Incentivizing Negative Emissions Through Carbon Shares

Derek Lemoine

No 27880, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I analyze a novel climate policy instrument that attaches a transferable asset to each unit of carbon in the atmosphere. I show that this instrument improves on an emission tax by incentivizing both optimal emission reductions and optimal removal of past emissions. Emitters post a bond equal to the worst-case social cost of carbon, and the regulator deducts damages as they are realized over time. Quantitatively, a bond that is double the optimal emission tax is sufficient to provide optimal carbon removal incentives in 95% of cases.

JEL-codes: G12 H23 Q54 Q58 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-ene and nep-env
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Working Paper: Incentivizing Negative Emissions Through Carbon Shares (2021)
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