Project

Carbon Pricing after Paris (CarPri)

Start of Project: 01.12.2018 — End of Project: 01.11.2021

Abstract

The EMF 36 study “Carbon Pricing After Paris (CarPri)” will investigate how the Paris Agreement on steep greenhouse gas emission reductions can be reached through climate policy measures, in particular by means of more stringent carbon pricing. The starting point of the analysis are the national climate action plans submitted to the Paris Agreement by individual countries (the so-called Intended Nationally Determined Contributions – INDCs) which comprise national emission reduction pledges and policy instruments for emission reductions. The EMF study will provide an impact assessment of existing climate action plans and discuss alternative climate policy regimes to meet the Paris targets. The fundamental objective is to provide robust insights into policy options trading off key dimensions of a sustainable climate future, i.e. environmental effectiveness, overall economic performance and the incidence of regulatory measures. The project is participating in theDialogue on the Economics of Climate Change, the accompanying process to the German Ministry of Education and Research funding measure “Economics of Climate Change II”.

The Paris Agreement of 2015 is the central international agreement to deal with the challenge of anthropogenic climate change. The overall objective of CarPri is to provide an impacts assessment for the implementation of the national greenhouse gas emission reduction targets that have been submitted in the context of the Paris agreement and of alternative climate policy futures to comply with more ambitious global reduction requirements in line with a 2°C or even a 1.5°C temperature target as proclaimed in the Paris Agreement.

The Post-Paris climate futures thus include scenarios along two key dimensions. One dimension sets the emission reduction obligations that are either given by the INDCs or may emerge from additional efforts to meet the 2°C (1.5°C) temperature targets; the other dimension refers to the policy strategies and instruments for meeting the emission reduction requirements. Scenarios on climate policy futures will include:

a best-case scenario where INDCs are reached in a cost-effective manner (global “where-flexibility”) with a global carbon price.
a scenario cluster 1 where different degrees of “where-flexibility” by means of sectoral and regional expansion of emissions trading (linkages) determine the global and regional impacts of Paris compliance.
a scenario cluster 2 on how instrument choice affects the magnitude and distribution of economic costs. Instruments include market-based instruments such as emission taxes or emission permits as well as command-and-control instruments such as efficiency (emission) standards or renewable portfolio standards. These instruments can be used in isolation or – reflecting common policy practice – in combination.

Beyond a common set of core scenarios investigated jointly across all participating modeling groups, additional complementary scenarios are studied by individual groups focusing on more specific, yet policy-relevant aspects of future climate policy design such as technological progress, what-/ when-flexibility in greenhouse gas emission reduction, the role of pre-existing distortions and revenue recycling, issue linkage of climate and trade policies.

The steering committee members for CarPri are:

Christoph Böhringer (University of Oldenburg, Germany)
Sonja Peterson (Kiel Institute for the World Economy, Germany)
Tom Rutherford (University of Wisconsin, USA)
John Weyant (Stanford University, USA)
Jan Schneider (University of Oldenburg, Germany)
Malte Winkler (Kiel Institute for the World Economy, Germany)

Project workshops were held in Kiel (Kick-Off Workshop, April 4-5 2019) and Seville (first Modelling Workshop, October 24-25 2019). The other planned workshops had to be held remotely due to the pandemic.

All project results will be published in a special issue in Energy Economics. The core scenarios and some of the individual contributions are also published as working papers.

Core results:

Christoph Böhringer, Sonja Peterson, Thomas F. Rutherford, Jan Schneider & Malte Winkler (2021): Climate policies after Paris: pledge, trade, and recycle – insights from the 36th Energy Modeling Forum Study (EMF36), Kiel Working Paper no. 2183, available at https://www.ifw-kiel.de/de/publikationen/kieler-arbeitspapiere/2021/climate-policies-after-paris-pledge-trade-and-recycle-0/

Individual contributions:

Malte Winkler, Sonja Peterson & Sneha Thube (2021): Gains associated with linking the EU and Chinese ETS under different assumptions on restrictions, allowance endowments, and international trade, Kiel Working Paper no. 2185, available at https://www.ifw-kiel.de/de/publikationen/kieler-arbeitspapiere/2021/gains-associated-with-linking-the-eu-and-chinese-ets-under-different-assumptions-on-restrictions-allowance-endowments-and-international-trade-0/

Taran Fæhn & Hidemichi Yonezawa (2021): Emission targets and coalition options for a small, ambitious country: An analysis of welfare costs and distributional impacts for Norway, Statistics Norway, Research Department, Discussion Paper no. 956, available at https://www.ssb.no/en/forskning/discussion-papers/_attachment/453794?_ts=1795fd3e1c0

