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GTAP Resource #6951

"A global framework for climate mitigation policies"
by Bekkers, Eddy, Ayse Nihal Yilmaz, Marc Bacchetta, Kirti Jhunjhunwala, Jeanne Metivier, Enxhi Tresa and Ankai Xu


To keep the world on a path of 1.5°C to 2°C global warming, carbon emissions should be reduced by, respectively, 48% and 27% by 2030 relative to 2019.

Carbon pricing is one policy tool to mitigate climate change. Due to increasing fragmentation in carbon pricing policies, some governments are exploring border carbon adjustment strategies to address competitiveness concerns.

To enrich the discussion on the policy approaches to reduce carbon emissions, a global carbon pricing framework (GCPF) containing three main components is developed. First, a formula for the carbon price in each economy as a function of a set of normative criteria. The normative criteria consist of the historical contribution to global emissions, the current level of development, and the economic costs of climate change. Second, a formula for the allocation of a share (20%) of carbon tax revenues to support economies to cope with climate change. Third, the possibility to realize an equivalent reduction in emissions with other policy instruments.

The performance of the framework is evaluated quantitatively conducting simulations with the WTO Global Trade Model generating three main results.

First, the GCPF establishes a tight link between the economic costs of carbon pricing for individual economies until 2030 and the normative criteria reflecting climate goals and principles.

Second, though the relation between the economic costs of carbon pricing and the normative criteria is weak when support is not considered, allocating 20% of carbon tax revenues to support adversely impacted economies is sufficient to generate a strong positive relationship.

Third, economies with a larger carbon price would not suffer larger economic declines as measured by real output and real exports in emission-intensive, trade-exposed sectors (EITEs).

The framework can contribute to the debate about international coordination of climate mitigation policies and the role of the WTO in this area.

Resource Details (Export Citation) GTAP Keywords
Category: 2023 Conference Paper
Status: Not published
By/In: Presented during the 26th Annual Conference on Global Economic Analysis (Bordeaux, France)
Date: 2023
Version: 1
Created: Yilmaz, A. (4/14/2023)
Updated: Yilmaz, A. (4/14/2023)
Visits: 569
- Dynamic modeling
- Climate change policy
- Trade and the environment
- GTAP Data Base and extensions

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