Mitigation Policies for the Paris Agreement: An Assessment for G20 Countries

Abstract

Following submission of greenhouse gas (GHG) mitigation commitments or pledges (by 190 countries) for the 2015 Paris Agreement, policymakers are considering specific actions for their implementation. To help guide policy, it is helpful to have a quantitative framework for understanding: i) the main impacts (on GHGs, fiscal balances, the domestic environment, economic welfare, and distributional incidence) of emissions pricing; ii) trade-offs between pricing and other (commonly used) mitigation instruments; and iii) why/to what extent needed policies and their impacts differ across countries. This paper provides an illustrative sense of this information for G20 member countries (which account for about 80 percent of global emissions) under plausible (though inevitably uncertain) projections for future fuel use and price responsiveness. Quantitative results underscore the generally strong case for (comprehensive) pricing over other instruments, its small net costs or often net benefits (when domestic environmental gains are considered), but also the potentially wide dispersion (and hence inefficiency) in emissions prices implied by countries' mitigation commitments. JEL Classification Numbers: Q48, Q54, Q58, H23

Hot Air Won't Fly: The New Climate Consensus That Carbon Pricing Isn't Cutting It

“…A $70 carbon tax, the IMF model projects, would cut emissions by significantly more than 30% in coal-dependent China, India, and South Africa; by some 15%-25% in such countries as the United States, Canada, and the United Kingdom; and by less than 15% in coal-light France and Saudi Arabia. 9 (That helps explain why, among all these countries, only France has imposed a carbon price above $40 per ton. And even France has difficulty raising the effective price on carbon, as the recent Yellow Vest protests, which led France to suspend a proposed fuel-tax increase, show.…”

Republic of Korea

“…For illustration, price floors of $75, $50, and $25 per ton respectively in 2030 for the three largest projected global emitters alone (the United States, China, and India) would be sufficient to keep G20 emissions in line with a 2 o C target. SeeParry (2020).©International Monetary Fund. Not for Redistribution…”

“…38 Periods might be defined as averages over multiple years given that carbon storage might be lumpy during years when harvesting occurs. 39 See Mendelsohn and others (2012), Parry (2020) for further discussion of design issues for forestry feebates. 40 For example, the U.S. Administration's Climate Plan contains a proposal for a BCA (see https://joebiden.com/climate-plan).…”