The effectiveness of carbon taxing in mitigating climate change

It is well acknowledged that addressing climate change effectively should be of highest importance in the 21st century. Various approaches have emerged in response to the challenges posed by climate change and global warming. Market-based instruments in particular aim to provide a cost-effective approach in curbing CO2 emissions and thus mitigating climate change. Even though various studies have come to the conclusion that emission trading systems are not successful in mitigating the large-scale consequences of climate change, the overall effectiveness of another market-based instrument, namely carbon taxing, is still under consideration. This thesis aims to contribute to the existing pool of literature by evaluating to what extent carbon taxing is successful in reducing per capita CO2 emissions and thus mitigating climate change. Consequently, this thesis has analized 54 (high-income) countries over a 28 year-long period to establish whether countries with implemented carbon taxing initiatives have significantly lower levels of per capita CO2 emissions. The results of the panel regression indicate that the presence of a carbon tax leads to an overall 14.5% decrease in per capita emissions among high-income countries. Therefore the conclusion can be drawn that carbon taxing can serve as an important and effective policy-instrument in addressing climate change.