Supporting Energy Pricing Reform and Carbon Pricing Policies Through Crediting

The report examines the potential for 'policy crediting' to incentivize developing countries to implement or strengthen carbon pricing and energy subsidy reforms. Through case studies in Morocco, Indonesia, Mexico, and China (Beijing), the study finds that the financial value of carbon credits is generally very low compared to the fiscal gains from the base policies themselves, suggesting that credits are unlikely to be the primary driver for policy adoption. However, the report argues that crediting could still play a role by supporting mitigation at the 'policy margin' (complementary measures), funding the operational strengthening of ETS markets, or providing targeted compensation to vulnerable stakeholders. The authors highlight significant challenges in establishing baselines and monitoring, reporting, and verification (MRV) for policy-level reductions compared to project-level offsets.

• The financial value of carbon credits is typically very low relative to the fiscal gains from implementing the base pricing reform, meaning crediting is unlikely to be the critical factor in the decision to implement these policies.
• In Morocco, the removal of all fossil fuel subsidies is estimated to reduce energy-related emissions by 1.6% to 3.08% by 2020, with potential savings of 1.2 to 2.3 MtCO2e.
• In Indonesia, the removal of fossil fuel subsidies is projected to reduce national CO2 emissions by 5% to 7% between 2015 and 2030.
• Mexico's carbon tax was significantly weakened during the legislative process, reducing expected annual mitigation from 5.8 million t CO2 to 1.6 million t CO2.
• The Beijing ETS pilot aims for an 18% reduction in carbon intensity compared to the 20092011 period, and reported a 4.5% fall in emissions from major polluters in 2013.
• The most promising approach for policy crediting is supporting emission reductions at the 'policy margin,' such as crediting complementary mitigation actions net of the pricing reform itself.
• Establishing baselines and attributing emission reductions to a specific policy is significantly more challenging for fiscal instruments (taxes and subsidy reform) than for quantity-based policies like an ETS.
• Political resistance to pricing reform is often driven by perceived impacts on vulnerable populations and industrial competitiveness, rather than overall economic gain.
• Crediting revenues could be used to strengthen the operation of an ETS by improving market liquidity, reducing compliance costs through MRV support, or expanding the system's scope.
• In Indonesia, strong nationalist sentiment may lead to resistance against policies perceived as being influenced or funded by external international actors.

APA

Wooders, P., Gass, P., Bridle, R., Beaton, C., Gagnon-Lebrun, F., Michaelowa, A., Hoch, S., Honegger, M., Matsuo, T., Ricardo, V. V., Johnson, M., & Harries, J. (2016). Supporting Energy Pricing Reform and Carbon Pricing Policies Through Crediting. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/supporting-energy-pricing-reform-carbon-pricing-through-crediting.pdf

Chicago

Wooders, Peter, Philip Gass, Richard Bridle, Christopher Beaton, Frédéric Gagnon-Lebrun, Axel Michaelowa, Stephan Hoch, et al. Supporting Energy Pricing Reform and Carbon Pricing Policies Through Crediting. International Institute for Sustainable Development, 2016. https://www.iisd.org/system/files/publications/supporting-energy-pricing-reform-carbon-pricing-through-crediting.pdf.

Wikipedia

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BibTeX

@techreport{wooders2016supporting, author = {Wooders, Peter and Gass, Philip and Bridle, Richard and Beaton, Christopher and Gagnon-Lebrun, Frédéric and Michaelowa, Axel and Hoch, Stephan and Honegger, Matthias and Matsuo, Tyeler and Ricardo, Vanessa Villa and Johnson, Mark and Harries, James}, title = {{Supporting Energy Pricing Reform and Carbon Pricing Policies Through Crediting}}, institution = {International Institute for Sustainable Development}, year = {2016}, month = may, url = {https://www.iisd.org/system/files/publications/supporting-energy-pricing-reform-carbon-pricing-through-crediting.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }