Contribution of carbon pricing to meeting a mid-century net zero target

Journal Article · Wed Feb 15 04:00:00 EST 2023 · Climate Policy

DOI:https://doi.org/10.1080/14693062.2023.2170312· OSTI ID:1973408

Haites, Erik ^[1]; Bertoldi, Paolo ^[2]; König, Michael ^[3]; Bataille, Christopher ^[4]; Creutzig, Felix ^[5]; Dasgupta, Dipak ^[6]; de la rue du Can, Stéphane ^[7]; Khennas, Smail ^[8]; Kim, Yong-Gun ^[9]; Nilsson, Lars J. ^[10]; Roy, Joyashree ^[11]; Sari, Agus ^[12]

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1. Margaree Consultants Inc., Toronto (Canada)
2. European Commission, Ispra (Italy). Joint Research Centre
3. Frankfurt School of Finance and Management (Germany)
4. Columbia University, New York, NY (United States); Institut du Développement Durable et des Relations Internationales, Paris (France)
5. Technische University Berlin (Germany)
6. The Energy and Resources Institute (TERI), New Delhi (India)
7. Lawrence Berkeley National Laboratory (LBNL), Berkeley, CA (United States)
8. Energy and climate change consultant (Algeria and United Kingdom)
9. Korea Environment Institute, Sejong City (Korea, Republic of)
10. Lund Univesity (Sweden)
11. Asian Institute of Technology (AIT) (Thailand); Jadavpur University, Kolkata (India)
12. Bandung Institute of Technology (SBMITB) (Indonseia)

A mid-century net zero target creates a challenge for reducing the emissions of emissions-intensive, trade-exposed sectors with high cost mitigation options. These sectors include aluminium, cement, chemicals, iron and steel, lime, pulp and paper and petroleum refining. Available studies agree that decarbonization of these sectors is possible by mid-century if more ambitious policies are implemented soon. Existing carbon pricing policies have had limited impact on the emissions of these sectors because their marginal abatement costs almost always exceed the tax rate or allowance price. But emissions trading systems with free allowance allocations to emissions-intensive, trade-exposed sectors have minimized the adverse economic impacts and associated leakage. Internationally coordinated policies are unlikely, so implementing more ambitious policies creates a risk of leakage. This paper presents policy packages a country can implement to accelerate emission reduction by these sectors with minimal risk of leakage. To comply with international trade law the policy packages differ for producers whose goods compete with imports in the domestic market and producers whose goods are exported. Carbon pricing is a critical component of each package due its ability to minimize the risk of adverse economic impacts on domestic industry, support innovation and generate revenue. The revenue can be used to assist groups adversely impacted by the domestic price and production changes due to carbon pricing and to build public support for the policies.

• Research Organization: Lawrence Berkeley National Laboratory (LBNL), Berkeley, CA (United States)
• Sponsoring Organization: USDOE Office of Science (SC); Agence Nationale de la Recherche
• Grant/Contract Number: AC02-05CH11231
• OSTI ID: 1973408
• Journal Information: Climate Policy, Journal Name: Climate Policy Journal Issue: ahead-of-print Vol. ahead-of-print; ISSN 1469-3062
• Publisher: Taylor & Francis
• Country of Publication: United States
• Language: English

Related Subjects

54 ENVIRONMENTAL SCIENCES
EITE
carbon pricing
carbon tax
emissions trading schemes
emissions-intensive
policy instruments
trade-expose sectors