The goals set in the Paris Agreement (2°C target and NDCs) raise the central question of how nations can achieve these targets both effectively and efficiently. Under the umbrella of the internationally recognized Energy Modeling Forum (EMF), CarPri investigates the role of carbon pricing and the economic effects of various climate policy scenarios, deploying around 20 international institutes´ climate-economy models. In addition to an overview paper on the core scenarios of the project, each institute prepares an additional paper with a focus of their own choosing. The overarching issues for these individual contributions are on the one hand distributional effects for different income groups, and on the other hand effects of various international collaborations. The research results will be published in a special issue at Energy Economics and will inform political decision-makers and societal stakeholders about the economic and emissions-related consequences of various regulatory instruments.
Update on the project´s process
The modeling work is completed, all studies have been submitted for publication in a special issue of the journal Energy Economics. Most of them are already accepted for publication, some are still in the reviewing process.
The actual NDCs do not suffice to meet the Paris Agreement´s 2°C target, and stricter targets lead to larger costs in the global perspective. However, if global emission trading is introduced, the global costs for an emission pathway in line with the 2°C target almost equals that of the current NDCs under the assumption of no international emission trading. Hence, cost savings through where-flexibility pay the bill for a more ambitious international climate policy. Furthermore, political feasibility of enhanced climate mitigation targets can be increased substantially by recycling revenues from emission pricing in a lump-sum fashion. A recycling scheme giving revenues in equal shares to households can offset the regressive impacts of CO2 pricing and even deliver social welfare gains with a reduction in CO2 emissions if inequality aversion is sufficiently high.
Preliminary results of the project
Figure 3 shows the global welfare impacts in a scenario without international emission trading (labelled ref; lighter shaded bars) and in a scenario with global emission trading (labelled global; darker shaded bars) for the three different ambition levels on emission reduction NDC (current unconditional pledges), NDC+ (current conditional pledges), and NDC-2C (reductions in line with the 2°C target). On the x-axis, individual models are displayed. On the y-axis the global welfare changes (in Hicksian equivalent variation (HEV)) relative to a Baseline scenario without ambitious emission reduction targets are displayed. On average, the global welfare losses associated with reaching NDC-2C under global emission trading are very similar to global welfare losses associated with reaching the current NDCs (NDC) without international emission trading.
- Emission reductions that are in line with the temperature targets of the Paris Climate Agreement are achievable with only minor losses in real income if CO2 pricing is cost-efficient. Harmonised CO2 pricing via international emissions trading plays a central role in this.
- Poorer households in particular are strongly affected by a CO2 price. A refund of revenues via flat-rate transfers can prevent this regressive effect.
Akın-Olçum, G. et al. (submitted):
A model intercomparison of the welfare effects of regional cooperation for ambitious climate mitigation targets. Energy Economics.
Böhringer, C.; Schneider, J. (2021):
The incidence of CO2 pricing under alternative international market responses - A Computable General Equilibrium Analysis for Germany. Energy Economics 101, 105404.
Böhringer, C., Schneider, J., Peterson, S., Winkler, M. (2021):
Carbon Pricing after Paris - Overview of Results from EMF 36. Energy Economics.
Landis, F, Fredriksson,G., Rausch, S. (2021):
Between- and Within-Country Distributional Impacts from Harmonizing Carbon Pricing in the EU. Energy Economics, 103, 105585.
Winkler, M., Peterson, S. Thube, S. (2021):
Gains from linking the EU and Chinese ETS under different assumptions on restrictions, transfer payments, and international trade. Energy Economics 104, 105630.