Will the Centralisation of Carbon Pricing Revenue in the EU Lead to Laxer Climate Policy?

Clemens Fuest and Volker Meier

No 8979, CESifo Working Paper Series from CESifo

Abstract: We analyse the economic impact of using carbon pricing revenue to fund the EU budget. Such a reform would redistribute from countries with above average carbon intensive production to less carbon intensive countries. Once the reform is implemented, the low carbon countries will prefer a lower carbon price, i.e. laxer climate policy at the EU level, than before the reform. For high carbon countries the opposite is true. As a result, EU climate policy becomes less ambitious and less disputed. We also analyse an extension of the model in which consumption generates carbon emissions that are not covered by the emission certificate regulation, and we consider the impact of changes in EU climate policy on the rest of the world as well as global emissions.

Keywords: climate change; global externalities; EU finances; political economy (search for similar items in EconPapers)
JEL-codes: H23 H27 H87 Q58 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8979

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