Energy consumption and CO2 emissions: How effective are price signals?

The planet’s CO 2 emissions and consumption of fossil fuels are rising much faster than would be compatible with international climate commitments. This raises the question of whether greater use could be made of price signal s , by taxing fossil fuel consumption (either via a tax proper or via a price on CO 2 ). But would the use of prices be effective? We try to estimate for the OECD and for the world the price elasticity of energy consumption and fossil fuel consumption. We find that: For the OECD, energy and fossil fuel prices have to increase by 20% to reduce consumption by 1%; For the world, energy and fossil fuel consumption is not very price-sensitive at all. P rice signal s are therefore not very effective in the OECD and are ineffective globally.