBenefitsofCarbonPricing

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Design:

Simpelplus

Acknowledgments

ThisreportwaspreparedforthePartnershipforMarketReadinessbyBerkeleyEconomicAdvisingandResearch.TheteamwasledbyDavidRoland-HolstwithsupportfromDrewBehnke,SamuelHeft-Neal,andRyanTriolo.ResearchassistancewasprovidedbyCharlesFondecave,LiamFr?lund,JoslynFu,SydneySchoonover,andAnnaWang.

TheWorldBankoversawthedevelopmentoftheguide,includingprovidingsubstantiveinputsandmanagingtheproject.TheWorldBankteamconsistedofDanielBesleyandMarissaSantikarn.TechnicalinputandexpertisewereprovidedbyCarloAlbertoAmadei,SimonBlack,IraDorband,HasanDudu,ErickFernandes,HarikumarGadde,DirkHeine,CharlJooste,SeanNelson,andGregorSchwerhoff.TechnicalinputswerealsoprovidedbyCyrilCassisa,LucaLoRe,andInsaHandschuchfromtheInternationalEnergyAgency.

BeyondMitigation:QuantifyingtheDevelopmentBenefitsofCarbonPricing

Contents

Synthesis:BenefitsofCarbonPricinginBrief

7

Introduction

13

2.1

Purpose,Structure,andScopeoftheGuide

16

2.2

OverviewofModelingApproaches

17

AirQuality

18

3.1

Introduction

20

3.2

IdentifyingAirQualityBenefitsandLinkages

21

3.3

MeasuringandModelingDirectImpacts

32

3.4

IndirectImpacts

41

WaterResources

46

4.1

Introduction

48

4.2

IdentifyingBenefitsandLinkagetoCarbonPrices

49

4.3

MeasuringandModelingImpacts

57

SoilHealth

74

5.1

Introduction

76

5.2

IdentifyingBenefitsandLinkagetoCarbonPrices

77

5.3

MeasuringandModelingImpacts

84

Transportation

94

6.1

Introduction

96

6.2

IdentifyingBenefitsandLinkagetoCarbonPrices

96

6.3

MeasuringandModelingImpacts

106

FiscalPolicy

118

7.1

Introduction

120

7.2

GeneratingRevenue

120

7.3

LimitingDistortionaryImpactofTaxation

125

7.4

DistributionalImplicationsofFiscalPolicywithCarbonPricing

126

7.5

MeasuringandModelingImpacts

128

BalanceofPayments

132

8.1

Introduction

134

8.2

ExportandImportResponses

134

8.3

MeasuringandModelingIndirectImpacts

135

TechnologicalChange

144

9.1

Introduction

146

9.2

ApplyingthePorterHypothesistoCarbonPricing

147

9.3

MeasuringandModelingImpacts

151

AppendixA:PartialEquilibriumandGeneralEquilibriumModels

156

References

161

FurtherReading

177

3

Figures

Figure1.1:Carbon-PricingBenefitsbeyondMitigation

9

Figure2.1:Carbon-PricingBenefitsbeyondMitigation

15

Figure3.1:

OverviewofBenefitsfromImprovedAirQuality

21

Figure3.2:

PrimaryAirPollutantsandTheirSources

22

Figure3.3:

GlobalDistributionofPollutionMortalityRates

26

Figure3.4:

PollutionDeathsbyPollutionType

27

Figure3.5:

LinkagesbetweenPollutionandCropYields

29

Figure3.6:

ProjectedOzone-RelatedCropYieldBenefitsofEmissionsReductions,2050

30

Figure3.7:

AirQualityBenefitMetrics

31

Figure3.8:

OverviewofBenefitsfromImprovedAirQuality

32

Figure3.9:

ElasticityofDemandforEnergyandReductionsinEnergyUse

33

Figure3.10:

CharacterizationofMorbidityMeasures

40

Figure3.11:

IncorporatingHealthBenefitsintoaCGEModelingFramework

42

Figure3.12:

