Climate Policy and the Economy: Evidence from Europe's Carbon Pricing Initiatives / Diego R. Känzig, Maximilian Konradt.

Format:

Book

Author/Creator:

Känzig, Diego R.

Contributor:

National Bureau of Economic Research.

Konradt, Maximilian.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31260.

NBER working paper series no. w31260

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

This paper investigates the impact of carbon pricing on the economy, with a focus on European carbon taxes and the carbon market. Our analysis reveals three key findings. First, while both policies have successfully reduced emissions, the economic costs of the European carbon market are larger than for national carbon taxes. Second, we explore four factors that explain this difference: fiscal policy and revenue recycling, pass-through and sectoral coverage, spillovers and leakage, and monetary policy. Our findings suggest that all four factors play a significant role. Third, we document substantial regional heterogeneity in the impacts of the carbon market, which crucially depend on the share of freely allocated emission permits and the degree of market concentration in the power sector.

Notes:

Print version record

May 2023.