Overview of carbon pricing policies in Latin America and the Caribbean, 2025: an analysis of their effectiveness and guidelines for implementation

This document presents an overview of carbon pricing policies in Latin America and the Caribbean. It focuses on the characteristics of carbon pricing instruments, both explicit, such as carbon taxes and emissions trading systems, and implicit, such as fuel taxes, the social price of carbon and the reduction of fossil fuel subsidies. The document also provides an analysis of the effects of related policies (e.g. subsidies and elasticities) on the effectiveness of carbon pricing, and includes the estimation of an econometric model that measures the effectiveness of carbon pricing in terms of reducing emissions. The results of this estimation identify a statistical link between the carbon tax rate and a reduction in emissions in the five countries of the region that implement a carbon tax. However, to ensure that carbon taxes are an effective public policy instrument for reducing emissions, they must be coordinated and consistent with other policies.