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### Introduction and context
- Containing global warming to 1.5-2oC above pre-industrial levels requires reducing global CO2 and other GHG emissions 25 to 50 percent below 2019 levels by 2030.
- About 140 countries, covering nearly 90 percent of global GHGs, have proposed, or set, net zero emissions targets for around mid-century.
- Emissions commitments, even if fully achieved, would only cut global GHGs by about half of the needed reductions in 2030.
- Measures equivalent to a global carbon price exceeding $75 per tonne by 2030 are needed for staying below 2oC; current global average carbon price is $5 per tonne.
- Monitoring compliance and comparing mitigation effort can be done by measuring emissions impacts and/or their carbon price equivalent (CPE).
- Policy equivalence metrics:
  - Economywide carbon price equivalent (ECPE): carbon price yielding same economywide emissions reduction as a policy.
  - Sectoral carbon price equivalent (SCPE): price on emissions in a particular sector yielding the same sectoral emissions reduction as the policy.

### Scope and coverage
- Analysis covers 19 G20 country members accounting for 80 percent of projected BAU global CO2 emissions in 2030.
- Focus sectors: power generation, industry, road transport, and buildings.
- Uses energy price projections as of mid-2021 and illustrates only policies legislated with numerical targets.
- Where policy packages are difficult to disentangle, analysis focuses on intended sectoral targets rather than individual instruments.

### Key findings and summary statistics
- Explicit carbon pricing:
  - Carbon pricing schemes operate in 45 countries and twelve G20 countries (as of April 2022).
  - Projected ECPEs for 2030 mostly modest; in five cases (Canada, France, Germany, Italy, the UK) about $50 per tonne or more.
- Sectoral impacts and SCPEs:
  - Power: renewables targets and coal phaseouts imply large SCPEs.
    - For seven countries, achieving targets would cut sectoral CO2 emissions by more than 50 percent below 2030 BAU levels.
    - SCPEs are upwards of $150 per tonne in ten cases (estimates above $150 per tonne not reported for power and industry due to uncertainty around breakthrough technologies).
  - Industry, transport, buildings: generally smaller economywide emissions reductions; policies often target new capital rather than existing stock.
  - Buildings: aggressive targets in France, Germany, Italy, and Japan apply to all buildings and imply SCPEs exceeding $150 per tonne.
- Combined policy ECPEs:
  - ECPEs for all mitigation policies/targets combined in 2030 exceed $150 per tonne in six cases and are between $1 and $136 per tonne in the rest.
- Fuel taxes and subsidies:
  - Existing fuel taxes imply ECPEs of around $5-40 per tonne in most cases (moderately negative where fuels are subsidized).
- BAU and sectoral shares (2030 BAU scenario):
  - GDP projected growth 2021–2030: over 50 percent in China and India; 5–25 percent in most other G20 countries.
  - CO2 emissions growth under BAU between about -20 and +10 percent in most cases.
  - Country shares of 2030 BAU fossil fuel CO2 emissions: China 38 percent, the US 19 percent, India 12 percent, Russia 6 percent, Japan 3 percent, other countries 0.7-2.2 percent.
  - By country grouping: advanced economies 33 percent of BAU G20 emissions, higher-income EMDEs 52 percent, lower-income EMDEs (India and Indonesia) 15 percent.
  - Sectoral contributions to 2030 BAU fossil fuel CO2 emissions: power generation ~35 percent, buildings ~10 percent.

### Methodology and the CPAT model
- CPAT overview:
  - Climate Policy Assessment Tool (CPAT) developed by IMF and World Bank staff; provides estimates for 170 countries of future fuel use and emissions by major energy sector and impacts of pricing and non-pricing mitigation approaches.
  - Reduced-form model parameterized to be approximately consistent with mid-range empirical literature on income and fuel price elasticities and more detailed energy models.
- Behavioural modelling and assumptions:
  - Fuel price responsiveness decomposed into demand responses and efficiency margins (shift to low-emission ICE and EVs).
  - Non-pricing policies modeled as shadow prices on efficiency margins.
  - Capital turnover lifespans: vehicles 15 years, commercial buildings 55 years, residential buildings 85 years.
- Three-step analytical procedure:
  1. Establish BAU projections using CPAT, holding current policy levels fixed.
  2. Model sectoral and economywide emissions impacts from planned tightening or new policies to 2030 relative to BAU.
  3. Map emissions impacts into SCPEs and ECPEs by calculating the carbon price that achieves the same emissions reduction.
- Important methodological caveats:
  - Where overlapping policies make disentangling impacts infeasible, analysis assumes countries implement policies sufficient to meet announced sectoral targets and focuses on those targets.
  - Credibility of sectoral targets is critical; if not implemented, analysis will overstate emissions reductions and carbon price equivalence.
  - Uncertainty increases for large policy changes that might drive non-linear adoption of breakthrough technologies (e.g., CCS, direct air capture).

### Explicit carbon pricing instruments (detailed points)
- As of April 2022:
  - Carbon pricing instruments operate in 45 countries and in twelve G20 countries.
  - In eight G20 countries pricing schemes cover more than 50 percent of national GHGs: Canada, France, Japan, Korea, Mexico, South Africa, Germany, and the UK.
  - Examples of design:
    - Canada: provinces/territories implement a minimum carbon price via tax or ETS covering power, transport, buildings.
    - Japan and South Africa: carbon taxes midstream on fuel supply.
    - Korea: downstream ETS for large emitters in power and industry; midstream for suppliers of heating fuels.
    - EU and UK ETS: apply to power generation and industry.
    - France and Germany: also apply pricing midstream to fuels used in building and transport sectors.
  - The US has regional ETSs covering 8 percent of nationwide emissions.
- Current and projected prices:
  - As of April 2022 EU ETS permit price equivalent $87 per tonne; French and German national scheme prices $49 and $33 per tonne respectively.
  - Prices expected to rise in the EU, UK, German ETS, and the Canadian system.
  - For five countries where expected price increases for 2030 can be specified, projected emissions reductions from price increases are 2-20 percent.
  - For existing carbon pricing, ECPEs are below prevailing carbon prices reflecting incomplete coverage (example: Canada ECPE $30 per tonne vs formal carbon price $40 per tonne).
  - By 2030, ECPEs about $50 per tonne or more in Canada, France, Germany, Italy, and the UK; $10 per tonne or less in other cases.

### Power sector — renewables targets and coal phaseouts
- Renewables targets:
  - In 13 cases targets for 2030 vary from 30 percent (Korea) to 90 percent (Canada) share of renewables in power generation mix.
  - Actual 2021 renewable shares vary between 0 percent (Saudi Arabia) and 83 percent (Brazil).
- Instruments that subsidize renewables: FIT, RPS, RECs, net metering, investment/production tax credits.
- Coal phaseouts:
  - Eight G20 countries pledged to phaseout or “phasedown” coal-fired power generation; in five cases a complete ban on or before 2030.
  - Combined renewables+coal phaseout promotes switching coal→gas and coal/gas→renewables.
  - Modeling infers additional emissions reduction from coal phaseout by comparing combined policies with renewables target alone.
- Results (relative to baseline with carbon pricing):
  - Sectoral emissions reductions from renewable targets/coal phaseouts are 50 percent or more in seven cases and less than 25 percent in five cases.
  - SCPEs for renewable/coal phaseouts combined exceed $150 per tonne in ten cases and are $50 per tonne or less in eight cases.
  - Economywide reductions: achieving renewable/coal phaseout targets reduces CO2 by nearly 30 percent in Australia and Saudi Arabia; around 10 percent or less in most other cases.

