Since 2014, global carbon pricing coverage has grown from 12% of emissions at $7 per tonne to 23% at $32 per ton. However, its regressive impact—disproportionately burdening lower-income populations—poses challenges for public and political support. By addressing climate change through emission reductions, promoting clean energy transitions (SDG 7), and reducing inequalities (SDG 10), the research offers a blueprint for sustainable economic growth (SDG 8).

The study suggests that integrating redistributive measures with carbon pricing at these tipping points can mitigate inequality, maintain economic growth, and enhance public acceptance. Notably, researchers developed real-time metrics to detect sector-specific tipping points without relying on counterfactual analysis, providing policymakers with actionable tools for intervention. Real-time metrics empower policymakers to balance sustainability, equity, and development for global progress.
Dr. Debraj Roy, author and Assistant Professor at the Computational Science Lab, Informatics Institute emphasized, “Computational models allow us to simulate complex economic systems, uncover tipping points, and test policy interventions in ways traditional experiments cannot, enabling more effective strategies for sustainability.”

Further, the study highlights that carbon pricing is not universally effective, particularly in countries lacking renewable energy potential, where it may function as a blanket energy tax without facilitating a shift to low-carbon economies. Addressing key challenges like phasing out coal power plants—responsible for 20% of global emissions—requires significant private investment influenced by Environmental, Social, and Governance (ESG) standards and strong public support.

Moving toward a net-zero economy requires significant investments in green electricity and energy storage, necessitating careful navigation of policy trade-offs. Experiences from countries like Chile, Singapore, and Sweden demonstrate that political challenges to carbon pricing can be overcome with pragmatic approaches. The study underscores the need for complementing carbon pricing with other mitigation tools to address market failures and drive innovation in low-carbon technologies. This approach underscores the critical balance between economic growth, equity, and environmental sustainability, offering innovative solutions to the global climate crisis.

Read the full study here: Nature Communications.