Thread by @jan_c_steckel

Two recent meta-analysis of the ex-post literature on #CarbonPricing (by @greenprofgreen & @JLilliestam etal) suggest carbon pricing is not effectively reducing emissions. This might be both a premature and misleading conclusion.

A thread.

When interpreting ex-post evaluations, we need to acknowledge that less than 10% of G20 emissions are priced at sufficient levels, more than 50% < USD 10/t

@mkalkuhl @Max_Franks_

2/N

In meta-analyses it’s also difficult to take updates in a dynamic literature into account. One example, literature on ex-post carbonpricing effects in the transport sector has seen some important methodological discussions.

See @julljus https://10.1257/pol.20170144 ...

3/N

Result: If carbon price is sufficiently high (e.g. in Sweden) reduction of 6 – 11% per year can be expected. Not so bad. Underlying reasons (i.e. fuel switch, modal switch ... ) not fully understood.

4/N

On Sweden, @JLilliestam fears price has 1) only triggered fuel switch but 2) no innovation. On #1, we don’t know! Could also be other factors, including modal shift, infrastructure investments etc.. On #2: We wouldn’t necessary expect it in a small economy.

5/N

Does it trigger innovation then in the EU? Indeed a puzzle, lit. on ETS suggests more tech adoption than innovation. However, 2020 paper in @AEAjournals shows quite convincingly that EU ETS indeed led to innovation, rather than adoption: https://10.1257/pol.20180135

6/N

What can we learn from different synthesis approaches?

Based on a harmonized dataset Best et al find significantly lower emissions growth rates in countries that established a carbon price, using a panel of 142 countries.

link.springer.com/article/10.100…

@burke_ec @frankjotzo

7/N

New @INETeconomics WP uses counterfactuals & also estimates necessary price for achieving PA goals: USD 110/t, rightfully raising important questions of political feasibility and complementing instruments.

doi.org/10.36687/inetw…

@ryanrafaty

8/N

For sure we will need to identify factors rendering carbon prices ineffective and/or additional externalities we might need to tackle with additional instruments, e.g. high capital costs (e.g. doi.org/10.1088/1748-9…), technological learning, information asymmetries etc.
9/N

Also: We should understand better why carbon prices have not been implemented at levels necessary, including the prevalence of lobbies (e.g. doi.org/10.1016/j.jeem…), or the role of social norms (e.g.: sciencedirect.com/science/articl…, with @DorotheaKuebler @Jakob_MCC) ...

10/N

… or how to implement policies, looking into questions of #sequencing, @ch_flachsland, how to make carbon pricing acceptable, @seb_levi and how to use revenues @LinusMattauch In short: The #PoliticalEconomy of climate policy.

11/N

We will also need a broader understanding of other climate policies and how various polices interact.

But (freely after Mark Twain): Recent reports of carbon pricing being ineffective seem to be greatly exaggerated.

@BrigitteKnopf @BachmannRudi @CKemfert @RichardTol

12/N

Our common goal to find feasible solutions to solve the climate crisis arguably calls for a broad research agenda how to make climate policy work, given political realities, including various disciplines.

Look very forward to being a part of this!

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Two links obviously didn't work, here are the correct ones:

Calel on innovation in the EU ETS
aeaweb.org/articles?id=10…

Andersson on the effect of the Swedish Carbon Tax:
aeaweb.org/articles?id=10…