Combating Climate Change through Policy Instruments. A Meta-Analysis of Carbon Taxation

Nora Marija Laurinaitytė and Annie Liu
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Nora Marija Laurinaitytė: Bank of Lithuania
Annie Liu: Bank of Lithuania

No 45, Bank of Lithuania Occasional Paper Series from Bank of Lithuania

Abstract: Recently, there has been a surge of interest in policies that target climate change. This paper begins by discussing why policymakers, and central banks in particular, should be concerned about climate change, and goes on to argue why carbon pricing is an appropriate political instrument to reduce greenhouse gas (GHG) emissions. The paper details two categories of carbon pricing, namely carbon taxation and the introduction of Emission Trading Systems (ETSs), illustrating why a carbon tax is the more efficient instrument. Popular models for optimal carbon taxation and implications of carbon taxation are discussed. The paper concludes with recommendations to policymakers, which include advocacy of differentiated rather than uniform carbon taxation, phased-in carbon taxation instead of a blanket approach, introduction of the carbon border adjustment mechanism (CBAM), and Green Quantitative Easing (QE).

Keywords: carbon taxation; climate change; green QE (search for similar items in EconPapers)
JEL-codes: E51 E62 H23 Q54 Q58 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2023-01-16
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Persistent link: https://EconPapers.repec.org/RePEc:lie:opaper:45

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