Abstract: This document aims to present a synthesis of some of the main debates about carbon prices for policy purposes in the road to the COP30 to be hosted by the Government of Brazil in 2025. The Paris Climate Change Agreement has the target of a temperature rise of 1.5o C and 2o C during this century, which requires the construction of a carbon-neutral economy between 2050 and 2070. A carbon price in all deep decarbonization scenarios is consistent with the Paris Agreement. However, intense debates remain about the final consequences of a carbon price on Greenhouse gas emissions and the collateral effects on economic dynamism and income distribution. The literature revision indicates that:
1. The carbon price for a Just Climate transition to a carbon net zero economy could be high.
2. The carbon price would contribute to reducing greenhouse gas emissions but is not necessarily consistent with a carbon net-zero economy.
3. The carbon price can potentially negatively affect economic dynamism and income distribution.
However, these effects can be compensated with fiscal recycling policies. Henceforth, it is possible to incorporate a carbon price under a Just Climate Transition under a more comprehensive approach considering recycling policies.
This Advocacy Note was produced by the South American Network on Applied Economics / Red Sur, with the aid of a grant from the International Development Research Centre (IDRC) of Canada, as part of the project: “Elevating and Connecting Research from Latin America and Africa to Inform the G20 and COP30: Public Debt, Care, and Climate Change”, between 2024 and 2025.