### Industry sector targets and impacts
- Coverage and overlaps:
  - Eight countries have targets for reducing CO2 or energy intensity of industry; in four cases targets overlap with explicit carbon pricing.
- Impacts:
  - Industry emissions targets reduce economywide CO2 most in France, Germany, Japan, and the UK—SCPEs in these cases exceed $150 per tonne and economywide CO2 reductions are around 7 to 10 percent.

### Transportation — standards, feebates, EVs
- CO2 emission rate / fuel economy standards:
  - Apply nationally in nine G20 countries and at the EU level; varied in 2020 from ~100 grams CO2 per km (EU countries, Korea) to 140 grams CO2 per km (South Africa).
  - Standards apply to sales fleets (first-time sales) and do not promote faster retirement of existing vehicles nor reduce vehicle km travelled (the latter effect ignored in analysis).
- Feebates and fiscal incentives:
  - Nine G20 countries include feebates in initial vehicle purchase tax systems.
  - EV subsidies vary between $2,000 (UK) and $7,500 (US).
  - Fees for high emitters rise to between $3,000 (Italy) and $12,000 (France).
- EV policy coverage:
  - 15 G20 countries have targets for phasing in EVs or phasing out ICEVs; ten countries pledged to fully phase out ICEVs in new sales by 2030 or 2035.
- Results (sectoral and economywide, 2030 relative to 2030 baseline with carbon pricing):
  - Emissions reductions from tightening CO2/km standards range from 0.1 percent (UK and France) to 16 percent (Italy); average across six countries with binding standards: 8 percent.
  - On-road vehicle stock emissions cut by around one-half of the reduction in new vehicle fleet emissions between 2020 and 2030.
  - Additional emissions reductions from binding EV targets in 2030 range from 2 percent (India) to 17 percent (Italy).
  - SCPEs for combined CO2/km and EV sales shares range from about $15 per tonne (India, South Africa) to over $150 per tonne (Canada, France, Germany, Italy, UK).
  - Economywide CO2 reductions from both CO2/km and EV share targets below 2030 baseline levels by 8 percent or less in all but one case (Italy).
  - Note: indirect emissions from additional electricity used by EVs are not considered in computing emissions effects; IMF staff in Korea estimate slow power decarbonization could offset about 20 percent of transport CO2 abatement benefits by 2030.

### Buildings: energy reduction targets and policies
- Country targets:
  - France, Germany, Italy, and Japan: targets for reducing energy use from total building stock by 25-44 percent between 2020 and 2030.
  - Nine other G20 countries: targets for new buildings to produce approximately zero emissions by 2030 (in five cases) or later.
- Instruments: building codes, retrofitting incentives, certification, clean fuel requirements, appliance performance standards, labelling.
- Effectiveness caveat:
  - Policies applying only to new buildings less effective because <2 percent of building stock is replaced each year and new buildings are already more efficient.
- Results (2030):
  - Sectoral emissions reductions exceed 30 percent below baseline in 2030 in France, Germany, and Japan; around 5 percent or less where standards apply only to new buildings.
  - SCPEs over $150 per tonne in France, Germany, and Japan; less than $25 per tonne in six cases.
  - Economywide CO2 reductions for France, Germany, Italy, and Japan: 4-10 percent below BAU levels.

### Fuel taxes and subsidies: existing excise landscape and impacts
- 2020 emissions-weighted charges per tonne of CO2 show coal relatively untaxed; gasoline and diesel account for larger taxes.
- Natural gas taxes vary widely (example: -$158 per tonne CO2 in buildings in Russia to $218 in buildings in Japan).
- Behavioural responses:
  - Road fuel taxes reduce vehicle km travelled, shift among ICEVs, and promote EV adoption.
  - Natural gas taxes in power can promote renewables but could perversely increase coal generation.
- Results (removing existing taxes/subsidies by 2030):
  - Economywide CO2 reductions from existing fuel tax systems around 5-20 percent in most cases.
  - Where subsidies exist, they increase economywide CO2 emissions by 2-8 percent.
  - ECPEs mostly in the range $5-40 per tonne.
- Interpretation note:
  - Estimates based on removal of existing policies—indicate stringency of pre-existing fuel tax systems, not planned changes.

### Combined effects of mitigation policies (2030)
- Combined effect (avoiding double counting):
  - CO2 reductions below levels with no carbon pricing:
    - Less than 20 percent in eight countries.
    - From 20 to about 50 percent in the other 11 countries.
- Policy mix:
  - Renewables targets significant in 15 cases.
  - Explicit carbon pricing contributes substantively in eight cases.
  - Attribution to individual policies ambiguous where overlaps exist.
- ECPEs for combined policies:
  - Exceed $150 per tonne in six cases.
  - Below $60 per tonne in ten cases.
- Relation to NDCs and remaining gaps:
  - Three countries do not have binding emissions targets: India, Russia, Turkey.
  - Some countries over-achieve binding NDCs with sectoral policies: Australia, Canada, China, France, Germany, Italy, Saudi Arabia.
  - In seven cases specified policies and sectoral targets fall well short of reductions needed for NDCs.
  - Even if existing targets met for all countries, a large gap remains between 2030 emissions reductions and those needed to achieve Paris temperature goals.

### Conclusions, policy insights, and limitations
- Key insights:
  - Carbon pricing and energy excises promote broad behavioural responses; non-pricing sectoral policies often complement or substitute pricing.
  - Accelerating renewables while phasing out coal in power can significantly cut emissions.
  - Buildings efficiency regulations would be more impactful if applied to existing as well as new buildings.
  - Pre-existing fuel taxes can have significant ECPEs, but counting them in comparisons is ambiguous as they were mainly implemented for non-climate reasons.
- Limitations and suggested future work:
  - Analysis confined to fossil fuel CO2 emissions from power, industry, transport, and buildings.
  - Future work could integrate other sectors (extractives, forestry, agriculture, waste) and gases (including methane).
  - Broader metrics (fiscal, economic welfare, macroeconomic impacts, distributional burdens) would be useful for comprehensive comparisons.

### Annex B — Policy equivalence for Border Carbon Adjustments (BCA)
- BCA logic:
  - Charges on embodied carbon in imports should be reduced to the extent foreign country applies carbon pricing to those emissions.
  - Alternative policies with similar emissions effects can have very different impacts on production costs; carbon pricing generally imposes higher private costs because remaining emissions face a charge.
  - Some regulations could place higher private costs than emissions-equivalent carbon pricing in specific cases (very high emissions reductions or inefficient design).
  - Non-pricing policies reduce assessed emissions intensity of products and therefore reduce BCA charges without further adjustment.
- Granularity and EITE focus:
  - BCA equivalence requires granular focus on energy-intensive, trade-exposed sectors (steel, aluminum, cement).
  - These sectors are a minor share of global emissions.
- BCAs as mitigation incentives or exemptions:
  - A country could exempt another country from a BCA if that country does its “fair share” (e.g., member of a carbon club) using a mitigation-based equivalence metric.
  - Such exemptions address carbon leakage concerns but may not solve EITE competitiveness concerns and could face WTO challenges if a non-exempted firm's product has lower embodied emissions than an exempted one.

