OECD Economics Department Working Papers
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.
- ISSN: 18151973 (online)
- https://doi.org/10.1787/18151973
A Taxonomy of Instruments to Reduce Greenhouse Gas Emissions and their Interactions
This paper reviews alternative (national and international) climate change mitigation policy instruments
and interactions across them. Carbon taxes, cap-and-trade schemes, standards and technology-support
policies (R&D and clean technology deployment) in particular are assessed according to three broad costeffectiveness
criteria, their: i) static efficiency, defined to cover not just whether the instrument is costeffective
per se but also whether it provides sufficient political incentives for wide adoption; ii) dynamic
efficiency, which implies an efficient level of innovation and diffusion of clean technologies in order to
lower future abatement costs; iii) ability to cope effectively with climate and economic uncertainties.
Multiple market failures and political economy obstacles need to be addressed in order to meet these
criteria. In this regard, carbon taxes or cap-and-trade schemes appear to perform better than alternatives.
However, their cost-effectivenes can be enhanced through targeted use of other instruments. There is
therefore room for climate policy packages.
Keywords: mitigation, international climate policy, climate change, greenhouse gas, global warming
JEL:
Q54: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Climate; Natural Disasters and Their Management; Global Warming;
H23: Public Economics / Taxation, Subsidies, and Revenue / Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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