Economics at your fingertips  

EU Climate Mitigation Policy

Jiaqian Chen, Anna Shabunina, James Roaf, Philippe Wingender, Daniel Garcia-Macia, Maksym Chepeliev (), Dominique van der Mensbrugghe () and Dora Iakova

No 2020/013, IMF Departmental Papers / Policy Papers from International Monetary Fund

Abstract: This paper aims to contribute to the debate on the choice of policies to reach the more ambitious 2030 emission reduction goals currently under consideration. It provides an analysis of the macroeconomic and distributional impacts of different options to scale up the mitigation effort, and proposes enhancements to the existing EU policies. A key finding is that a well-designed package, consisting of more extensive carbon pricing across EU countries and sectors, combined with cuts in distortionary taxes and targeted green investment support, would allow the EU to reach the emission goals with practically no effects on aggregate income. To enhance the social and political acceptance of climate policies, part of the revenue from carbon pricing should be used to compensate the most vulnerable households and to support the transition of workers to greener jobs. A carbon border adjustment mechanism could complement the package to avoid an increase in emissions outside the EU due to higher carbon prices in the EU (“carbon leakage”). From a risk-reward perspective, the benefits of reducing the risk of extreme life-threatening climate events and the health benefits from lower air pollution clearly outweigh the costs of mitigation policies.

Keywords: DPPP; DP; EU emission; EU mitigation Policy framework; trading partner; ETS price; EU climate adaptation; EU effort; EU GHG emission; EU Policy framework; EU production emission; EU taxonomy; EU directive; EU recovery; price volatility; Carbon tax; Greenhouse gas emissions; Sustainable growth; Income; Emissions trading; Global; Eastern Europe; EU export; carbon price signal (search for similar items in EconPapers)
Pages: 67
Date: 2020-09-16
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in IMF Departmental Papers / Policy Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().

Page updated 2022-09-30
Handle: RePEc:imf:imfdps:2020/013