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

Authors :
Haites, Erik
Haites, Erik
Bertoldi, Paolo
König, Michael
Bataille, Christopher
Creutzig, Felix
Dasgupta, Dipak
du Can, Stéphane de la rue
Khennas, Smail
Kim, Yong-Gun
Nilsson, Lars J
Roy, Joyashree
Sari, Agus
Haites, Erik
Haites, Erik
Bertoldi, Paolo
König, Michael
Bataille, Christopher
Creutzig, Felix
Dasgupta, Dipak
du Can, Stéphane de la rue
Khennas, Smail
Kim, Yong-Gun
Nilsson, Lars J
Roy, Joyashree
Sari, Agus
Source :
Climate Policy; vol ahead-of-print, iss ahead-of-print, 1-12; 1469-3062
Publication Year :
2023

Abstract

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. Key policy insights A country with a mid-century net zero GHG emission target likely will need to implement more ambitious mitigation policies soon for emission-intensive sectors such as aluminium, cement, chemicals, iron and steel, lime, pulp and paper and petroleum refining. More ambitious mitigation policies are likely to vary by country and be implemented at different times, creating a risk of leakage due to industrial production shi

Details

Database :
OAIster
Journal :
Climate Policy; vol ahead-of-print, iss ahead-of-print, 1-12; 1469-3062
Notes :
application/pdf, Climate Policy vol ahead-of-print, iss ahead-of-print, 1-12 1469-3062
Publication Type :
Electronic Resource
Accession number :
edsoai.on1391605679
Document Type :
Electronic Resource