Climate Policy Instruments Research Articles

Projecting short to medium-term effects of carbon emissions trading on Serbia's GDP

This paper presents an approach to assess the short to medium-term effects of the Emissions Trading System (ETS), an economic and climate policy instrument aimed at reducing greenhouse gas emissions, on GDP from the expenditure side. The analysis focuses on Serbia's electricity sector, which relies heavily on lignite-based production dominated by state-owned enterprises. The obtained projections suggest that in the short term, the introduction of an ETS may lead to slower GDP growth compared to official forecasts. However, by 2030, accelerated growth is observed, eventually converging with and even surpassing the projected growth in scenarios characterized by higher investments.

Identifying and tracking climate change mitigation strategies with a cluster-based assessment

To guide climate change mitigation efforts, we identify and characterize the different types of mitigation strategies countries adopted over the last two decades. The analysis exploits the novel and rich policy repository of the OECD’s Climate Actions and Policies Measurement Framework (CAPMF), covering more than 120 policy variables and 50 countries over 2000–2020. All countries in the dataset increased the number of climate policy instruments and their stringency over the past two decades, but at a different pace and using different policy instruments. Using statistical cluster analysis, we identify four distinct types of mitigation strategies, which differ in the composition and stringency of mitigation policies. Regression results show that emissions are negatively associated with the overall stringency of the country’s mitigation strategies. Evidence also supports the hypothesis that this relationship is stronger for mitigation strategies comprising a more diverse set of instruments, pointing to possible policy synergies.

Stakeholder perspectives on border carbon adjustments: Trinidad and Tobago's balancing act between competitiveness and climate action

ABSTRACT Introduction This policy analysis paper explores stakeholder perspectives on the potential impact of Border Carbon Adjustments (BCAs) as an external climate policy instrument on Trinidad and Tobago. The research is based on data collected through a questionnaire and two workshops.Discussion The study finds that while the majority of stakeholders are aware of BCAs and generally support their implementation for environmental reasons, there are concerns about their impact on the competitiveness of the country's exports and the social consequences. Stakeholders expressed concerns about potential job losses, increased costs for consumers, and reduced competitiveness of local industries.Conclusion The research recommends the participation of Trinidad and Tobago in international discussions on BCA design to advocate for phased exemptions as the country decarbonizes and to influence key BCA design features such as geographic coverage, product coverage, emissions scope, fees and application of the fees and crediting for foreign policy. The country should also develop robust Measurement, Reporting, and Verification (MRV) systems to measure and verify domestic carbon emissions accurately. Additionally, the country should introduce policies like a carbon tax to potentially reduce emissions and the amount of taxes paid.

Local preferences for the adoption and modification of climate policy instruments under a radical left government: unveiling the impact and legacy of Barcelona in Common

ABSTRACT This study aims to uncover how shifting towards a radical left ideology affects a city’s climate policy. Using semi-structured interviews with stakeholders and an analysis of local action plans and laws enacted in Barcelona between 1984 and May 2023, we find that the period of local government led by the radical left, embodied by Barcelona in Common, saw a significant increase in the adoption of climate-related policy instruments, with a preference for ‘soft’ over ‘hard’ measures. Likewise, this administration more actively raised the ambition of pre-existing policy instruments, though evidence suggests that this trend is driven by other, non-ideological factors. The results further show that ‘hard’ policy instruments especially were more prone to changes, both in terms of raising or reducing policy ambition. Overall, these findings enhance our understanding of local climate policymaking and how it is affected by partisan politics.

Impact of ideology on individuals’ attitudes to a climate-motivated tax on food

ABSTRACT The expanding field of public acceptance consistently shows left-leaning ideology as a predictor of support for many climate policy instruments. However, little work has been done to investigate the indirect links between ideology and policy-specific beliefs like perceived fairness, effectiveness and infringement on personal freedom on policy acceptance. Of this work, none pertain specifically to taxes that target greenhouse gas emissions from food consumption, called climate-motivated food taxes (CMF tax). CMF taxes are useful for studying the factors underlying ideology because they intersect with changing personal behaviour, which especially triggers ideological concerns. Moreover, CMF taxes appear to be an effective way to curb emissions stemming from the production of animal products, primarily beef and dairy, which are responsible for nearly a third of global emissions. Lastly, this study provides insight into how the predictability of ideological effects on policy acceptance differs in countries also beyond those classically studied (such as the USA and countries in Europe) by utilizing survey data collected in 2023 from Brazil, Germany, India, South Africa, Sweden and the USA (N = 10,513). We find direct and indirect links between ideology and policy acceptability, where fairness and effectiveness beliefs about policies mediate more of the effect than beliefs about freedom.

Strategic dimensions of solar geoengineering: Economic theory and experiments

Solar geoengineering denotes a set of technologies that would enable a fast and relatively cheap global temperature reduction. Besides potential physical side-effects, a major concern is the strategic dimension: Who is going to use solar geoengineering and how would it affect others? How does the presence of solar geoengineering change the strategic incentives surrounding other climate policy instruments such as mitigation? We review the existing theoretical and experimental contributions to those questions and outline promising lines of future economic research.

