Climate and Carbon

The international community has agreed to limit the average global temperature increase tono more than 2ºC above pre-industrial levels. This will require a gradual phase-out of fossilfuel emissions by the second half of this century. This report brings together lessons learnedfrom OECD analysis on carbon pricing and climate policies. It recommends thatgovernments ensure coherent policies surrounding the gradual phase-out of fossil fuelemissions and consistent signals to consumers, producers and investors alike. A keycomponent of this approach is putting an explicit price on every tonne of CO2 emitted.Explicit pricing instruments, however, may not cover all sources of emissions and will oftenneed to be complemented by other policies that effectively put an implicit price onemissions. But the policies must be mutually supportive and as cost-effective as possible,both on their own and as a package. In addition, tax exemptions and fossil-fuel subsidiesthat undermine the transition towards zero carbon solutions must be reformed. Finally, thereport highlights the issues of competitiveness, distributional impacts and communicationas key elements in implementing climate policy reform.

OECD Environment Policy Papers

Climate and Carbon

Aligning Prices and Policies