### Annex C — CPAT model description and calculation methods
- Model coverage and projection inputs:
  - CPAT covers over 170 countries and projects fuel use and CO2 for power, industry, transport, buildings.
  - Projections use GDP, income elasticity of demand, price responsiveness, technological change, and international energy prices.
  - Current carbon pricing, non-pricing policies, and fuel taxes held fixed in real terms at 2021 levels in BAU.
- Pass-through and price responsiveness:
  - Pass through of carbon charges into fuel user prices generally taken as 100 percent; in cases with SOEs or regulated pricing pass-through estimated at 0.25, 0.5, or 0.75.
  - Fuel and electricity price elasticities over the longer term parameterized broadly between -0.5 and -0.8.
- Sector modelling specifics:
  - Power: average of a simplified fuel-choice model and a technology-explicit hybrid economic-engineering model; constraints include maximum annual renewables scale-up.
  - Industry: disaggregated into eight industries; carbon pricing reduces emissions intensity and can reduce production via higher consumer prices.
  - Transport: models fuel consumption declines via shifts to more efficient vehicles and reduced VMT; vehicle turnover model distinguishes ICEVs and EVs with 15-year assumed life (6.7% turnover per year).
  - Buildings: decomposed into energy/CO2 intensity changes and behavioural changes; new building CO2/electricity intensity assumed initially 30% of existing stock with progressive reduction to 0% by 2030 under new building policies.
- Calibration and data:
  - CPAT populated using IEA and other sources (latest data 2019); GDP projections from IMF forecasts; energy taxes, subsidies, prices compiled from IMF/WBG/national sources; international fuel prices using IMF projections as of 2022.
  - Carbon emissions factors from IIASA (2021).
- Calculating ECPE and SCPE:
  - Economywide CO2 reductions: difference between BAU 2030 and policy 2030 economywide emissions.
  - ECPE/SCPE obtained by modelling the equivalent carbon price required (economywide or sectoral) to achieve the same CO2 reduction.
  - Renewables targets modeled via renewable generation subsidy funded by tax on electricity consumption; coal phaseout via tax on coal with revenues used to subsidize electricity consumption; industrial intensity reductions via charge on fuel inputs with revenues returned as output-based subsidies.
  - CO2/km standards modeled with a virtual shadow price to achieve target reductions; EV targets use supplementary vehicle turnover model; buildings use supplementary building model.
  - ECPE of pre-existing fuel taxes/subsidies computed by setting taxes/subsidies to zero by 2030 and then imposing a carbon price to return emissions to original BAU level.

*Source: IMF staff, Annex A–C of the IMF Working Paper "A Framework for Comparing Climate Mitigation Policies Across Countries".*

### Annex A. Background Information on Mitigation Targets and Policies......................................................

### Annex A. Background Information on Mitigation Targets and Policies

### Introduction and context
- Containing global warming to 1.5-2oC above pre-industrial levels requires reducing global CO2 and other GHG emissions 25 to 50 percent below 2019 levels by 2030.
- About 140 countries, covering nearly 90 percent of global GHGs, have proposed, or set, net zero emissions targets for around mid-century.
- Emissions commitments, even if fully achieved, would only cut global GHGs by about half of the needed reductions in 2030.
- Measures equivalent to a global carbon price exceeding $75 per tonne by 2030 are needed for staying below 2oC, whereas the current global average carbon price is only $5 per tonne.
- Political constraints on raising mitigation ambition include concerns about competitiveness impacts and relative implementation in other countries; international mechanisms to reinforce the Paris Agreement (for example, scaling up ambition among large economies and coordinated carbon pricing) are discussed as possible responses.
- Monitoring compliance with international arrangements requires a transparent methodology for comparing mitigation effort, which can be done by measuring emissions impacts and/or their carbon price equivalent (CPE).
- Policy equivalence can be measured:
  - Economywide carbon price equivalent (ECPE): the carbon price that would yield the same economywide emissions reduction as the policy under consideration.
  - Sectoral carbon price equivalent (SCPE): the price on emissions in a particular sector that would yield the same sectoral emissions reduction as the policy under consideration.
- Equivalence from a mitigation perspective does not imply equivalence in costs or competitiveness (see Annex B).

### Scope and coverage
- The analysis covers 19 country members of the G20, which collectively account for 80 percent of projected business-as-usual (BAU) global CO2 emissions in 2030.
- Focus is on major energy-using sectors: power generation, industry, road transport, and buildings.
- Analysis uses energy price projections as of mid-2021 and illustrates only policies that have been legislated with numerical targets.
- Where policy packages are difficult to disentangle, the sectoral targets these packages are intended to achieve are the focus rather than individual instruments.

### Key findings and summary statistics
- Explicit carbon pricing:
  - Many countries have explicit carbon pricing schemes, but projected ECPEs for 2030 are mostly modest; in five cases (Canada, France, Germany, Italy, the UK) they are about $50 per tonne or more.
  - Carbon pricing schemes are operating in 45 countries and twelve G20 countries (as of April 2022).
- Sectoral impacts and SCPEs:
  - In power generation, renewables targets and coal phaseout policies imply large sectoral carbon pricing equivalents.
    - For seven countries, achieving these targets would cut sectoral CO2 emissions by more than 50 percent below 2030 BAU levels.
    - SCPEs are upwards of $150 per tonne in ten cases for power generation (estimates above $150 per tonne are not reported for the power and industry sectors due to uncertainty around breakthrough technologies).
  - For industry, transport, and buildings, economywide emissions reductions are generally smaller; these sectors have smaller shares in economywide emissions and policies often target new capital rather than the existing stock.
  - Aggressive building emissions targets in France, Germany, Italy, and Japan apply to all buildings and imply SCPEs exceeding $150 per tonne.
- Combined policy ECPEs:
  - ECPEs for all mitigation policies/targets combined in 2030 exceed $150 per tonne in six cases and are between $1 and $136 per tonne in the rest.
- Fuel taxes and subsidies:
  - Existing fuel taxes imply ECPEs of around $5-40 per tonne in most cases (and moderately negative in cases where fuels are subsidized).
  - Fuel taxes were often implemented for non-climate reasons, leaving ambiguity about whether they should be included in ECPEs.
- BAU and sectoral shares (2030 BAU scenario):
  - Under BAU, GDP projected growth: over 50 percent between 2021 and 2030 in China and India; 5–25 percent in most other G20 countries.
  - CO2 emissions growth under BAU is between about -20 and +10 percent in most cases.
  - Country shares of 2030 BAU fossil fuel CO2 emissions: China 38 percent, the US 19 percent, India 12 percent, Russia 6 percent, Japan 3 percent, other countries 0.7-2.2 percent.
  - By country grouping: advanced economies 33 percent of BAU G20 emissions, higher-income EMDEs 52 percent, lower-income EMDEs (India and Indonesia) 15 percent.
  - Sectoral contributions to 2030 BAU fossil fuel CO2 emissions: power generation ~35 percent (largest source), buildings ~10 percent (smallest BAU share).
- Model assumptions and caveats:
  - CPAT supplements with dynamic models of capital turnover for buildings and vehicles; assumed lifespans: vehicles 15 years, commercial buildings 55 years, residential buildings 85 years.
  - Uncertainty increases for large policy changes that might drive non-linear adoption of ‘breakthrough’ technologies (e.g., CCS, power with biofuel energy and CCS, direct air capture). Given these uncertainties, SCPEs above $150 per tonne are not reported for power and industry.