The Legal Objectives of the EU Emissions Trading System: An Evaluation Framework

AbstractClimate policies are often evaluated using criteria that are heterogeneous and misaligned with the stated aims of these policies. By combining legal research methods with insights from economic theory, we systematically map and analyze the legal objectives of the European Union (EU) Emissions Trading System (ETS), a key climate policy instrument. We find that the EU ETS is shaped by a nuanced internal normative framework, the principal goal of which is emissions reduction, combined with three secondary goals of cost-effectiveness, economic efficiency and equity, and a meta-goal of coherence. Based on the contents and interrelations of these legal objectives, we formulate evaluation criteria that can be used to critically analyze and evaluate the EU ETS performance in a more comprehensive, transparent, and comparable manner. The resulting methodology is applicable to other environmental policies and jurisdictions.

CO2-Bepreisung und Industriepolitik

Abstract Carbon pricing is a central instrument of a market-based climate policy. However, the different international price levels vary greatly, thereby creating new distortions of competition. To compensate for this, state aid for transformation efforts becomes relevant. Industrial policy therefore has a new and difficult role to play in the transformation.

Wie kann die grüne Transformation gelingen?

Abstract Germany aims to become climate-neutral by 2045. In order to achieve this ambitious goal, an all-encompassing transformation of the economy is necessary. In addition to the energy transition towards, at best, a complete supply of renewable energies, the promotion of green innovations is of central importance for the transformation. Furthermore, the pricing of CO₂ is emphasized as a central instrument of climate policy. However, carbon management strategies also play an important role. Finally, the carbon dividend should ensure social justice and create public support. The question arises as to whether the planned and implemented measures can actually make the green transformation a success.

Australian human-induced native forest regeneration carbon offset projects have limited impact on changes in woody vegetation cover and carbon removals

Carbon offsets are a widely used climate policy instrument that can reduce mitigation costs and generate important environmental and social co-benefits. However, they can increase emissions if they lack integrity. We analysed the performance of one of the world’s largest nature-based offset types: human-induced regeneration projects under Australia’s carbon offset scheme. The projects are supposed to involve the human-induced regeneration of permanent even-aged native forests through changes in land management. We analysed 182 projects and found limited evidence of regeneration in credited areas. Changes in woody vegetation cover within the areas that have been credited also largely mirror changes in adjacent comparison areas, outside the projects, suggesting the observable changes are predominantly attributable to factors other than the project activities. The results add to the growing literature highlighting the practical limitations of offsets and the potential for offset schemes to credit abatement that is non-existent, non-additional and potentially impermanent.

Public acceptability of policy instruments for reducing fossil fuel consumption in East Africa

ABSTRACT In recent decades, there has been increasing research interest in individuals’ support of and resistance to climate and environmental policy instruments. However, there is an empirical bias in the literature, as few studies have been conducted in low-income countries. Based on a survey with 4,766 respondents we identify the level of public acceptability for climate policy instruments and their determinants in East Africa (Ethiopia, Kenya, Rwanda, Tanzania and Uganda). While our sample is not fully representative of the East-African population, we capture highly educated individuals in urban areas, who are likely to have a large influence on policy processes. In line with previous studies in other contexts, we find that higher education and climate change concern are linked to the acceptability of policies aimed at reducing fossil fuel consumption. Specifying how the revenue from a climate tax or subsidy removal would be used, almost doubled the support for these policy instruments. In contrast to earlier studies, we find that investments in social programmes, not environmental programmes, was the revenue specification that increased the acceptability the most. One possible explanation would be that in a context where poverty is more prevalent, social issues are more salient to people. We also find weak associations between trust in government and the acceptability of climate policy instruments in East Africa and large heterogeneity across the five focal East African countries. Besides establishing an empirical foundation for future research on climate policy support in East Africa, the study provides essential policy insights: Investing in education and improved information, contributing to increased awareness and understanding of climate concerns, can potentially increase support for climate policy proposals also in the East African context. Earmarking revenues from climate policy instruments for social programmes may also significantly boost support. However, as our study is not fully representative of the population in the five countries and relies on stated preferences, which may be subject to different biases, the results should be interpreted with caution.

The EU's carbon border adjustment mechanism: Shaped and saved by shifting multi‐level reinforcement?

AbstractIn April 2023, the EU institutions finally adopted an innovative international climate policy instrument: the Carbon Border Adjustment Mechanism (CBAM). As the long and winding road to a CBAM has included significant EU‐internal and EU‐external opposition, a “shifting Multi‐Level Reinforcement” (MLR) perspective is helpful for understanding this development. When France assumed initial leadership from 2007, skepticism to the WTO, generous amounts of free allowances, combined with a low carbon price, provided a strong oppositional force. Then, influential elements in the European Parliament called for a carbon border tax, which was subsequently included as a central ingredient in the “Fit for 55” package launched by the Commission, In the decisionmaking process, leadership involving all the previous forces resulted in an institutional reinforcement dynamic strong enough to counter EU‐internal as well as EU‐external challenges and ‘turbulence’. This case shows the relevance of an updated MLR perspective for understanding also other EU processes, taking into account the growing role of both policy packages and trilogues as decisionmaking tools, indicating a possible strengthened role for the Commission also in the decisionmaking phase.

