TY  - RPRT
A1  - Lessmann, Kai
A1  - Gruner, Friedemann
A1  - Kalkuhl, Matthias
A1  - Edenhofer, Ottmar
T1  - Emissions Trading with Clean-up Certificates
BT  - Deterring Mitigation or Increasing Ambition?
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
U6  - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:517-opus4-641368
SN  - 2628-653X
IS  - 79
ER  - 
TY  - RPRT
A1  - Franks, Max
A1  - Kalkuhl, Matthias
A1  - Lessmann, Kai
T1  - Optimal Pricing for Carbon Dioxide Removal Under Inter-Regional Leakage
T2  - CEPA Discussion Papers
N2  - 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.
T3  - CEPA Discussion Papers - 43 
KW  - carbon pricing
KW  - trade
KW  - unilateral climate policy
KW  - terms-of-trade effects
KW  - removal subsidies
Y1  - 2022
U6  - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:517-opus4-538080
SN  - 2628-653X
IS  - 43
ER  -