SocialAccountingMatrixExtendedtoIncludeHealthEffectsfromPollution

43

Figure4.1:

NationalWaterSystemComponents

49

Figure4.2:

WaterQualityRiskforBiologicalOxygenDemand,Nitrogen,andElectricalConductivity

55

Figure4.3:

MetricsforAssessmentofWaterSectorBenefits

57

Figure4.4:

StepsforQuantifyingDirectBenefitsfromWaterQuantity

58

Figure4.5:

StepsforQuantifyingDirectBenefitsfromImprovedWaterQuality

63

Figure4.6:

StructureofGTAP-BIO-W

69

Figure5.1:

ThreatstoSoilHealth

77

Figure5.2:

GlobalDemandforSoilNutrients,1979–2021

80

Figure5.3:

MetricsforAssessmentofSoilHealthBenefits

83

Figure5.4:

StepsforQuantifyingDirectBenefitsfromImprovedSoilHealth

84

Figure5.5:

PartialEquilibriumEffectsofNitrogenFertilizerApplication

85

Figure6.1:

ProportionofPopulation,RoadTrafficDeaths,andRegisteredMotorVehiclesby

CountryIncomeCategory,2016

97

Figure6.2:

TrafficFatalities

97

Figure6.3:

ConceptualFrameworkoftheRelationshipbetweenGasolinePricesandTrafficSafety

99

Figure6.4:

WorldRankingofCongestion,bytop150Cities

102

Figure6.5:

NegativeExternalityMetricsforAccidentsandCongestions

103

Figure6.6:

CorridorCapacity(peopleperhourona3.5-meter-widelane)

104

Figure6.7:

RoadInjuryandCongestionBenefitFlowChart

106

Figure7.1:

GreaterFiscalDepthinHigher-IncomeCountries

121

Figure7.2:

Revenue,Price,andShareofEmissionsCoveredforImplementedCarbon

PricingInitiatives

122

Figure7.3:

TaxEvasionLevelbyIncome

124

Figure7.4:

EstimatedDistributionalImpactsofaModerateCarbonTax

127

Figure7.5:

MetricstoQuantifytheFiscalPolicyBenefitsofaCarbonPrice

128

Figure9.1:

TheTechnology-TransferStaircase

147

Figure9.2:

MetricsforTechnologicalChangeBenefits

149

Figure9.3:

HowRevenueReallocationandEnergyEfficiencyCreateJobs

150

Figure9.4:

TechnicalChangeBenefitFlowChart

152

BeyondMitigation:QuantifyingtheDevelopmentBenefitsofCarbonPricing

Tables

Table1.1:

PolicyBenefitsofCarbonPricing

11

Table3.1:

MorbidityImpactsandCostsofPollutionExposure

27

Table3.2:

AverageEnergyElasticitiesintheEmpiricalLiterature

34

Table3.3:

QuantifyingtheEffectsofaCarbonPriceonAirQuality(HealthandAgriculturalImpacts)

44

Table4.1:

QuantifyingtheEffectsofaCarbonPriceonWaterResources

73

Table5.1:

KeyThreatstoSoilHealth

78

Table5.2:

QuantifyingtheEffectsofaCarbonPriceonSoilHealth

93

Table6.1.

QuantifyingtheEffectsofaCarbonPriceonTransport(HealthandEconomicImpacts)

115

Table7.1:

QuantifyingtheEffectsofaCarbonPriceonFiscalPolicy

131

Boxes

Box3.1:

TheInteractionbetweenaCarbonPriceandHouseholdAirPollution

23

Box3.2:

DataSourcesforEstimatingPrematureDeathsfromPollution

37

Box3.3:

CalculatingIncome-AdjustedValueforMortalityRiskperLifeforIndividualCountries

39

Box4.1:

WaterResourcesinSouthAfrica

50

Box4.2:

GroundwaterUseandScarcityinIndia

52

Box4.3:

EconomicsofWaterExtractioninAgriculture

59

Box4.4:

AssessingWaterQualityImpactsofCarbonPricing

64

Box4.5:

