Unit 4 - Climate Change Mitigation Policies 1: Introduction to Carbon Pricing Instruments Flashcards
What are the three key stages that policy interventions can address in climate change mitigation?
- Influencing economic activity levels
- Improving carbon emission abatement
- Promoting carbon dioxide removal
Why is carbon pricing considered more effective than regulatory standards?
Answer:
- It accommodates different marginal abatement costs (MAC) between firms
- Allows firms with lower reduction costs to reduce more emissions
- Enables firms with higher costs to reduce less but pay more
- Creates a uniform MAC across firms, leading to enhanced societal net benefits
According to the empirical evidence study by Döbbeling-Hildebrandt et al. (2024), what percentage of active carbon pricing policies have empirical evidence?
Answer: Only 20 out of 73 active carbon pricing policies (approximately 27%) have empirical evidence.
What are some national strategies for addressing climate change?
- carbon pricing through taxes and/or tradable permits
- carbon emission regulations
- technology policies for reducing all greenhouse gases
- carbon sequestration incentives
What were the key findings regarding the effectiveness of carbon pricing schemes based on the empirical evidence?
- 17 out of 21 studied schemes showed significant emission reductions
- Minimum emission reduction was approximately 6.83%
- More effective in long-term compared to short-term
- Success depends on context and policy design
How does carbon pricing address the problem of externalities?
Answer: Carbon pricing implements a carbon tax equivalent to marginal external costs on the decision-maker, leading to an efficient internalization of these costs that would otherwise leak onto society.
What happens to production and pricing when a Pigou tax is implemented?
Answer: With carbon pricing (Pigou tax), production reduces from Qm to Q, and price increases from Pm to P, effectively eliminating the “loss of net benefits.”
What are the immediate implementation strategies mentioned for climate change mitigation?
- Eliminating fossil fuel subsidies
- Facilitating breakthrough low-carbon & energy efficiency technologies through R&D
- Implementing subsidies and infrastructure investments (e.g., smart grids, improved transmission and distribution)
What is the global mean energy budget?
balance between incoming solar radiation and outgoing heat from Earth’s atmosphere and surface
What are some international actions for climate change mitigation?
- implementation of Paris Agreement pledges
- negotiation of additional agreements and more stringent pledges as follow-up to Paris Agreement
- Climate finance for mitigation in developing countries
When is carbon pricing useful for addressing externalities?
1) not all costs are borne by the decision-maker (leak onto society), and 2) efficient bargaining is not possible
