We develop a model of optimal carbon taxation and redistribution taking into account horizontal equity concerns by considering heterogeneous energy efficiencies. By deriving first- and second-best rules for policy instruments including carbon taxes, transfers and energy subsidies, we then...

This paper studies various options to support allowance prices in the EU Emissions Trading System (ETS), such as adjusting the cap, an auction reserve price, and fixed and variable carbon taxes in addition to EU ETS. We use a dynamic computable general equilibrium model that explicitly allows...

Novel Carbon Dioxide Removal (CDR) technologies have seen a first wave of deployment, driven by investments through voluntary carbon markets and by specific support policies. To sustain the momentum, a credible long-term policy path is urgently needed to lead removal technologies through the...

For any emission trading system (ETS) with quantity-based endogenous supply of allowances, there exists a negative demand shock, e.g. induced by abatement policy, that increases aggregate supply and thus cumulative emissions. We prove this green paradox for a general model and then apply it to...

This paper describes a model, implemented in an Excel spreadsheet, for evaluating a wide range of fiscal and regulatory instruments policymakers might consider for implementing their Paris mitigation pledges. Policies are evaluated against a range of metrics, including impacts on carbon dioxide...

This paper investigates the impact of carbon pricing on the economy, with a focus on European carbon taxes and the carbon market. Our analysis reveals three key findings. First, while both policies have successfully reduced emissions, the economic costs of the European carbon market are larger...

This paper evaluates alternative options for rebating revenues from a unilateral emissions price, focusing on energy-intensive and trade-exposed industries. A theoretical model is developed to demonstrate that conditional rebating policies—which would be distortionary in a first-best...

We study how European climate and energy policy targets affect different member states and households of different income quintiles within the member states. We find that renewable energy targets in power generation, by reducing EU ETS permit prices, may make net permit exporters worse off and...

I estimate the level of emissions cost pass-through to hourly wholesale electricity prices in Germany, based on spot market data. I control for contemporaneous shocks to demand and supply by constructing a detailed supply curve for fossil generation, and intersecting it with residual demand for...

China's recently launched CO2 emissions trading system, already the world's largest, aims to contribute importantly toward global reductions in greenhouse gas emissions. The system, a tradable performance standard (TPS), differs importantly from cap and trade (C&T), the principal emissions...