@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{BacheletKalkuhlKoch2022, type = {Working Paper}, author = {Bachelet, Marion and Kalkuhl, Matthias and Koch, Nicolas}, title = {What if working from home will stick?}, series = {CEPA Discussion Papers}, journal = {CEPA Discussion Papers}, number = {41}, issn = {2628-653X}, doi = {10.25932/publishup-53238}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-532384}, pages = {28}, year = {2022}, abstract = {The COVID-19 pandemic created the largest experiment in working from home. We study how persistent telework may change energy and transport consumption and costs in Germany to assess the distributional and environmental implications when working from home will stick. Based on data from the German Microcensus and available classifications of working-from-home feasibility for different occupations, we calculate the change in energy consumption and travel to work when 15\% of employees work full time from home. Our findings suggest that telework translates into an annual increase in heating energy expenditure of 110 euros per worker and a decrease in transport expenditure of 840 euros per worker. All income groups would gain from telework but high-income workers gain twice as much as low-income workers. The value of time saving is between 1.3 and 6 times greater than the savings from reduced travel costs and almost 9 times higher for high-income workers than low-income workers. The direct effects on CO₂ emissions due to reduced car commuting amount to 4.5 millions tons of CO₂, representing around 3 percent of carbon emissions in the transport sector.}, language = {en} } @techreport{FranksKalkuhlLessmann2022, type = {Working Paper}, author = {Franks, Max and Kalkuhl, Matthias and Lessmann, Kai}, title = {Optimal Pricing for Carbon Dioxide Removal Under Inter-Regional Leakage}, series = {CEPA Discussion Papers}, journal = {CEPA Discussion Papers}, number = {43}, issn = {2628-653X}, doi = {10.25932/publishup-53808}, url = {http://nbn-resolving.de/urn:nbn:de:kobv:517-opus4-538080}, pages = {12}, year = {2022}, abstract = {Carbon dioxide removal (CDR) moves atmospheric carbon to geological or land-based sinks. In a first-best setting, the optimal use of CDR is achieved by a removal subsidy that equals the optimal carbon tax and marginal damages. We derive second-best subsidies for CDR when no global carbon price exists but a national government implements a unilateral climate policy. We find that the optimal carbon tax differs from an optimal CDR subsidy because of carbon leakage, terms-of-trade and fossil resource rent dynamics. First, the optimal removal subsidy tends to be larger than the carbon tax because of lower supply-side leakage on fossil resource markets. Second, terms-of-trade effects exacerbate this wedge for net resource exporters, implying even larger removal subsidies. Third, the optimal removal subsidy may fall below the carbon tax for resource-poor countries when marginal environmental damages are small.}, language = {en} }