Exploring Carbon Pricing in Developing Countries

Abstract

of the World Bank. World Bank colleagues Dirk Heine and Angela Naneu Churie Kallhauge provided very helpful peer-review comments. The authors are especially grateful for the extensive efforts by Niraj Palsule to fill substantive gaps in successive drafts of the report and to otherwise improve its content. Thanks are due also to Deepika Davidar of the World Bank, who edited the report. Funding support from the CF-Assist Trust Fund and the Government of Norway is gratefully acknowledged.The findings, interpretations and conclusions herein are those of the author(s) and do not necessarily reflect the views of the Ethiopian Development Research Institute, World Bank, the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. vi fuelwood in the latter. Using price-based measures to restrict land clearing and fuelwood use is challenging; however, several promising ideas are beginning to emerge in recent studies. Other possibilities include expanding both current reforestation programs and current clean cooking programs that reduce fuelwood demand through more efficient wood fuel cookstoves and through fuel-switching, especially in urban areas. Both reforestation and clean cooking initiatives can provide large co-benefits through increased ecosystem protection, and improved health by reducing air pollution exposure. Revenues from a carbon tax could be used in various ways to support such initiatives. Beyond researching efficient expansion of reforestation and clean cooking measures, another fruitful avenue for investigation is how changes in current industrial and trade policies could expand access to more energy-efficient and less-polluting technology and capital. Further analysis that considers a broader range of economic instruments to mitigate emissions from land-use and land-use change is recommended. This includes: (i) land tax or subsidies that encourage land rehabilitation, reforestation, maintenance of natural forests; (ii) payments for environmental services; and (iii) land clearing taxes.