AchievingSustainableIrrigationWaterWithdrawals

67

Box4.6:

WaterSecurityinVietnam

70

Box4.7:

SubnationalWaterResourceAllocationandPricinginChina

72

Box5.1:

ModelingExternalitiesofNitrogenFertilizerApplication

86

Box5.2:

PriceElasticityofDemandforPesticidesinEurope

88

Box5.3:

ModelingExceedanceLevelsofAcidDepositioninEuropeunderGHGPricing

89

Box5.4:

CarbonPricingandFertilizerUse

92

Box5.5:

DistributionalImpactsofPublicSpendinginAgriculture

92

Box6.1:

TheHighTollofTrafficInjuries:TheMacroeconomicandWelfareBenefits

ofReducingRoadTrafficInjuriesinLow-andMiddle-IncomeCountries

98

Box6.2:

EvidenceLinkingIncreasedGasolinePriceswithReducedVehicleAccidents

108

Box6.3:

EstimatingCountry-LevelCongestionData

111

Box6.4:

CorrelationbetweenIncreasedGasolineTaxesandFewerVehicleMilesTraveled

112

Box6.5:

CGEAssessmentofUrbanCongestioninthePhilippinesShowingEconomic

GrowthResultingfromReducedCongestion

117

Box6.6:

IntegratingBigDataandGeneralEquilibriumModelingforTransportBenefitAssessment

117

Box8.1:

ImpactofaCarbonTaxontheBalanceofPaymentsinIreland

135

Box8.2:

ImpactofaCarbonTaxonUKBalanceofPayments

137

Box8.3:

ImpactofaCarbonTaxinSouthAfrica

138

Box8.4:

GlobalWaterServices:OpportunitiesfromTradeinEmbodiedResources

140

Box8.5:

DutchDiseaseandExternalAssistance

143

Box9.1:

ModelingEvidence:TheEffectofaCarbonTaxonR&D

153

Box9.2:

CapturingEnergyandEmissionTrendsinCGEModels

154

Box9.3:

Bottom-UpAbatementTechnologiesinaGlobalCGEModel

155

BoxA.1:

PriceElasticitiesofDemand

156

5

Abbreviations

AFOLU agriculture,forestry,andotherlanduse

BOP balanceofpayments

CGE computablegeneralequilibrium

CO2 carbondioxide

CPAT CarbonPricingAssessmentTool

CTM chemicaltransportmodels

DALY disability-adjustedlifeyears

DSGE dynamicstochasticgeneralequilibrium

EPA EnvironmentalProtectionAgency(US)

ETS emissionstradingsystem

EU EuropeanUnion

EUETS EuropeanUnionEmissionTradingSystem

FASST FastScenarioScreeningTool

GAINS GreenhouseGasandAirPollution

InteractionsandSynergies

GBD GlobalBurdenofDisease

GDP grossdomesticproduct

GHG greenhousegas

GNP grossnationalproduct

Gt gigatonnes

GTAP GlobalTradeAnalysisProject

ha hectare

ITC inducedtechnologicalchange

kg kilogram

kgN kilogramofnitrogen

LCT low-carbontechnology

LPG liquifiedpetroleumgas

m3 cubicmeters

MAR meanannualrunoff

MJ megajoule

MMBtu millionBTUs

MMTCO2e millionmetrictonsofCO2equivalent

OECD OrganisationforEconomicCo-operationandDevelopment

PMR PartnershipforMarketReadiness

POLES ProspectiveOutlookfortheLong-termEnergySystem

R&D researchanddevelopment

SAM socialaccountingmatrix

SDG SustainableDevelopmentGoal

SIMPLE-G SIMPLE-on-a-Grid

VAT valueaddedtax

VMT vehiclemilestraveled

VOT valueoftraveltime

VSL valueofstatisticallife

WBM WaterBalanceModel

μg/m3 microgramspercubicmeter

AlldollaramountsareUSdollarsunlessotherwiseindicated.

BeyondMitigation:QuantifyingtheDevelopmentBenefitsofCarbonPricing

1.