Maksym Chepeliev, Israel Osorio Rodarte & Dominique van der Mensbrugghe (2021): Distributional Impacts of Carbon Pricing Policies under Paris Agreement: Inter and Intra-Regional Perspectives. GTAP Working Paper no. 88, available at https://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=6194

Christoph Böhringer, Thomas F. Rutherford & Jan Schneider (2021): The Incidence of CO2 Emissions Pricing Under Alternative International Market Responses - A Computable General Equilibrium Analysis for Germany. Oldenburg Discussion Papers in Economics no. V-435-21, available at https://uol.de/f/2/dept/wire/fachgebiete/vwl/V-435-21.pdf

Additional publications related to CarPri:

Malte Winkler & Sonja Peterson (2021): International carbon pricing coalitions – their potential for saving costs, ratcheting up NDCs and reaching climate targets. Global Solution Journal Issue 7, pp. 194-200, available at Global-Solutions-Journal-7-Summit-2021-Edition.pdf (global-solutions-initiative.org)

Malte Winkler & Sonja Peterson (2021): Einheitliche CO2-Preise in der EU und China. Table China, available at https://table.media/china/standpunkt/einheitliche-co2-preise-in-der-eu-und-china/ (in German)

Thube, S., Peterson, S., Nachtigall, D. and Ellis, J. (forthc.) The economic and environmental benefits from international co-ordination on carbon pricing: A review of economic modelling studies. Environmental Research Letters

Conferences

The GTAP and EAERE conferences took place July 23^rd – July 25^th, 2021. CarPri was represented with several presentations and sessions at both events:

EAERE:

Wednesday, June 23rd

10-12 (CEST): Environment, Trade and firm incentives.

The Incidence of CO2 Pricing Under Alternative International Market Responses -- A Computable General Equilibrium Analysis for Germany (Jan Schneider)

10-12 (CEST): Egg-timer session, Pollution.

Gains from linking the EU and Chinese ETS under different assumptions on restrictions, transfer payments, and international trade (Malte Winkler)

Thursday, June 24th

10-12 (CEST): IAM and input-output analysis.

The Incidence of Carbon Pricing: From Input–Output via Microsimulation to General Equilibrium (Florian Landis)

12:30-2:30 (CEST): Redistributional effects of climate policy.

Is carbon pricing always regressive? Insights from a recursive-dynamic CGE analysis with heterogeneous households for Austria (Jakob Meyer)

Distributional and Efficiency Impacts of Higher EU Climate Targets (Gustav Fredriksson)

Friday, June 25th

5:30-7:30 (CEST): Thematic Session: Results from EMF36

Climate Policies after Paris: Pledge, Trade, and Recycle Overview of Results from EMF 36 (Sonja Peterson)
A model intercomparison of the welfare effects of regional cooperation for ambitious climate mitigation targets (Gökce Akin Olcum)
Climate policy design, competitiveness and income distribution (Toon Vandyck)

5:30-7:30 (CEST): International cooperation on climate

Implication of the Paris Targets for the Middle East through different cooperation option (Mohammad M. Khabbazan)
Carbon policy options for a small ambitious country: An analysis of social costs and distributional impacts (Taran Faehn)

GTAP:

Wednesday, June 23^rd

6:00 – 8:12 EDT: Session “Climate Change Policy”, hosted by Maksym Chepeliev

Gains from linking the EU and Chinese ETS under different assumptions on restrictions, adjusted endowments, and international trade (Malte Winkler)

Thursday, June 24^th

8:30 – 10:42 EDT: Session “Climate Change Policy”, hosted by Maksym Chepeliev

Implication of the Paris Targets for the Middle East Through Different Cooperation Options (Mohammad M. Khabbazan)

Friday, June 25^th

6:00 – 7:37 EDT: Session “Results from the Energy Modeling Forum on Post-Paris Carbon Pricing (EMF36)”, organized by Sonja Peterson and Christoph Böhringer

Climate Policies after Paris: Pledge, Trade, and Recycle (Jan Schneider)
Distributional Impacts of Carbon Pricing Policies under Paris Agreement: Inter and Intra-Regional Perspectives (Israel Osorio Rodarte)
Distributional effects of carbon pricing on households: a case study for Brazil under the Paris Agreement goals (Rafael Garaffa)

The annual conference of the Verein für Socialpolitik (VfS) took place September 26^th - September 29^th. CarPri was represented with several presentations:

Monday, 27^th September: 5:30 – 6:00: Climate Policies after Paris: Pledge, Trade, and Recycle Overview of Results from EMF 36 (Jan Schneider)
Tuesday, 28^th September: 4:00 – 4:30: Prices and standards for equitable climate policy in Europe (Matthias Weitzel)