### Methodology and the CPAT model
- The analysis uses the Climate Policy Assessment Tool (CPAT), a modelling platform developed by IMF and World Bank staff.
- CPAT provides estimates for 170 countries of future fuel use and emissions by major energy sector and the emissions impacts of a diverse range of pricing and non-pricing mitigation approaches.
- CPAT is a reduced-form model parameterized to be approximately consistent with the mid-range of the empirical literature on income and fuel price elasticities and more detailed, country-specific energy models.
- CPAT models behavioral responses to policies:
  - Fuel price responsiveness is decomposed into demand responses (changes in vehicle use) and efficiency margins (shifting to low-emission ICE and electric vehicles).
  - Non-pricing policies are modeled as shadow prices on efficiency margins.
- Three-step analytical procedure:
  1. Establish a consistent set of BAU projections across countries using CPAT, holding current policy levels fixed.
  2. Model sectoral and economywide emissions impacts from planned tightening or new policies to 2030 relative to BAU.
  3. Map sectoral and economywide emissions impacts into SCPEs and ECPEs by reverting to BAU and calculating the carbon price (in US$) that achieves the same emissions reduction at the sectoral and economywide levels respectively.
- Important methodological notes:
  - Where overlapping policies make emissions impacts infeasible to disentangle, the analysis assumes countries implement policies sufficient to meet announced sectoral targets and focuses on those targets.
  - If countries do not implement policies sufficient to meet targets, the analysis will overstate emissions reductions and carbon price equivalence.
  - Credibility of sectoral targets is critical when applying the methodology to international agreements.

### Explicit carbon pricing instruments (summary)
- Carbon pricing is recognized as the most effective instrument to cut emissions by promoting a wide range of behavioral responses and equating marginal abatement costs.
- As of April 2022:
  - Carbon pricing instruments operate in 45 countries globally and in twelve G20 countries.
  - In eight G20 countries, pricing schemes cover more than 50 percent of national GHGs: Canada, France, Japan, Korea, Mexico, South Africa, Germany, and the UK.
  - Examples of instrument design:
    - Canada: provinces/territories must implement a minimum carbon price via tax or ETS covering fuels used in power, transport, and buildings.
    - Japan and South Africa: implemented carbon taxes midstream on fuel supply.
    - Korea: downstream ETS for large emitters in power and industry, midstream for suppliers of heating fuels.
    - EU and UK ETS: apply to emissions from power generation and industry.
    - France and Germany: also apply pricing systems midstream to fuels used in building and transport sectors.
  - The US has regional ETSs, covering only 8 percent of nationwide emissions.

*Source: IMF staff, Annex A of the IMF Working Paper "A Framework for Comparing Climate Mitigation Policies Across Countries".*

### Annex A, Table A - 2 provides more detail on pricing schemes in G20 countries. For example, as of

### wpiea2022254-print-pdf - Annex A, Table A - 2 provides more detail on pricing schemes in G20 countries. For example, as of

### Explicit carbon pricing: current levels and expected changes
- As of April 2022 the EU ETSs’ permit price was equivalent to $87 per tonne, while prices in the French and German national schemes were $49 and $33 per tonne, respectively.
- Prices are expected to rise in the EU, UK, and German ETS, and the Canadian system, and can be inferred from futures markets or from policy, but future price trajectories are not available for the other schemes.
- For the five countries where expected price increases for 2030 can be specified, projected emissions reductions from the price increases are 2-20 percent.
- For existing carbon pricing, ECPEs are below prevailing carbon prices, reflecting the incomplete coverage of the pricing schemes—for example, in Canada the ECPE is $30 per tonne compared with the formal carbon price of $40 per tonne.
- By 2030, EPCEs are about $50 per tonne or more in Canada, France, Germany, Italy, and the UK but are $10 per tonne or less in other cases.

*Source: IMF Staff using CPAT.*

### Non-pricing sectoral policies — overview and measurement approach
- Sectoral policies are assessed accounting for potential overlaps with carbon pricing; additional emissions reductions from sectoral policies are measured relative to emissions in a 2030 baseline with carbon pricing (where relevant accounting for enhanced pricing) rather than the BAU.
- Overlaps are more significant for the power and industrial sector than for transport and buildings.
- ECPEs are reported for combined policy packages rather than individual sectoral measures.

### Power sector — renewables targets and coal phaseouts
- Renewables targets and status:
  - Nearly all G20 countries have targets for the share of renewables (biomass, geothermal, hydro, wind, solar) in power generation and corresponding policies to make headway on these targets (though in four cases targets are met in the BAU projections).
  - In 13 cases, targets are for 2030, varying from a share of renewables in the power generation mix from 30 percent (Korea) to 90 percent (Canada).
  - As of 2021, actual renewable energy shares in generation varied between 0 percent (Saudi Arabia) and 83 percent (Brazil).
- Common instruments that explicitly or implicitly subsidize renewables:
  - Feed-in tariffs (FIT), which guarantee above-market prices for renewable generation;
  - Renewable portfolio standards (RPS), which specify requirements for the share of renewables in power generation;
  - Tradable renewable energy certificates (RECs), which supplement RPSs but also promote a voluntary market for electricity consumers to buy renewable energy;
  - Net metering, which allows households who generate some of their own electricity to use that electricity anytime, instead of when it is generated; and
  - Investment or production tax credits for renewables.
- Policy design and modeling assumptions:
  - These policies promote switching from coal/gas to renewables, but they do not involve the pass through of charges on remaining emissions (such as from a carbon tax) into electricity prices and therefore, at best, have limited impacts on reducing electricity demand in industry and buildings.
  - Country-specific policy instruments are not modelled individually; instead, countries are assumed to achieve their renewable generation targets for 2030 (or linearly interpolated shares for countries with target dates beyond 2030).
- Coal phaseouts:
  - Eight G20 countries have pledged to phaseout or “phasedown” coal-fired power generation including, in five cases, a complete ban on or before 2030.
  - When combined with a renewables target, two responses are promoted: fuel switching from coal to gas and coal/gas to renewables.
  - In modeling these combinations, the CO2 reduction from the combined policies is compared with that from the renewables target alone to infer the additional emissions reduction from the coal phaseout—this avoids double counting emissions reductions.
- Results (renewables targets and coal phaseouts, relative to baseline with carbon pricing):
  - At the sectoral level, emissions reductions from renewable targets/coal phaseouts are 50 percent or more in seven cases but less than 25 percent in five cases.
  - SCPEs for renewable/coal phaseouts combined exceed $150 per tonne in ten cases but are $50 per tonne or less in eight cases.
  - At the economywide level, achieving stated renewable/coal phaseout targets reduces CO2 emissions by nearly 30 percent in Australia and Saudi Arabia, but the reductions are around 10 percent or less in most other cases.

### Industry sector targets and impacts
- Policy coverage and overlaps:
  - Eight countries have targets for reducing CO2 or energy intensity of industry though in four cases these targets overlap with explicit carbon pricing.
- Impacts:
  - Implementing industry emissions targets would reduce economywide CO2 emissions most significantly in France, Germany, Japan, and the UK—SCPEs in these cases exceed $150 per tonne and economywide CO2 reductions are around 7 to 10 percent.

