The use of effective carbon rates as an indicator for climate mitigation policy

In 2016, the Organisation for Economic Co-operation and Development (OECD) introduced the effective carbon rate (ECR). This innovative indicator measures the combined price put on carbon emissions by energy taxes and emissions trading schemes. In this chapter, we first calculate the national weighted average ECR for a selection of case countries (which is not provided by the OECD), including China, the US, Japan, the UK, France, Germany and Belgium. Second, a comparative case study is carried out for Belgium and China, including the provision of explanations for the differences between them and both countries’ prospects for the near future. Finally, the chapter draws conclusions on two levels. First, lessons from the comparative analysis are transformed into policy recommendations. And second, a discussion is presented on the potential of the ECR as an indicator to measure both the use of economic instruments for the environment and the ambition levels of countries with regard to climate mitigation policy.