Synthesis:BenefitsofCarbonPricinginBrief

Synthesis:BenefitsofCarbonPricinginBrief 7

Synthesis:BenefitsofCarbonPricinginBrief

Thisguideisahandbookforpublicdecisionmak-ers,researchers,andprivatestakeholderswhowanttounderstandthebroadereconomicbenefitsofcarbon-pricingmeasures.Thesearemeasuresthatexplicitlypricethecarboncontentofgoods,suchascarbontaxes,emissionstradingsystems,andcred-itingmechanisms.1Theworld’scurrentrelianceoncarbon-basedenergyhaspervasiveimplicationsforeconomicactivity,soitisnosurprisethatacar-bonpricecanhaveextensivespillovereffects.Theseeffectsorlinkagesofferaroadmapforpolicymak-ersseekingtocombinecarbonmitigationwithstrat-egiesthatadvanceotherpublicpolicyanddevel-opmentobjectives.Theguideidentifiessevenmajorareasofcarbon-pricingbenefits:airquality,water,soilhealth,transport,fiscalpolicy,balanceofpay-ments,andtechnologicalchanges.

Becauseclimategoalsoftencompetewithotherpublicpriorities,itisimportanttorecognizethatcarbonpricescanyieldnumerousbenefitstosoci-etybeyondclimatemitigation.Theseinclude,butarenotlimitedto,cleanerairandwater,improvementsinhumanhealth,saferandlesscongestedroads,increasedenergyandfoodsecurity,inducedadop-tionanddiffusionoftechnologicalinnovation,andenhancedmacroeconomicstabilitythroughstrongerfiscalandinternationalpaymentsbalances.Care-fullydesignedcarbonpricereformscanalsoimprovetheefficiencyofexistingtaxsystems,drivingmoreeffectivecoverageoftheinformalsectorindomesticresourcemobilization,improvedfiscalneutralityforvalue-addedtaxation,reduceddistortionaryimpactsfromexemptionsinpreexistingtaxschemes,taxationofeconomicrentsratherthanprofits,reducedrisksoftaxevasion,andreducedcostsoftaxcomplianceandadministration(seefigure1.1).

Thesebenefitscanbesubstantial2andcanhelpgovernmentssecureamoresustainableandinclu-sivebasisforlivelihoodimprovement.Manyofthesebenefitsaremoredirect,localized,andimmediatethanclimatebenefits,andinsomecasestheyareevenlarger(Parry,Veung,andHeine2014).Byfac-toringinthesepotentialbenefitsatthestartoftheirmitigationpolicyprocess,policymakerscandesigntheircarbonpriceandotherclimatestrat-egiestodeliverbenefitsbeyondemissionsreduc-tions,ensuringgrowinghumanneedsaremetinparallelwithenvironmentalgoals.Importantly,quantifyingandcommunicatingthesebenefitscanalsobuildbroadersupportfortheadoptionofcarbonpricing.

Itshouldbeacknowledgedattheoutsetthatallpolicieswillhavedistributionaleffects,andcar-bonpricingisnoexception.Carbonpricingcancre-atebenefitsbutalsoleadtocostsandchallenges.Asacarbonpriceaffectsbasiccommodityprices,thesecostsmaybemorevisiblethaninthecaseofalternativepolicies,butalternativepolicieswillalsohavecostimplications.Forexample,totheextentthatthepoorspendalargerproportionofincomeonfuel,carbonpricingmightberegressiveunlesscompensatorymeasures,suchastargetedexemptionsorcleanfuelsubsidies,arealsoimple-mented.Likewise,carbonpricingofmarketedfuelsmightinduceruralhouseholdstosubstitutebio-massburning,increasingindoorairpollutionunlesspairedwithcompensatorymeasures.Whilesuchchallengesmayarise,theguideidentifiesrelevantmitigatingcountermeasuresthatallowthemainbenefitsofcarbonpricingtoberealizedinmostcircumstances.

Itshouldbenoted,however,thatmanyofthebenefitsexaminedinthisguidecanbeobtainedfromawidearrayofclimatemitigationpolicies.

