Carbon Pricing after Paris: Overview of Results from EMF 36 — Sonja Peterson

Sprecherin

Sonja Peterson (Kiel Institute)

Abstract

Given the inertia in the climate system, greenhouse gas emission reduction will take decades before showing up as benefits in terms of avoided climate damages while causing economic adjustment costs in the shorthand mid-run. The discrepancy in the time scale of costs and benefits explains why climate policy is dominated by the issue of how large emission abatement costs are and how these costs are distributed across regions and households. This article summarizes the insights of an Energy Modeling Forum study (EMF36) on the magnitude and distribution of climate policies in the aftermath of the Paris Agreement where countries voluntarily committed themselves to Nationally Determined Contributions (NDCs). The model cross-comparison study suggests that tightening of the NDCs in line with the commonly agreed 2◦C temperature target will induce global economic costs of roughly 1% in 2030 – yet, these cost are unevenly spread across regions with fossil fuel exporting countries being most adversely affected from the transition towards a low-carbon economy. In order to reduce adjustment costs at the global and regional level, comprehensive emissions trading which exploits least-cost abatement options is strongly desirable as it can relax contentious normative debates on equitable burden sharing. The recycling of carbon revenues on an equal-per-household base appeals as an attractive strategy to mitigate regressive effects of carbon pricing and thereby make stringent climate policy more acceptable on societal fairness grounds. 

Autoren

Christoph Böhringer (Universität Oldenburg) — Sonja Peterson (Institut für Weltwirtschaft) — Jan Schneider (Universität Oldenburg) — Malte Winkler (Institut für Weltwirtschaft)

Raum

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