Working Paper: NBER ID: w17569
Authors: Joseph E. Aldy; Robert Stavins
Abstract: Because of the global commons nature of climate change, international cooperation among nations will likely be necessary for meaningful action at the global level. At the same time, it will inevitably be up to the actions of sovereign nations to put in place policies that bring about meaningful reductions in the emissions of greenhouse gases. Due to the ubiquity and diversity of emissions of greenhouse gases in most economies, as well as the variation in abatement costs among individual sources, conventional environmental policy approaches, such as uniform technology and performance standards, are unlikely to be sufficient to the task. Therefore, attention has increasingly turned to market-based instruments in the form of carbon-pricing mechanisms. We examine the opportunities and challenges associated with the major options for carbon pricing: carbon taxes, cap-and-trade, emission reduction credits, clean energy standards, and fossil fuel subsidy reductions.
Keywords: carbon pricing; climate change; cap-and-trade; carbon tax; emissions reduction
JEL Codes: D02; F18; H23; K32; L38; Q28; Q48; Q5; Q54; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| carbon pricing mechanisms (Q58) | greenhouse gas emissions (Q54) |
| carbon tax (H23) | investment in cleaner technologies (Q55) |
| investment in cleaner technologies (Q55) | greenhouse gas emissions (Q54) |
| EU ETS (Q58) | aggregate emissions (E10) |
| carbon pricing design and implementation (Q58) | effectiveness of emissions reductions (Q52) |
| competitiveness concerns (F23) | effectiveness of carbon pricing (H23) |