Notethatthese“developmentbenefits”ofclimatepolicy(inthiscasecarbonpricing)shouldnotbeconfusedwith“climatebenefits”(e.g.,reducedgreenhousegasemissionsorincreasedadaptation)ofdevelopmentpolicies.

BeyondMitigation:QuantifyingtheDevelopmentBenefitsofCarbonPricing

Figure1.1

CarbonPricingBenefitsbeyondMitigation

Balanceof

payments

Increaseenergysecurity

Macroe-conomicstabilization

Source:WorldBank.

●Reduce

Transport

congestion

●Reduceroad

injuries

Benefitsofof

●Decreasesoil

carbonpricing

contamination

Soilhealth

●Reducethreat

ofgroundwater

depletion

●Decreasesoil

acidification

Water

resources

●Decreasemorbidity/

mortality

●Increasewater

Airquality

availibility

●Decreaseextraction

●Decreasewater

Technology

Fiscal

●Reduce

pollution

●Increaseagricultural

congestion

●Increaselabor

productivity

●Increase

●Increase

productivity

●Increaselabor

tecnology

revenue

supply

transfer/

●Reduce

adoption

●Reduce

distortionary

morbidity

●Increase

taxes

low-carbon

●Coverinformal

●Increasecrop

innovation

yields

economy

●Reducetax

●Reducemortality

evasion

Loweradministrative/compliancecost

Synthesis:BenefitsofCarbonPricinginBrief 9

Despitetheirpotentialimportance,carbonpricebenefitshavereceivedquitelimitedattentiontodatefrompolicymakers.Carbonpricing’senvironmentaleffectsonissueslikeairandwaterhavebeenstud-iedinthescientificcommunity,butgreatereffortisneededtobringthesefindingstotheattentionofpolicymakers.Whilesomeacknowledgmentofthesustainabledevelopmentbenefitsofcarbon-pricingcreditsisevidentinthevoluntarycarbonmarket,additionalworkisneededtomoresystematicallyconsiderhowthesebenefitscanbeidentified,quan-tified,andfactoredintoboththetechnicalcaseforcarbonpricingandtheshapingofcommunicationnarrativestobuildsupportforthepolicy.

Areviewofcarbonpricemodelingrevealsanhis-toricallynarrowconceptualizationofthecostsandbenefits.Technical,exanteassessmentsemployedbypolicymakers–includingpartialequilibriumapproaches(e.g.,cost-benefitanalysis)andgen-eralequilibriumapproaches(e.g.,computablegen-eralequilibrium[CGE],macrostructural,ordynamicstochasticgeneralequilibrium[DSGE]models)–tendtofocusontheeffectsonregulatedsector

emissions,adjustmentcosts,employment,andoutput.Indoingso,theyarelikelytomissasub-stantialportionofthebenefitsofcarbonpricingforachievinggovernmentobjectives.Worse,gov-ernmentsmaynotevenknowthatthesebenefitsexist,aproblemcompoundedbypervasivegapsintheeconomicliteratureonbenefits.

Existingstudiesfocusonspecificbenefitswhileignoringothers,examineeffectsgloballyorindevel-opedcountriesratherthanindevelopingcountrycontexts,andrelyheavilyonscienceorengineeringasopposedtoeconomicorsocialsciencemethods(Dengetal.2017).Suchsampleandmethodologicalbiasestendtoconcentratetheevidenceonspecifictechnicalissuesanddirectimpacts;theylargelyomitthecomplexitiesandconstraintsofpolicydesignandimplementationindevelopingcountries,aswellasextensiveindirecteffectsacrosshetero-geneousstakeholdergroups.

Table1.1summarizesthekeybenefitsexploredinthisguide,alongsidesomeinitialrecommendationsonhowthesebenefitscanbequantifiedandmodeled.

BeyondMitigation:QuantifyingtheDevelopmentBenefitsofCarbonPricing

Table1.1

PolicyBenefitsofCarbonPricing

Benefits Significancefortheeconomyandsociety

Airquality ?Carbonpricingdisincentivizescarbon-heavy

fueluseandcanreducelocalpollutionlevels.

