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  - Kalkuhl, Matthias
A1  - Franks, Max
A1  - Gruner, Friedemann
A1  - Lessmann, Kai
A1  - Edenhofer, Ottmar
T1  - Pigou’s Advice and Sisyphus’ Warning
BT  - Carbon Pricing with Non-Permanent Carbon-Dioxide Removal
T2  - CEPA Discussion Papers
N2  - 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.
T3  - CEPA Discussion Papers - 62 
KW  - Carbon Dioxide Removal
KW  - Carbon Capture
KW  - Social Cost of Carbon
KW  - Climate Policy
KW  - Impermanence
Y1  - 2023
U6  - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:517-opus4-575882
SN  - 2628-653X
IS  - 62
ER  -