### Transportation — standards, feebates, EVs
- CO2 emission rate / fuel economy standards:
  - One or other of these policies apply nationally in nine G20 countries, and at the EU level, and have been progressively tightened over the last two decades.
  - Standards in 2020 varied from the equivalent of around 100 grams CO2 per km in EU countries and Korea to 140 grams CO2 per km in South Africa and are scheduled to continue tightening.
  - Standards apply to sales fleets averaging over both internal combustion engine vehicles (ICEVs) and electric vehicles (EVs) but only to first-time sales—they do not promote faster retirement of existing, high-emission vehicles.
  - Standards also do not reduce vehicle km travelled—by lowering fuel costs per km they can encourage more driving (this latter effect is ignored in the analysis).
- Feebates and fiscal incentives:
  - Nine G20 countries include some form of feebates into initial vehicle purchase tax systems.
  - EV subsidies vary between $2,000 (UK) and $7,500 (US).
  - Fees for high emitters rise to between $3,000 (Italy) and $12,000 (France).
- Prospective impacts and modeling:
  - It is difficult to separate the individual impact of regulations and feebates on emissions; the emissions impacts are considered from countries achieving their specified reductions in future CO2/km. For example, prospective EU standards will cut emission rates of vehicles 37.5 percent below 2020 levels by 2030.
  - Other transportation vehicles (buses, trucks, trains, boats, planes, etc.) are not comprehensively considered, though these vehicles typically account for about a third of transport sector CO2 emissions across G20 countries in the 2030 BAU.
- EV policies:
  - 15 G20 countries have targets for phasing in EVs or phasing out ICEVs—ten countries have pledged to fully phase out ICEVs in new vehicle sales by 2030 or 2035.
  - The emissions impact of EV phase-ins is inferred by comparing CO2 reductions from the CO2/km and EV sales targets combined with that from the CO2/km target only; EV targets are based either on those for 2030 or linearly interpolated shares for 2030 for countries with target dates beyond 2030.

*Source: IMF Working Paper excerpts (Annex A, Table A - 2; Figure 4; sections IV.A–C).*

### 2030. In computing the emissions effects, partly offsetting indirect emissions from the additional

### 2030. In computing the emissions effects, partly offsetting indirect emissions from the additional

### Transport: CO2/km standards and EV targets
- Emissions reductions from tightening CO2/km standards for light-duty vehicle sales (sectoral, 2030, relative to 2030 baseline with carbon pricing):
  - Range from 0.1 percent (UK and France) to 16 percent (Italy).
  - Average across the six countries with binding standards: 8 percent.
- On-road vehicle stock emissions are cut by around one-half of the reduction in new vehicle fleet emissions between 2020 and 2030 (due to gradual turnover and standards increase).
- Additional emissions reductions from binding EV (or equivalent) targets in 2030 (beyond CO2/km standards):
  - Range from 2 percent (India) to 17 percent (Italy).
- SCPEs (carbon price equivalents) for combined CO2/km and EV sales shares (panel B):
  - Range from about $15 per tonne (India, South Africa) to over $150 per tonne (Canada, France, Germany, Italy, and UK).
- Economywide CO2 emissions reductions from achieving both CO2/km and EV share targets (panel C):
  - Below 2030 baseline levels by 8 percent or less in all but one case (Italy).
- Note: indirect emissions from additional electricity used by EVs are not considered in computing the emissions effects. Example: IMF staff in Korea estimate that a slow decarbonization of power generation compared with a rapid decarbonization would offset about 20 percent of transport CO2 emissions abatement benefits by 2030.

### Buildings: energy reduction targets and policies
- Country targets:
  - France, Germany, Italy, and Japan: targets for reducing energy use from the total building stock by 25-44 percent between 2020 and 2030.
  - Nine other G20 countries: targets for new buildings to produce approximately zero emissions by 2030 (in five cases) or later.
- Typical policy instruments:
  - Building codes specifying design requirements to reduce energy needs for space heating and cooling.
  - Retrofitting incentives (fiscal incentives for insulation).
  - Building certification programs for energy, emissions, and other green criteria.
  - Clean fuel requirements (phasing out fossil fuel heating systems in new buildings).
  - Energy performance standards for household appliances.
  - Labelling schemes for appliances.
- Effectiveness caveat:
  - Policies applying only to new buildings are less effective because less than 2 percent of the building stock is replaced each year and new buildings are already more energy efficient.
- Results (2030, sectoral and economywide):
  - Sectoral emissions reductions from energy targets for buildings (panel A):
    - Exceed 30 percent below baseline in 2030 in France, Germany, and Japan.
    - Around 5 percent or less where standards apply only to new buildings.
  - SCPEs (panel B):
    - Over $150 per tonne in France, Germany, and Japan.
    - Less than $25 per tonne in six cases.
  - Economywide CO2 reductions (panel C):
    - For France, Germany, Italy, and Japan: 4-10 percent below BAU levels.
    - Less in other cases.

### Fuel taxes and subsidies: existing excise landscape and impacts
- Table 1 summary (2020, expressed in emissions-weighted charges per tonne of CO2):
  - Coal remains relatively untaxed across countries and sectors.
  - Gasoline and diesel account for much larger taxes relative to other fuels.
  - Natural gas taxes vary widely, e.g., -$158 per tonne of CO2 (buildings in Russia) to $218 (buildings in Japan).
- Behavioral responses:
  - Road fuel taxes promote reduced vehicle km travelled, shifts among ICEVs with different fuel economy, and shifts from ICEVs to EVs.
  - Natural gas taxes in power generation can promote renewables but could perversely increase coal generation.
- Results (existing fuel taxes and subsidies, relative to removing them by 2030):
  - Economywide CO2 reductions from existing fuel tax systems: around 5-20 percent in most cases.
  - Where subsidies exist, they increase economywide CO2 emissions by 2-8 percent.
  - ECPEs (panel B) mostly in the range of $5-40 per tonne.
- Note on interpretation:
  - These estimates are based on removal of existing policies rather than new additional policies; they indicate the stringency of pre-existing fuel tax systems, not planned policy changes.

### Combined effects of mitigation policies (2030)
- Combined effect of specified policies and targets (avoiding double counting) varies substantially across countries:
  - CO2 reductions below levels with no carbon pricing:
    - Less than 20 percent in eight countries.
    - From 20 to about 50 percent in the other 11 countries.
- Policy mix and contributions:
  - Renewables targets make a significant contribution in 15 cases.
  - Explicit carbon pricing contributes substantively in eight cases.
  - Attribution to individual policies is ambiguous where policies overlap (e.g., carbon pricing of power emissions and renewables targets).
- ECPEs for combined policies:
  - Exceed $150 per tonne in six cases.
  - Below $60 per tonne in ten cases.
- Relation to NDCs:
  - Three countries do not currently have binding emissions targets: India, Russia, Turkey.
  - Some countries over-achieve binding NDCs with sectoral policies: Australia, Canada, China, France, Germany, Italy, Saudi Arabia.
  - In seven cases the economywide emissions reductions from specified policies and sectoral targets fall well short of the reductions needed for NDCs.
- Remaining gap:
  - Even if existing targets were met for all countries, a large gap between 2030 emissions reductions and those needed to achieve the Paris Agreement’s temperature goals would remain.

