Needed: a price for carbon capture

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Abstract This paper presents a macroeconomic framework for carbon markets. We set up a global climate-economy with carbon-intensive energy inputs, renewable energy, natural carbon sinks, and a carbon capture technology to show that (i) within a comprehensive carbon pricing system, a carbon tax alone implements any given path of carbon emissions; (ii) ‘additionality’ is not a property of the optimal carbon pricing system; and (iii) without a carbon tax, renewable subsidies, preservation of carbon sinks and a price for carbon capture are needed.

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