OECD Economics Department Working Papers

ISSN: 
1815-1973 (online)
http://dx.doi.org/10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

 

The Economics of Climate Change Mitigation

How to Build the Necessary Global Action in a Cost-Effective Manner You or your institution have access to this content

English
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Author(s):
Jean-Marc Burniaux1, Jean Château1, Rob Dellink1, Romain Duval, Stéphanie Jamet
Author Affiliations
  • 1: OECD, France

02 June 2009
Bibliographic information
No.:
701
Pages:
127
http://dx.doi.org/10.1787/224074334782

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This paper examines the cost of a range of national, regional and global mitigation policies and the corresponding incentives for countries to participate in ambitious international mitigation actions. The paper illustrates the scope for available instruments to strengthen these incentives and discusses ways to overcome barriers to the development of an international carbon price, based on the quantitative assessment from two global and sectorially-disaggregated CGE models. Key step towards the emergence of a single international carbon price will most likely involve the phasing out of subsidies of fossil fuel consumption and various forms of linking between regional carbon markets, ranging from direct linking of existing emission trading systems to more indirect forms through the use of sectoral crediting mechanisms. The paper discusses regulatory issues raised by the expansion of emission trading and crediting schemes as well as the complementary contribution of non-market based instruments such as the imposition of technical standards and R&D policies. Finally, the paper emphasises the important role of international transfers, not least to overcome the relatively strong economic incentives in some countries to free ride on other regions mitigation actions. While they can take various explicit or implicit forms, transfers made primarily through market mechanisms, for instance via the allocation of binding emission reduction commitments across countries, would be most cost-effective.
Keywords:
sectoral approach, climate change, carbon leakage, climate policy, deforestation, energy subsidies, crediting mechanism
JEL Classification:
  • H23: Public Economics / Taxation, Subsidies, and Revenue / Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies
  • H41: Public Economics / Publicly Provided Goods / Public Goods
  • O13: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products
  • O3: Economic Development, Innovation, Technological Change, and Growth / Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights
  • Q32: Agricultural and Natural Resource Economics ; Environmental and Ecological Economics / Nonrenewable Resources and Conservation / Exhaustible Resources and Economic Development
  • Q34: Agricultural and Natural Resource Economics ; Environmental and Ecological Economics / Nonrenewable Resources and Conservation / Natural Resources and Domestic and International Conflicts
  • Q54: Agricultural and Natural Resource Economics ; Environmental and Ecological Economics / Environmental Economics / Climate ; Natural Disasters and Their Management ; Global Warming
 
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