TY  - UNPD
A1  - Lessmann, Kai
A1  - Gruner, Friedemann
A1  - Kalkuhl, Matthias
A1  - Edenhofer, Ottmar
T1  - Emissions Trading with Clean-up Certificates
T2  - CEPA Discussion Papers
N2  - We analyze how conventional emissions trading schemes (ETS) can be modified by introducing “clean-up certificates” to allow for a phase of net-negative emissions. Clean-up certificates bundle the permission to emit CO2 with the obligation for its removal. We show that demand for such certificates is determined by cost-saving technological progress, the discount rate and the length of the compliance period. Introducing extra clean-up certificates into an existing ETS reduces near-term carbon prices and mitigation efforts. In contrast, substituting ETS allowances with clean-up certificates reduces cumulative emissions without depressing carbon prices or mitigation in the near term. We calibrate our model to the EU ETS and identify reforms where simultaneously (i) ambition levels rise, (ii) climate damages fall, (iii) revenues from carbon prices rise and (iv) carbon prices and aggregate mitigation cost fall. For reducing climate damages, roughly half of the issued clean-up certificates should replace conventional ETS allowances. In the context of the EU ETS, a European Carbon Central Bank could manage the implementation of cleanup certificates and could serve as an enforcement mechanism.
T3  - CEPA Discussion Papers - 79 
KW  - carbon removal
KW  - carbon pricing
KW  - net-negative emissions
KW  - carbon debt
Y1  - 2024
UR  - https://publishup.uni-potsdam.de/frontdoor/index/index/docId/64136
UR  - https://nbn-resolving.org/urn:nbn:de:kobv:517-opus4-641368
SN  - 2628-653X
IS  - 79
ER  -