### Conclusions and methodological notes
- Methodology:
  - Operationalizes quantification of emissions impacts and carbon price equivalence of pricing policies, non-pricing sectoral targets, and pre-existing fuel taxes for G20 countries to 2030.
  - Implemented with the IMF-WB CPAT model; parameterized to be approximately consistent with midrange estimates of emissions projections and policy responsiveness from the broader energy modelling literature and econometric evidence.
- Key insights:
  - Carbon pricing and energy excises promote a wide range of behavioral responses; non-pricing sectoral policies (clean technology subsidies, coal phaseouts, fuel economy standards, emission rate regulations, feebates) are often used to complement or substitute for pricing.
  - Accelerating renewables while phasing out coal in the power sector can significantly cut emissions.
  - Buildings efficiency regulations would be much more impactful if applied to existing buildings as well as new buildings.
  - Pre-existing fuel taxes can have significant carbon price equivalence, but whether they should be counted when comparing mitigation effort is unclear because they were implemented largely for non-climate reasons.
- Limitations and suggested future work:
  - Analysis confined to fossil fuel CO2 emissions from power, industry, transport, and buildings sectors.
  - Future work could integrate other sectors (extractives, forestry, agriculture, waste) and gases (including methane).
  - A comprehensive comparison across policies and countries using broader metrics (fiscal, economic welfare, macroeconomic impacts, distributional burdens) would be useful.

*IMF Working Paper — A Framework for Comparing Climate Mitigation Policies Across Countries*

### Annex A. Background Information on Mitigation

### Annex A. Background Information on Mitigation

### Targets and Policies (Economywide Mitigation Pledges, Table A‑1)
- Argentina: Second submission; Net emissions cap of 359 MtCO2e in 2030; Year for Net Zero Target: 2050d
- Australia: Second submission; Reduce GHGs 43% below 2005 by 2030; Year for Net Zero Target: 2050d
- Brazil: Second submission; Reduce GHGs 43% below 2005 by 2030; Year for Net Zero Target: 2050
- Canada: First submission; Reduce GHGs 30% below 2005 by 2030; Year for Net Zero Target: 2050
- China: First submission; Reduce CO2/GDP 65% below 2005 by 2030; Year for Net Zero Target: 2060
- France: Second submission; Reduce GHGs 55% c below 1990 by 2030; Year for Net Zero Target: 2050c
- Germany: Second submission; Reduce GHGs 65% below 1990 by 2030; Year for Net Zero Target: 2045
- India: First submission; Reduce GHG/GDP 33-35% below 2005 by 2030; Year for Net Zero Target: 2070
- Indonesia: First submission; Reduce GHGs 29%(41%) below BAU in 2030; Year for Net Zero Target: 2060
- Italy: Second submission; Reduce GHGs 55% c below 1990 by 2030; Year for Net Zero Target: 2050c
- Japan: Second submission; Reduce GHGs 25.4% below 2005 by 2030; Year for Net Zero Target: 2050
- Mexico: Second submission; Reduce GHGs 22% (36%) below BAU in 2030; Year for Net Zero Target: 2050d
- Russia: First submission; Reduce GHGs to 70% of 1990 level by 2030; Year for Net Zero Target: 2060d
- Saudi Arabia: Second submission; Reduce GHGs 278 MtCO2e below BAU by 2030; Year for Net Zero Target: 2060d
- South Africa: Second submission; Reduce GHGs to 350-420 MtCO2e in 2025 and 2030; Year for Net Zero Target: 2050d
- South Korea: Second submission; Reduce GHGs 40% below 2017 by 2030; Year for Net Zero Target: 2050
- Turkey: First submission; Reduce GHGs 20% (25%) below BAU by 2030; Year for Net Zero Target: 2053
- United Kingdom: Second submission; Reduce GHGs 68% below 1990 by 2030; Year for Net Zero Target: 2050
- United States: Second submission; Reduce GHGs 50-52% below 2005 by 2025; Year for Net Zero Target: 2050
- Sources: UNFCCC (2021).
- Notes reproduced from source:
  - 'First' and 'second round' refers to whether nationally-determined contribution was submitted in 2015/16 or has been updated in 2020/21/22.
  - Targets conditional on international support are in brackets.
  - EU wide target.
  - Target has been announced but is not yet featured in policy documents.

### Explicit Carbon Pricing Policies (Table A‑2)
- Instrument/coverage (April 2022, 2030 prices, US $/ton) by country:
  - Argentina: Carbon tax for all emissions (5,5)
  - Canada: Carbon tax/ETS for power, industry, transport, buildings (40, 140)b
  - China: ETS for electricity to be expanded to industry (9, 9)c
  - France: EU ETS for power/industry (87,140), domestic tax for industry/buildings/transport (49,
  - Germany: EU ETS for power/industry (87,140), domestic ETS for buildings/transport (33,55)
  - Italy: EU ETS for power/industry(87,140)
  - Japan: Carbon tax for all emissions (2,2), Subnational ETS schemes
  - Mexico: Carbon tax for all emissions (0.42-4,0.42-4), ETS for power/industry (4,4), Subnational
  - South Africa: Carbon tax for all emissions (10, 10)
  - South Korea: ETS for power/industry/buildings (19, 19)
  - UK: ETS for power/industry (99,130), domestic tax for power (24,24)
  - US: Subnational ETS schemes
- Sources: WBG (2022), IMF staff, and national sources.
- Notes reproduced from source:
  - Where prices, or caps in ETSs, are not specified in legislation for 2030 they are based on 2022 prices or, as in Germany, the last available year where a price is specified. For the EU ETS, the 2030 price is an estimate based on CPAT.
  - For some provinces and territories industry is covered by a tradable emission rate standard rather than carbon pricing.
  - China's ETS takes the form of a tradable emission rate standard.
  - Mexico's carbon price on additional CO2 emission content compared to natural gas.

### Power Generation: Sector-Specific Targets and Policies (Table A‑3)
- Renewables generation shares 2021 and future targets (selected entries, percentages and years preserved):
  - Argentina: 2021 renewables 27; Future target 20 (2025)a
  - Australia: 2021 renewables 20; Future target 68 (2030)
  - Brazil: 2021 renewables 83b
  - Canada: 2021 renewables 68; Future target 90 (2030)
  - China: 2021 renewables 28; Future target 80 (2060)
  - France: 2021 renewables 22; Future target 40 (2030)c
  - Germany: 2021 renewables 41; Future target 80 (2030)
  - India: 2021 renewables 22; Future target 50 (2030)
  - Indonesia: 2021 renewables 17; Future target 48 (2030)
  - Italy: 2021 renewables 41; Future target 55 (2030)
  - Japan: 2021 renewables 21; Future target 36-38 (2030)
  - Mexico: 2021 renewables 18; Future target 35 (2024)
  - Russia: 2021 renewables 18; Future target 20 (2020)
  - Saudi Arabia: 2021 renewables 0; Future target 50(2030)
  - South Africa: 2021 renewables 6; Future target 41(2030)
  - South Korea: 2021 renewables 5; Future target 30 (2030)
  - Turkey: 2021 renewables 44; Future target 60(2030)
  - UK: 2021 renewables 39; Future target 100 (2035)
  - US: 2021 renewables 19; Future target 28(2030)
- Regulatory and fiscal policy indicators (presence marked as national ● or subnational ○ in the source):
  - Feed in tariff, Renewable portfolio standard, Tradable renewable energy credits, Net‑metering, Investment or production tax credits — presence varies by country as shown in the table.
- Additional notes reproduced from source:
  - Argentina's target excludes large hydro, which is included in its generation share.
  - Brazil's latest NDC no longer includes a renewable target.
  - EU wide target.
  - ●= national. ○=subnational.

