Implicit carbon prices

Depending on the instrument, implicit carbon prices can be either positive or negative. There are a number of reasons for implicit carbon pricing being more widespread. Policies that implicitly price carbon often target problems at the local level (e.g., air pollution, traffic congestion, or the need for fiscal revenues). ==Relevance for designing border carbon adjustment mechanisms==

Considering both implicit and explicit carbon pricing measures can result in a very different understanding of a country’s actions on GHG emissions reductions than if only explicit carbon pricing is examined. In contrast, a proposed BCA in the United States includes a wider range of policies that includes implicit carbon pricing. It has been argued that using effective carbon pricing instead of explicit carbon pricing for BCA mechanisms could result in greater reductions in GHG emissions while also being more politically feasible and compatible with international trade agreements. == References ==