Does carbon pricing work? Experts debunk key climate myths

Five myths about carbon pricing debunked by climate researchers

Carbon pricing is often called the foundation of climate protection. Yet, despite its growing use, many still doubt its effectiveness. Now, researchers from the Potsdam Institute for Climate Impact Research (PIK) have tackled five widespread myths about this key policy tool.

Their findings appear in the book Carbon Has Its Price, which argues that carbon pricing remains essential for cutting emissions—if designed and supported properly. The first myth claims carbon pricing has no steering effect—that it fails to change behaviour. The researchers counter this by pointing to real-world examples where pricing shifts demand toward cleaner alternatives. They also argue that pricing aligns with ethical climate action, reinforcing its role as a policy driver.

A second objection calls carbon pricing politically unfeasible. The data tells a different story: 28% of global CO₂ emissions are already covered by pricing schemes. More countries continue to adopt them, proving that implementation is not only possible but expanding.

Critics also label carbon pricing socially unjust, warning it burdens low-income households. The book responds by stressing the need for targeted relief measures. Well-designed rebates or subsidies can offset costs for vulnerable groups, ensuring fairness while maintaining incentives to reduce emissions.

Some argue that carbon pricing is obsolete—that newer technologies make it unnecessary. The researchers disagree, highlighting the ongoing need for carbon dioxide removal (CDR) to reach climate neutrality. Pricing remains a crucial tool to fund and incentivise these efforts.

Finally, sceptics insist carbon pricing only works with a world government—an unrealistic demand. The EU’s Carbon Border Adjustment Mechanism (CBAM) offers a practical alternative. By taxing carbon-intensive imports, it reduces carbon leakage without requiring global political unity.

The study acknowledges that carbon pricing alone isn’t enough. Strong state capacities and complementary policies—like regulations and green investments—must work alongside it to drive deeper emissions cuts. The book’s arguments aim to clarify how carbon pricing fits into broader climate strategies. With 28% of global emissions already priced and tools like CBAM addressing cross-border challenges, the policy’s role looks set to grow. Yet its success still depends on careful design and additional measures to ensure fairness and effectiveness.