Does carbon pricing reduce emissions? – A systematic review and meta-analysis of the ex-post literature

For international climate targets to be achieved, they need to be backed by effective climate mitigation policies. In this regard, there is ongoing discussion in the literature and within policy circles on the role of carbon pricing. Proponents argue that carbon pricing is effective, efficient, and can generate revenues to support parallel social or environmental goals; while opponents suggest that stringent carbon pricing faces insurmountable political barriers, and has so far demonstrated little effectiveness in real world settings. Yet so far there has been little effort to synthesise the ex-post literature on carbon pricing effectiveness using a formal and reproducible method that limits numerous biases. In this article we aim to do so, shedding light on the effectiveness of carbon pricing schemes with regard to emission reductions. We systematically review quasi-experimental policy evaluations from varying contexts worldwide. We extensively search the literature using a comprehensive search query in multiple literature databases, including Web of Science, Scopus, RePEc and JSTOR. We apply pre-defined and transparent eligibility criteria to identify relevant studies that estimate ex-post mitigation effects of carbon pricing schemes. We include studies using a broad set of study designs to single-out the effect of a specific policy on the emissions pathway. Our final sample will comprise approximately 50 primary studies, studying at least 14 carbon pricing schemes across the globe. We conduct a comprehensive risk of bias analysis to evaluate the validity of the research methods in the included studies and extract all estimated effect sizes of the causal impact of the policy implementation on carbon emissions. We synthesise the study outcomes using established meta-analysis methods to understand not only mean effects of the policy implementation, but also patterns that explain variations in the data. We aim to answer (i) whether the mitigation effect fades or intensifies over time, (ii) which impact the price level and coverage of the pricing policy have, and (iii) which role other design features of the policy play. Our preliminary results suggest that carbon pricing policies reduce emissions between 2 and 16 percent, with large variations between pricing schemes and estimation methods. The final results will provide evidence on the impact of different sources of variation in relation to different instrument designs, policy types, targeted sectors, and times after implementation.