TY  - UNPD
A1  - Blanz, Alkis
A1  - Eydam, Ulrich
A1  - Heinemann, Maik
A1  - Kalkuhl, Matthias
T1  - Optimal carbon pricing with fluctuating energy prices — emission targeting vs. price targeting
T2  - CEPA Discussion Papers
N2  - Prices of primary energy commodities display marked fluctuations over time. Market-based climate policy instruments (e.g., emissions pricing) create incentives to reduce energy consumption by increasing the user cost of fossil energy. This raises the question of whether climate policy should respond to fluctuations in fossil energy prices? We study this question within an environmental dynamic stochastic general equilibrium (E-DSGE) model calibrated on the German economy. Our results indicate that the welfare implications of dynamic emissions pricing crucially depend on how the revenues are used. When revenues are fully absorbed, a reduction in emissions prices stabilizes the economy in response to energy price shocks. However, when revenues are at least partially recycled, a stable emissions price improves overall welfare. This result is robust to different modeling assumptions.
T3  - CEPA Discussion Papers - 51 
KW  - energy prices
KW  - E-DSGE
KW  - climate policy
KW  - welfare
Y1  - 2022
UR  - https://publishup.uni-potsdam.de/frontdoor/index/index/docId/56104
UR  - https://nbn-resolving.org/urn:nbn:de:kobv:517-opus4-561049
SN  - 2628-653X
IS  - 51
ER  -