?Potentialbenefitsfromimprovedairquality

aresignificantandlikelythelargestbenefitsofcarbonpricing.

?Benefitsincludeimprovedhumanhealth,

increasedagriculturalproductivity,andreduc-tionofpollution-relateddragsoneconomicgrowthsuchasworkerabsenteeism.

Quantificationofbenefits

Emissionschangesduetocarbonpricingcanbetranslatedintopollu-tionchangesandappliedtoexistingdose-responsefunctionstomodeldirectbenefitsfromimprovedairquality.

HealthbenefitsfromimprovedairqualitycanbeincorporatedintoCGEmodelingframeworksthroughdynamicmodelingoflaborsupplyandallocation.

Waterresources ?Manyregionsoftheworldareaffectedbywaterscarcityandbythreatstowaterqualityandwaterresourcesustainability.

Carbonpricingbenefitsincludeimprovementsinboththequantityandqualityofwaterresources.

Keypathwaysforwatersectorbenefitsincludereducedoverexploitationofground-waterresources,changesinwaterend-usedemands,andreducedwatercontamination.

Long-termrainfall,drainingofsoils,atmosphericdeposition,ammonium-basedfertilizers,landusechanges.

Soilhealth

?

Keythreatstosoilhealthincludesoil

contamination,soilacidification,andaltered

soilnutrientbalance.

?

Primarypathwaysbywhichcarbonpricing

leadstosoilbenefitsincludechangesin

agrochemicalapplication(fertilizerandpesti-

cides),airpollutantdeposition,landuse,

anddeforestation.

?

Benefitsmayberealizedinimprovedhuman

healthoutcomes,improvedcropyields,reduced

deforestation,andreducedbiodiversityloss.

CGEmodelingmaybeusedtoquan-tifytheindirectbenefitsrelatedtosoilhealthduetocomplexintersec-torallinkages.

Transportation

?

Carbonpricingcanreducetheprevalenceof

?

Benefitscanbequantifiedthrough

bothroadinjuriesandcongestionthrougha

avarietyofmetrics.Foraccidents

gasolinetaxbasedoncarboncontent.

theseincludefatalities,nonfatal

?

Empiricalevidenceshowshighergasolineprices

injuries,medicalcosts,property

damage,andforgonewagesand

leadtoreducedaccidentsandcongestion.

expenditures.Forcongestionthese

includenegativehealthoutcomes,

traveldelays,reducedbenefitsof

urbanagglomeration,additionalfuel

use,andtraveltimevariability.

?

Directbenefitscanbeusedasinputs

intoCGEmodels,andtherelated

linkagesandoverallbenefittothe

macroeconomycanbemeasured.

Synthesis:BenefitsofCarbonPricinginBrief 11

Benefits Significancefortheeconomyandsociety Quantificationofbenefits

Fiscalpolicy

?

Carbonpricingoffersauniqueopportunityfor

revenuegenerationwithlimiteddistortionary

impactsontheeconomy.

?

Replacingconventionaltaxeswithcarbontaxes

incentivizesexpansionoftheformalsector.

?

Carbontaxeshelplimittaxevasionand

reducetaxadministrationcosts.

?

Whilecarbontaxesareoftenassumedtobe

regressive,existingevidencesuggeststheyare

generallyprogressive.

MostbenefitsassociatedwithfiscalpolicyareindirectandarethusbestassessedthroughaCGEmodelingframework.

Balanceofpayments

?

Carbonpricingcanincreaseenergyindepen-

?

Usinghistoricaltradedata,avari-

denceandreducetheriskofuncertainexter-

etyofstandardmacroeconometric

nalimbalancesforimportingcountries.

modelscanestimateandleverage

?

Forfossilfuelexporters,carbonpricingpro-

relevanttradeelasticitiestodevelop

uncertaintyboundsonexpected

motesenergyefficiencyathome,freeingmore

balanceofpaymentvariationsubject

resourcestoearnforeignexchange.

tohistoricalpricevolatility.