Session on „Carbon Pricing on a Global Level” at the Global Solution Summit 2021 featuring EMF36 results: Global Solutions Summit 2021 (global-solutions-initiative.org)

Session on „Distributional Issues of Carbon Pricing” at the Global Solution Summit 2022 featuring EMF36 results: (https://www.global-solutions-initiative.org/video/community-session-addressing-distributional-issues-of-carbon-pricing/

BaUs and Targets

This dataset includes GDP (ppp and mer) and CO₂-emissions from fossil fuel combustion from the two Business-as-Usual (BaU) scenarios as well as the emission reduction targets used in CarPri. The BaUs are based on (1) EIA´s International Energy Outlook (IEO) (EIA, 2017), and (2) IEA´s World Energy Outlook (WEO) (IEA, 2018). Note that values were indexed to 2011, which is the base year of the GTAP9 database used by most models in CarPri. Each model was calibrated to meet these BaUs´ GDP (ppp) and CO₂-emissions in the target year 2030. The NDC emission targets are constructed based on Kitous et al. (2016) and calculated as percent reduction against the respective BaU in the target year 2030. In addition to the unconditional (NDC), conditional (NDC+) and 2°C (NDC-2C) targets used in the overview paper, this dataset also contains a stricter target, which is in line with the 1.5°C target (NDC-1.5C). A gdx file can be obtained upon request, please write an e-mail to Sonja Peterson.

Core Scenario Results

This dataset includes each group's modeling results of CarPri's core scenarios, which are used in the overview paper (https://doi.org/10.1016/j.eneco.2021.105471). Please consider the following information regarding the dimensions in the files. A gdx file can be obtained on request, please write an e-mail to Sonja Peterson.

Model

Seventeen teams from different institutions delivered their modelling results and were included in the analysis. The respective model names are included in the data files in dimension “Model” and are associated with the following institutions: CEPE (ETH Zürich), ICES (Euro-Mediterranean Center on Climate Change, CMCC), DART Kiel (Kiel Institute for the World Economy, IfW-Kiel), EC-MSMR (Ministry of Environment, Canada), EDF-GEPA (Environmental Defense Fund, EDF), DREAM (University Fudan), JRC-GEM-E3 (Joint Research Center, JRC), ENVISAGE (University Purdue), SNoW (Statistics Norway), TEA (University Rio de Janeiro), TUB (Technical University Berlin), C-GEM (University Tsinghua), UOL (University Oldenburg), WEGDYN (Wegener Centre Graz). For contact persons in each institution, please refer to Table 1 in the overview paper.

In the case of the Ministry of Environment, Canada, the modelling results for the model region “Canada” had to be excluded due to data protection issues. Therefore, we set EC-MSMR's results for regions “Canada” and, in order to avoid the possibility to re-calculate those values, “All” to zero.

Business-as-Usual (BaU)

The core scenarios include two Business-as-Usuals (BaUs) based on (1) EIA´s International Energy Outlook (IEO) (EIA, 2017), and (2) IEA´s World Energy Outlook (WEO) (IEA, 2018). Each model was calibrated to meet these BaUs´ GDP and CO₂-emissions in the target year 2030.

Sources:

EIA (2017). International Energy Outlook 2017. U.S. Energy Information Administration.

IEA (2018). World Energy Outlook 2018. International Energy Agency.

Target

The “target” dimension includes unconditional NDCs (NDC), conditional NDCs (NDC+), and the Paris Agreement´s overarching 2°C-target (NDC-2C). The target values are constructed based on Kitous et al. (2016) and calculated as percent reduction against the respective BaU in the target year 2030.

Cooperation

The core scenarios include five levels of international cooperation, under which the respective targets are met:

REF: Each model regions reaches its target individually via a uniform national carbon price

EUR_CHN: Europe and China share a carbon market solely across energy-intensive and trade-exposed (EITE) and power sectors to jointly reach their targets

ASIA: Japan, South Korea and China share a carbon market solely across EITE and power sectors to jointly reach their targets

GLOBAL: All model regions share a global carbon market across all sectors to jointly reach their targets

PARTIAL: All model regions share a carbon market solely across EITE and power sectors to jointly reach their targets

fmt

Results are displayed as (1) absolute values (abs), (2) absolute difference (in 2030) against the respective Baseline (dif), and (3) percent change (in 2030) against the respective Baseline (pct).

Region

For the core scenarios, each modelling group implemented a shared regional aggregation including eight single countries and six aggregated regions plus the global region “ALL”.

Value

The results for each parameter are displayed in the following units:

co2emissions: Gt

co2prices: 2011 US $

GDP: billion 2011 US $

targets: % reduction against Baseline

welfare: Hicksian Equivalent Variation in billion 2011 US$