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Climate policy options: A comparison of economic performance

Jean Chateau, Florence Jaumotte () and Gregor Schwerhoff

Energy Policy, 2024, vol. 192, issue C

Abstract: Countries are increasingly willing to implement climate policy. However, many countries prefer policy instruments other than carbon pricing. In this paper, we implement carbon taxes, feebates, subsidies and regulation in a computable general equilibrium (CGE) model. This allows quantifying the trade-offs between policy options for the major emitters. We find that in the electricity sector, where technology alternatives are very substitutable, the different policy instruments generate similar outcomes. In the energy-intensive and trade-exposed sectors, where substitution is much more difficult, carbon pricing provides the highest flexibility and thus lowest cost. Further, we provide the first analysis of asymmetric policies, that is the simultaneous use of different policy instruments by the major emitters. Using regulation or subsidies instead of carbon pricing in the electricity sector allows countries to gain small amounts of market shares internationally. Applying regulation to the energy-intensive and trade-exposed sectors, however, backfires by costing regulating countries market shares.

Keywords: Climate policy; Policy coordination; Carbon leakage; Carbon tax; Regulation (search for similar items in EconPapers)
JEL-codes: C68 F42 H23 Q54 Q58 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:192:y:2024:i:c:s0301421524002520

DOI: 10.1016/j.enpol.2024.114232

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