### Industrial Sector: Sector-Specific Emissions Targets (Table A‑4)
- Australia: Reduce the energy intensity of industry 30 percent between 2015 and 2030.
- China: Peak aluminium and steel CO2 emissions by 2025, and reduce them 40 and 30 percent, respectively from that peak by 2040.
- France: Reduce (all GHG) emissions from industry 37 percent by 2030 relative to 2019.
- Germany: Reduce CO2 emissions 49-51 percent below 1990 levels by 2030
- Japan: Reduce CO2 emissions 38% below 2013 levels by 2030
- South Africa: Reduce energy consumption of manufacturing 16 percent below 2015 levels by 2030.
- Turkey: Reduce energy intensity by at least 10 percent in each sub-sector by 2023 (2011 baseline)
- UK: Reduce CO2 emisisons 67 percent below 2018 levels by 2035.
- Sources: Climate Transparency; Climate Action Tracker: IEA; Government Websites.

### Vehicles: Targets, Market Shares, and Incentives (Table A‑5)
- % EVs in vehicle sales (2020, 2021) and targets (year) — selected entries preserved exactly:
  - Argentina: 2020 1; 2021 30 (2030); EV luxury car tax threshold at $56,800 compared with ICE threshold of $49,370.
  - Australia: 2020 1; 2021 30 (2030)
  - Brazil: 2020 125; 2021 119 (2022) <1
  - Canada: 2020 123; 2021 100 (2026); 4; 100 (2035); Feebate: $4,000 subsidy for EVs, taxes on ICEVs rising to $3,200.
  - China: 2020 116; 2021 72 (2030); 6; 100 (2035); Feebate: $4,000 subsidy for EVs, taxes on ICEVs risng to 40% of base prices. 10% sales tax exemption for EVs.
  - France: 2020 100; 2021 61 (2030); 11; 100 (2030)a; Feebate: $7,000 subsidy for EVs, taxes on ICEs rising to $12,000.
  - Germany: 2020 100; 2021 61 (2030); 14; 100 (2030)a; Feebate: $7,000 subsidy for EVs, taxes on ICEVs rising to $5,000.
  - India: 2020 114; 2021 112 (2022); <1; 30 (2030)b; Subsidy up to $137/kWh for EVs <$20,455, general sales tax reduced 28% to 5%.
  - Indonesia: 2020 <1; 2021 numeric (2025)c; EV luxury tax exemption.
  - Italy: 2020 100; 2021 61 (2030); 4; 100 (2030)a; Feebate: $4,600 subsidy for EVs, taxes on ICEs rising to $3,000.
  - Japan: 2020 106; 2021 92 (2030); <1; 100(2035); Feebate: $7,000 subsidy for EVs, rising environmental performance tax on ICEVs.
  - Mexico: 2020 114; 2021 85 (2025); <1; n/a e
  - Russia: 2020 production (2030)f; 5% purchase price subsidy on Russian-made EV up to maximum of $8,570.
  - South Korea: 2020 98; 2021 84 (2030); 3; numeric (2025)d; EV subsidy up to $17,000; excise tax reduction up to $2,700; acquisition tax reduction up to $1,200.
  - Turkey: 2020 numeric (2030)g; Special consumption tax reduced from 45%-160% to 10%- 60% for ZEVs.
  - UK: 2020 100; 2021 61 (2030); 11; 100 (2030); Feebate: $2,000 EV subsidy, taxes on ICEs rising to $3,870.
  - US: 2020 123; 2021 100 (2026); 2; 50 (2030); $7,500 producer subsidy for EVs (for first 20,000 vehicles sold).
- Notes reproduced from source:
  - EU wide target.
  - Target is for private cars. Target for commercial vehicles=70%, buses=40%, two and three-wheeler sales=80%.
  - Target of 2 million EVs in the passenger vehicle stock by 2025.
  - Target of 1.13 million EVs in the passenger vehicle stock by 2025.
  - No federal target but Jalisco, Mexico committed to 100(2030).
  - Annual EV production target of 220,000 units by 2030.
  - Target of 1 million EVs in the vehicle stock by 2030.
- CO2/km metric and additional registration fee incentives appear in the table as shown in the source.

### Buildings: Targets and Policies (Table A‑6)
- National targets and policy features (as reported in the source; ●= national policy, ●v = widely voluntary, ●m,v = Partially mandatory, widely voluntary):
  - Argentina: Building Energy Codes for all Building Types ●; Retrofitting Incentives v; Building Certification ●; Clean fuel requirements ●; Performance standards for household appliances ●; Appliance Labelling Scheme ●
  - Australia: Targets: All new buildings net zero emissions by 2030 (Canada entry shows similar). Australia: ●; Retrofitting Incentives ●; Building Certification m,v; Clean fuel requirements ●; Performance standards for household appliances ●
  - Canada: All new buildings net zero emissions by 2030. Policies: ●; Retrofitting Incentives ●; Building Certification ●; Clean fuel requirements v; Performance standards for household appliances ●; Appliance Labelling Scheme ●
  - China: Green buildings to account for 50% of new urban buildings. Policies: ●; Retrofitting Incentives ●; Building Certification ●; Clean fuel requirements m,v; Performance standards for household appliances ●; Appliance Labelling Scheme ●
  - France: Reduce building sector emissions 44% below 2020 emisisons by 2030; EU legislation requires all new buildings to be nearly zero energy. Policies: ●; Retrofitting Incentives ●; Building Certification ●; Clean fuel requirements m,v; Performance standards for household appliances ●; Appliance Labelling Scheme ●; additional entries ●
  - Germany: Reduce building sector emissions 43% below 2020 emisisons by 2030; EU legislation requires all new buildings to be nearly zero energy. Policies: ●; Retrofitting Incentives ●; Building Certification ●; Clean fuel requirements m,v; Performance standards for household appliances ●; Appliance Labelling Scheme ●; additional entries ●
  - India: Reduce energy use for new commercial buildings 50% by 2030. Policies: ●; Retrofitting Incentives v; Building Certification ●; Clean fuel requirements ●; Performance standards for household appliances ●; Appliance Labelling Scheme ●
  - Indonesia: Reduce energy intensity ≥ 1% per year till 2025. Policies: *; ●; Retrofitting Incentives v; Building Certification ●; Clean fuel requirements ●; Performance standards for household appliances ●
  - Italy, Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, UK, US: entries list targets such as "All new buildings net zero emissions by 2030" for several countries, percentage reduction targets, or EU legal requirements; corresponding policy markers ●, v, m,v preserved as in the source.
- Sources: Climate Transparency (2021); IEA (2020); Government Websites.