Innovation Market Failures and the Design of New Climate Policy Instruments

Innovation Market Failures and the Design of New Climate Policy Instruments

Climate policy and inequality in urban areas: Beyond incomes

Opposition to climate policies is partly due to their impacts on inequality. But with most economic studies focused on income inequalities, the quantitative spatial effect of economic climate policy instruments is poorly understood. Here, using a model derived from the standard urban model of urban economics, we simulate a fuel tax in Cape Town, South Africa, decomposing its impacts by income class, housing type, and location, and over different timeframes, assuming that agents gradually adapt. We find that in the short term, there are both income and spatial inequalities, with low-income households or suburban dwellers more negatively impacted. These inequalities persist in the medium and long terms, as the poorest households, living in informal or subsidized housing, have few or no ways to adapt to fuel price increases by changing housing type, size or location, or transportation mode. Low-income households living in formal housing are also impacted by the tax over the long term due to complex effects driven by competition with richer households in the housing market. Complementary policies promoting a flexible labor market, affordable public transportation, or subsidies that help low-income households live closer to employment centers will be key to the social acceptability of climate policies.

Citizens’ attitudes on climate policy instruments

Jukka Sivonen’s PhD thesis “Public attitudes on climate policy instruments: a comparative perspective in Europe” was examined at the University of Turku on 6 October 2023.

Additional or accidental? Simulating interactions between a low-carbon fuel standard and other climate policy instruments in Canada

Many jurisdictions are subject to climate action plans composed of multiple policy instruments. As climate policy landscapes become increasingly crowded, understanding the nature and likelihood of interactions between proposed policies and other instruments that make up a policy mix is a key element of policy design. We introduce a technology-rich computable general equilibrium model of the Canadian energy-economy, gTech, to explore the effectiveness of one such policy called the low-carbon fuel standard (LCFS) at reducing greenhouse gas emissions when implemented alongside other climate policy instruments. We find that the ability of a LCFS to reduce emissions depends on the ‘background’ policy mix it is layered on top of, in addition to its credit market design.

How carbon pricing affects multiple human needs: An agent-based model analysis

Climate policy is urgently needed to reduce emissions, but must also be evaluated in regard to its impact on human quality of life. To identify policy approaches that are able to achieve effective mitigation together with high levels of well-being, multiple human needs must be taken into account. To this end, we present an agent-based model that is able to describe the interaction between various economic sectors on the supply-side and individuals with heterogeneous incomes and needs on the demand-side. Individuals make choices under both income and time constraints; the latter being needed for non-market activities and time-intensive forms of consumption such as low-carbon modes of transport. The following climate policy instruments are considered: a carbon tax, permit trading, direct regulation, and investments in low-carbon infrastructure. Impacts are analyzed in regard to three different types of mitigation: avoid, shift, and improve. Results show that to achieve emission reductions together with high levels of well-being, carbon pricing is best combined with effective improvements of low-carbon infrastructure; revenue recycling should be progressive; and unnecessary abatement costs should be avoided. A comparison is provided with traditional formulations of social welfare.

The role of price incentives in enhancing carbon sequestration in the forestry sector of Hungary

This paper investigates the carbon sequestration potential of forests in Hungary through the introduction of a carbon price incentive, assuming an integrative national climate policy. We have developed a bio-economic mathematical optimisation model to represent the area and species distribution of Hungarian forests and we are optimising harvesting cycles without and with carbon payments. We assess the cost and volume of potentially available carbon removal by forests in the context of the national climate policy. To align our results with other climate policy instruments, we integrate the estimated carbon removal potential of the forests with the marginal carbon abatement cost curve of the energy sector in Hungary. We find that enhanced forest carbon sequestration can be more cost-effective than most other climate policy instruments. We find that forests could intervene at the lower end of the combined cost curve and shift it significantly to the right, resulting in much lower marginal and total costs of achieving the net zero target for Hungary.

How ideas shape the EU's climate policy: Moving toward the sufficiency paradigm for the EU ETS

AbstractThis article examines the paradigm shifts in the European Union's (EU's) climate policy from 2009 to 2022 looking closer at the main policy instrument of EU's climate policy, the EU Emissions Trading System (EU ETS). The paradigm shifts of the EU ETS are linked to the climate policy paradigms prometheanism/growth unlimited (PGU), ecological modernization (EM), and sufficiency. The question of how ideas have shaped EU climate policy and the EU ETS in the past decade is answered, with the establishment of the EM paradigm and moving toward the sufficiency paradigm. There is a need for more research looking closer at how this paradigm shift impacts legislation for climate policy going forward.

The Politics of Climate Policy Instruments

Reducing greenhouse gas emissions that are causing climate change requires the adoption of costly policies with often uncertain efficacy and distributional consequences. Because these emissions occur across sectors of the economy—electricity, transportation, and agriculture—and the built environment, and they require action at all levels of government—global, national, regional, and local—there is no single “silver-bullet” solution.