?

Forthesameexporters,pricingalsoreduces

theriskofDutchdisease,improvingcompet-

itivenessandinvestmentinothertradable

goodsandservices.

Technologicalchange

?

Carbonpricingcanprovideadynamicincen-

?

Benefitsoftechnologicalchange

tivetoinducetechnologicalchangethatleads

canbemeasuredbythefollowing

tolow-carbontechnologyinnovations.

metrics:businessperformance,

?

Empiricalevidencefindsthatenvironmental

innovation,productivity,andexport

competitiveness.

regulationstypicallyleadtoinnovations,

althoughthecostsdonotalwaysoffsetthe

?

Tofullyreflectthebenefitsfrom

gainsfrominnovation.

technologicalchange,CGEmodels

mustconsidertechnologyasan

exogenousparameter.

Source:WorldBank.

BeyondMitigation:QuantifyingtheDevelopmentBenefitsofCarbonPricing

2.

Introduction

Introduction 13

Introduction

Carbonpricingcanreduceemissionscost-effec-tively,anditcanalsogenerateanumberofotherbenefits.Thisguideprovidesanoverviewofthesebenefitstohelppolicymakersadvanceavarietyofsustainabledevelopmentobjectivesintheirowncountriesandaroundtheworld.Carbonpricesarebroadlyrecognizedasnecessaryforcorrectingmar-ketfailuresthatarisefrompollutionexternalities,becausethepricespaidforusingfossilfuelsdonotcomeclosetocompensatingsocietyforthecoststhatgreenhousegas(GHG)emissionsimposeonsociety.Wherethereisadivergencebetween(exter-nality-based)socialcostsandprivatevalues,car-bonpricingisanessentialenvironmentalpolicytool.

Thisguideusestheterm“carbonpricing”torefertopoliciesthatexplicitlypricethecarboncontentofgoods–carbontaxes,emissionstradingsystems,andcreditingmechanisms.However,manyofthebenefitsexaminedinthisguidecanbederivedfromawidearrayofclimatemitigationpolicies.Whereabenefitisexclusivetocarbonpricing,thisishigh-lightedinthetext.

Thisguideisdesignedtomeettheneedformoretimelyandreliableevidenceonbenefitstohelppolicymak-ersindevelopingcountriesmakedecisions–andcom-municate–aboutcarbon-pricinginstruments,andtohelppolicyresearcherschooseandimplementmod-elsthatyieldreliableevidenceonbenefitsandotherrelevantpolicyimpacts.Tosupporttheseefforts,thisguideidentifiesabroadrangeofcarbonpricebenefitsbeyondmitigation,whichincludeimprove-mentsinsevenareas:airquality,waterresources,soilhealth,transport,fiscalpolicy,balanceofpayments,andtechnologicalchange(seefigure2.1).Theguidealsoanalyzescasestudiesofbenefitestimationinadiversearrayofcountriesandcontexts.

Byincentivizinglow-carbonchangesinconsumptionandproduction,acarbonpriceoffersbenefitsthatmaygowellbeyondthebenefitsforglobalclimatechangemitigation.Thisbroaderconceptualizationgivespolicymakersamorenuancedunderstandingofthepervasiveimpactacarbonpricecanhaveandhowitcansupportotherdevelopmentgoals.Ofcourse,acarbonpricewillnotsolvetheissueofairpollu-tionorexcessivegroundwateruse,forinstance,butifdesignedproperlyitcansupportpositivechangesinthesevencategoriesoutlinedinthisguide.

BeyondMitigation:QuantifyingtheDevelopmentBenefitsofCarbonPricing

Figure2.1

Carbon-PricingBenefitsbeyondMitigation

Balanceof

payments

Increaseenergysecurity

Macroe-conomicstabilization

Source:WorldBank.

●Reduce

Transport

congestion

●Reduceroad

injuries

Benefitsofof

●Decreasesoil

carbonpricing

contamination

Soilhealth

●