@techreport{KalkuhlFranksGruneretal.2023,
  type      = {Working Paper},
  author    = {Kalkuhl, Matthias and Franks, Max and Gruner, Friedemann and Lessmann, Kai and Edenhofer, Ottmar},
  title     = {Pigou's Advice and Sisyphus' Warning},
  series = {CEPA Discussion Papers},
  journal   = {CEPA Discussion Papers},
  number    = {62},
  issn      = {2628-653X},
  doi       = {10.25932/publishup-57588},
  url       = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-575882},
  pages     = {66},
  year      = {2023},
  abstract  = {Carbon dioxide removal from the atmosphere is becoming an important option to achieve net zero climate targets. This paper develops a welfare and public economics perspective on optimal policies for carbon removal and storage in non-permanent sinks like forests, soil, oceans, wood products or chemical products. We derive a new metric for the valuation of non-permanent carbon storage, the social cost of carbon removal (SCC-R), which embeds also the conventional social cost of carbon emissions. We show that the contribution of CDR is to create new carbon sinks that should be used to reduce transition costs, even if the stored carbon is released to the atmosphere eventually. Importantly, CDR does not raise the ambition of optimal temperature levels unless initial atmospheric carbon stocks are excessively high. For high initial atmospheric carbon stocks, CDR allows to reduce the optimal temperature below initial levels. Finally, we characterize three different policy regimes that ensure an optimal deployment of carbon removal: downstream carbon pricing, upstream carbon pricing, and carbon storage pricing. The policy regimes differ in their informational and institutional requirements regarding monitoring, liability and financing.},
  language  = {en}
}
@techreport{HaenselFranksKalkuhletal.2021,
  type      = {Working Paper},
  author    = {H{\"a}nsel, Martin C. and Franks, Max and Kalkuhl, Matthias and Edenhofer, Ottmar},
  title     = {Optimal carbon taxation and horizontal equity},
  series = {CEPA Discussion Papers},
  journal   = {CEPA Discussion Papers},
  number    = {28},
  issn      = {2628-653X},
  doi       = {10.25932/publishup-49812},
  url       = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-498128},
  pages     = {51},
  year      = {2021},
  abstract  = {We develop a model of optimal carbon taxation and redistribution taking into account horizontal equity concerns by considering heterogeneous energy efficiencies. By deriving first- and second-best rules for policy instruments including carbon taxes, transfers and energy subsidies, we then investigate analytically how horizontal equity is considered in the social welfare maximizing tax structure. We calibrate the model to German household data and a 30 percent emission reduction goal. Our results show that energy-intensive households should receive more redistributive resources than energy-efficient households if and only if social inequality aversion is sufficiently high. We further find that redistribution of carbon tax revenue via household-specific transfers is the first-best policy. Equal per-capita transfers do not suffer from informational problems, but increase mitigation costs by around 15 percent compared to the first- best for unity inequality aversion. Adding renewable energy subsidies or non-linear energy subsidies, reduces mitigation costs further without relying on observability of households' energy efficiency.},
  language  = {en}
}
@techreport{LessmannGrunerKalkuhletal.2024,
  type      = {Working Paper},
  author    = {Lessmann, Kai and Gruner, Friedemann and Kalkuhl, Matthias and Edenhofer, Ottmar},
  title     = {Emissions Trading with Clean-up Certificates},
  series = {CEPA Discussion Papers},
  journal   = {CEPA Discussion Papers},
  number    = {79},
  issn      = {2628-653X},
  doi       = {10.25932/publishup-64136},
  url       = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-641368},
  pages     = {35},
  year      = {2024},
  abstract  = {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.},
  language  = {en}
}