Global benefits of the international diffusion of carbon pricing policies

Carbon pricing policies are essential for mitigating climate change, but the global benefits of leadership and the international diffusion of these policies are not well understood. Here we provide robust and statistically significant evidence showing that the adoption of carbon pricing in one country can explain the subsequent adoption of carbon pricing in other countries. For a neighbouring country, diffusion increases the probability of policy adoption on average by several percentage points. Translating these empirical estimates with Monte Carlo simulations into global reductions in emissions through policy diffusion suggests that for many countries, decreases in emissions as a result of diffusion could be larger than domestic emission reductions. These results support the adoption of stringent climate policies, especially in countries in which climate change mitigation might be considered as not very important because of relatively low levels of domestic emissions.