Effect of carbon pricing on the economy


The effect of carbon pricing on the economy depends on the design, structure and implementation of the pricing system.


  • Most studies suggest continued growth of the economy with a minimal negative effect on the economy in terms of GDP compared to business as usual (BAU; no carbon pricing); some suggest a positive effect

    • Many don't take into account the effect of climate change

  • Not all sectors will be affected negatively or positively

  • Study of environmental tax shifts in European countries indicated positive growth in GDP following the tax shifts

  • One study examined the effect of a $40/tonne of CO2 on Ontario’s economy

    • Ontario’s GDP in 2030 would decrease by 0.6% compared to BAU i.e. the GDP would still grow but would be smaller (0.6 percentage point smaller) compared to GDP not subjected to carbon pricing.

For more information please visit: http://pricecarbonnow.org/effect-carbon-pricing-employment