The World Bank has published a paper providing guidance on ‘Using Carbon Revenues’ to help policymakers understand the implications, opportunities and challenges associated with different approaches to carbon revenue use. The paper notes that carbon pricing, which is an important source of government revenue, can help support climate change mitigation, industrial competitiveness and other economic and development objectives. The ways in which carbon revenues are used are also important for public and stakeholder acceptance of carbon pricing.
The report explains that carbon revenues can, inter alia: help developing countries finance development objectives; be used to address the potentially negative impacts of carbon pricing on domestic industry competitiveness, reducing the risk of carbon leakage; and compensate individuals, households or businesses through direct transfers to help them deal with the negative impacts of carbon pricing. While individual countries tend to implement a combination of spending initiatives, the report notes, funding for climate and development projects has been the most widely adopted option based on reported revenue uses. [Technical Paper Landing Page]