Estimates of the inflation effect of a global carbon price on consumer, investment, export and import prices

This chapter considers the potential inflation effects of a global carbon price on consumer prices, investment prices, export prices, and import prices. We estimate the effects under three different scenarios. The results clearly indicate that the inflation effects in developed countries of a 100 USD/ton carbon price are small. For developing countries, the inflation effect is larger-potentially too large for it to be politically feasible to introduce a global carbon price. However, a simple adjustment of the price based on the price level in each country equalizes the inflation effects across all countries. In light of this kind of adjustment, a global carbon price is more likely to be implemented.