Country-Differentiated Social Cost of Carbon for an Equitable Carbon Pricing Benchmark

Carbon pricing is widely recognised as a cost-effective climate policy, yet its global implementation remains fragmented and poorly aligned with the equity principles of the UNFCCC, notably the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC). This paper proposes an operational framework to translate a reference global social cost of carbon (SCC) into country-differentiated carbon-pricing benchmarks consistent with equity considerations. The empirical analysis uses a global panel dataset (1992–2024) and a two-stage hurdle model to assess the role of economic capacity (GDP per capita) and historical responsibility (cumulative per capita CO2 emissions). Results show that both variables are correlated with participation in carbon pricing schemes, while their role in explaining pricing intensity is limited within countries and mainly emerges in cross-country comparisons. The empirical analysis provides contextual evidence on the practical relevance and political feasibility of the selected equity indicators but does not estimate the parameters of the normative benchmark. Against this empirical background, the paper develops two alternative formulations, additive and multiplicative, for deriving country-differentiated SCC-based benchmarks to support internationally coordinated carbon pricing policies. Both satisfy a benchmark revenue-neutral condition while embedding equity through indicators of economic capacity and climate responsibility. The additive formulation gives greater operational prominence to economic capacity while linking the responsibility component to collective climate-finance objectives through a transparent burden-sharing rule, whereas the multiplicative formulation provides a more balanced representation of the two equity dimensions. The proposed framework provides a transparent operational basis for equitable carbon pricing and highlights the substantial gap between observed carbon price levels and equity-consistent, SCC-based benchmarks across countries.