The economics of leadership in climate change mitigation

Climate policy exemptions for energy‐intensive sectors are often justified with distributional concerns. One concern is that households employed in energy‐intensive sectors might be affected disproportionally because of (international) capital mobility. By assuming that workers cannot move freely between sectors, we can reproduce this concern: uniform climate policy causes more inequality between the sectors when capital is mobile than when it is not. However, we find that affected households can be relieved more effectively with sector‐specific labour taxes than with sector‐specific climate policy. The reason for this finding is that households benefit more directly from sector‐specific labour tax cuts than from climate policy exemptions. Keeping climate policy uniform across sectors has the added benefit of creating incentives for long‐term decarbonisation. In addition, we find that the differential effect of capital mobility depends on the government's degree of inequality aversion – redistribution is more expensive when capital is mobile.

show abstract

“…The aim of such a unilateral policy could be to set a good example. See Schwerhoff () for possible motivations to implement policy unilaterally.…”

Section: Further Resultsmentioning

confidence: 99%

Optimal Environmental Taxation with Capital Mobility^*

Schwerhoff

Franks

2017

Fiscal Studies

Self Cite

View full text Add to dashboard Cite

show abstract

“…Further investment needs arise for adaptation to the unavoidable impacts of climate change (Malik and Smith, 2012), with costs to adapt to the likely impacts of climate change believed to amount to between US$ 25 bln per year to well over US$100 bln per year by 2015-2030(Fankhauser, 2010. Finally, addressing technology R&D market failures which are not appropriately tackled by a price on GHG emissions (Jaffe et al, 2005;Kalkuhl et al, 2012) would also require additional public support.…”

Section: Spending Revenues From Carbon Pricingmentioning

confidence: 97%

“…For instance, Hoel (1991) notes that in a game-theoretic setting, unilateral emission reductions could even increase global emissions, depending on the other players' reaction functions, and Konrad and Thum (2014) argue that -as it lowers the stakes of failing to agree for the other parties involved in the negotiationearly action can negatively affect the chance of reaching an agreement in a bargaining process. The question of interdependent reaction functions has only relatively recently been addressed by an emerging literature on the issue of leadership, which identifies conditions under which unilateral action can promote action in other regions (Schwerhoff, 2015). Some key insights from this literature are summarized below (see Table 1).…”

Section: Changing the Incentive Structurementioning

confidence: 99%

Closing the emission price gap

Edenhofer

Jakob

Creutzig

et al. 2015

Global Environmental Change

View full text Add to dashboard Cite

“…At the subsequent Katowice Conference of Parties (CoP) in 2018, China's role as a major emitter and leader, despite its developing status, was emphasized. Climate mitigation action taken by a smaller group of benchmark nations, including China, motivates other nations to follow (Schwerhoff, 2016). Conversely, minimal, delayed or obstructive action by a major emitting country may prompt a free-rider effect in which other countries reduce their efforts.…”

Section: Establishing Climate Leadership Through Paris Pledgesmentioning

confidence: 99%

Assessing Contributions of Major Emitters' Paris‐Era Decisions to Future Temperature Extremes

Lewis

Perkins‐Kirkpatrick

Althor

et al. 2019

Geophysical Research Letters

View full text Add to dashboard Cite

The likelihood and severity of high‐impact future temperature extremes can be reduced through climate change mitigation efforts. However, meeting the Paris Agreement warming limits requires notably stronger greenhouse gas emissions reduction efforts by major emitters than existing pledges. We examine the impact of Paris‐era decision‐making by the world's three largest greenhouse gas emitters (EU, USA, and China) on projected future extreme temperature events. Country‐level contributions to the occurrence of future temperature extremes are calculated based on current emissions policies and sequential mitigation efforts, using a new metric called the Contribution to Excess Risk Ratio. We demonstrate the Contribution concept by applying it to extreme monthly temperature projections. In many regions, future extremes depend on the current and future carbon dioxide emissions reductions adopted by major emitters. By implementing stronger Paris‐era climate pledges, major emitters can reduce the frequency of future extremes and their own calculated contributions to these temperature extremes.

show abstract

The economics of leadership in climate change mitigation

Cited by 27 publications

References 91 publications

Optimal Environmental Taxation with Capital Mobility^*

Optimal Environmental Taxation with Capital Mobility^*

Closing the emission price gap

Assessing Contributions of Major Emitters' Paris‐Era Decisions to Future Temperature Extremes

Contact Info

Product

Resources

About

The economics of leadership in climate change mitigation

Cited by 27 publications

References 91 publications

Optimal Environmental Taxation with Capital Mobility*

Optimal Environmental Taxation with Capital Mobility*

Closing the emission price gap

Assessing Contributions of Major Emitters' Paris‐Era Decisions to Future Temperature Extremes

Contact Info

Product

Resources

About

Optimal Environmental Taxation with Capital Mobility^*

Optimal Environmental Taxation with Capital Mobility^*