### Some Broader Mitigation Measures (Table A‑7, Measures Excluded from the Analysis)
- Argentina:
  - Climate change law establishes minimum standards including National Climate Change Response Plan, National System for GHG Inventory, monitoring of mitigation initiatives.
  - Invest US $16.6 billion to reactivate railway lines by 2030.
- Australia:
  - 2021-22 budget funds clean hydrogen, CCS, payments to farmers through national soil carbon innovation challenge, Climate Active framework, businesses introducing energy efficiency measures.
  - Emissions reduction fund for voluntary carbon credit sales to the government; small-scale Renewable Energy Scheme; national energy efficiency measures; National Energy Productivity Plan; National Food Waste Strategy; legislated phase-down of HFCs; state renewable targets.
  - Announced National Reconstruction Fund, Regions Fund, Driving the Nation Fund, and electric car tax incentives.
- Brazil:
  - Sectoral plans: ABC Plan; Steel Industry Plan; Low Carbon Emission Economy in Manufacturing Industry Plan; Sectoral Transport and Urban Mobility Plan; Low-Carbon Emission Mining Plan.
  - National Energy Plan (2050).
- Canada:
  - Canadian Net-Zero Emissions Accountability Act (legislates 2050 net-zero); 2030 Emissions Reduction Plan.
  - Developing GHG offset system; funding CAD $7 billion for nature-based solutions; CAD $1.72 billon to clean up inactive oil and gas wells.
  - Planting two billion trees over ten years; updating methane emission reduction targets.
- China:
  - 14th Five-Year Plan on energy (2022); medium-term regulatory targets: reduce energy and carbon intensities by 13.5 percent and 18 percent, respectively; increase nuclear power generation to reach 70GW by 2025.
  - Aim to increase forest stock volume by 6 billion cubic meters from 2005 levels by 2030.
  - Nationwide trading system expected to expand to cover seven industrial sub-sectors.
- France:
  - 2022 Climate and Resilience Law; National Energy and Climate Plan (2020-2030) including National Low Carbon Strategy; Multiannual Energy Programme.
- Germany:
  - Climate Action Plan 2050 to reach GHG neutrality by 2050; Ministry of Economic Affairs and Climate; "Easter Package" promoting renewable energy; increased funding for efficient buildings.
- India:
  - Perform, Achieve and Trade mechanism (intensity-based energy targets); pilot carbon market for SMEs and waste; FAME scheme; target of at least one charging station per 3km2; plan for energy storage and grid integration with role for hydrogen.
  - National Urban Transport Policy, Smart Cities Mission; blend 20 percent ethanol in petrol by 2025; Railways target net-zero emissions by 2030 after electrification by 2023; National Mission for Sustainable Agriculture.
- Indonesia:
  - National energy plan; electricity sector plan; National Medium-Term Development Plan 2020-2024.
  - Biofuel mandate; biodiesel from palm oil; Indonesian Sustainable Palm Oil certification; forestry sector plan to be net sink by 2030.
- Italy:
  - 2019 Climate Decree; Ministry of Ecological Transition; national recovery and resilience plan earmarks €62 billion including low-carbon public transit and rail infrastructure.
- Japan:
  - Sixth Basic Energy Plan; Global Warming Prevention Plan; long-term growth strategy based on NDC; Outlook for Energy Supply and Demand in FY2030.
  - Promote CCS technologies by 2050; Energy Conservation Act; improvements to coal-fired power plant efficiency standards and FIT revisions; improved fuel economy standards for trucks and buses by 2025.
- Mexico:
  - Guided by General Climate Change Law, National Strategy on Climate Change, Special Programme on Climate Change (last published 2021).
  - Committed US $2 billion to reduce methane (2022); signed forestry pledge at COP26; NDC aims to reach zero deforestation by 2030.
- Russia:
  - 2021 long-term climate strategy with projections until 2050; Draft Energy Efficiency Action Plan (2021).
- Saudi Arabia:
  - Vision 2030 aims to reduce fossil fuel subsidies; promoting circular carbon economy; grid interconnection with neighbors.
  - Increased insulation standards for new buildings and air conditioners; committed to plant 450 million trees by 2030 and 10 billion trees longer term.
- South Africa:
  - Climate Change Bill: establish national GHG emissions trajectory; Ministerial Committee on Climate Change to set sectoral emission targets every five years; carbon budgets for large emitters; Bill under consideration of the National Assembly.
- South Korea:
  - Framework Act on Carbon Neutrality and Green Growth (legislated climate neutrality); impact assessment strategy for public projects; integrates targets into budgeting; introduces climate response fund.
  - Green New Deal (2020) invests US $31 billion; 3rd Energy Master Plan (2019); 9th 15-year Basic Plan for Electricity Supply and Demand (2020); revised Renewable Energy Act (2021); joined Global Methane Pledge (2021).
- Turkey:
  - National Climate Change Strategy (2010-2023); National Climate Change Action Plan (2011-2023); 10th Development Plan; National Renewable Energy Action Plan; National Energy Efficiency Plan.
  - Commit to increase forest cover to 30% by 2023; policies to reduce waste-sector GHGs; aims to produce domestic EVs.
- UK:
  - 2020 Ten Point Plan for a Green Industrial Revolution; Energy White Paper (2020); 2021 Net Zero Strategy, hydrogen and building strategies.
- US:
  - Infrastructure Investment and Jobs Act invests $1.2 trillion in EV charging infrastructure and efficiency in power grid and building sector.
  - 2022 Inflation Reduction Act aims to reduce emissions mainly via subsidies and tax credits.
  - Passenger vehicle emission standard rollbacks reversed for model years 2023-2026; bill on hydrofluorocarbons introduced to reduce production over upcoming 15 years.

*Annex A. Background Information on Mitigation — IMF Working Paper materials.*

### Annex B. Policy Equivalence from the

### Annex B. Policy Equivalence from the Perspective of Implementing Border Carbon Adjustments

### BCA adjustments for alternative mitigation policies
- Charges on embodied carbon in products imported into a jurisdiction with a BCA should be reduced to the extent that the foreign country applies carbon pricing to those emissions.
- Alternative policies with similar effects on emissions can have very different impacts than carbon pricing on production costs.
- Generally, carbon pricing places higher private costs on firms than equivalent non-pricing policies because remaining emissions (after abatement measures) also face a charge.
- The charge on remaining emissions is generally larger than the cost of abatement measures—this is the charge the BCA seeks to equalize.
- Some regulations could place higher private costs on firms than emissions-equivalent carbon pricing, for example:
  - In cases of very high emissions reductions (when charges on remaining emissions are a relatively small part of firms’ compliance cost).
  - When regulations are inefficiently designed.
- Non-pricing policies reduce the assessed emissions intensity of products and therefore reduce the charges foreign firms pay under the BCA; no further adjustment is needed because there is no charge on remaining emissions.

### Granularity and focus on EITE sectors
- Equivalence from a BCA perspective would require a granular approach, focusing on energy-intensive, trade-exposed (EITE) sectors like steel, aluminum, and cement.
- These sectors and the emissions embodied in their tradeable goods are a minor share of global emissions.

### BCAs, mitigation encouragement, and exemptions
- Countries might implement BCAs to encourage mitigation in other countries.
- A country imposing a BCA might choose to exempt an entire country on grounds that it is doing its “fair share” of mitigation effort overall, for example as a member of a carbon club.
- In that case, a mitigation-based equivalence could be the appropriate metric for exemption.
- Such an arrangement would address concerns about carbon leakage (since the emissions of both countries are effectively agreed in the context of the carbon club), but would not necessarily be a remedy for concerns about EITE competitiveness.
- The arrangement might be challenged at the WTO if a firm from a non-exempted country could show its product had lower embodied emissions than an equivalent product from an exempted country.

*Source: Annex B. Policy Equivalence from the Perspective of Implementing Border Carbon Adjustments (excerpt).*

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### Annex C. The IMF-WB Climate Policy Assessment Tool (CPAT)

### (i) Model description and caveats
- CPAT covers over 170 countries and provides projections of fuel use and CO2 emissions for the four major energy sectors—power, industry, transport, and buildings.
- The tool starts with recently observed use of fossil fuels and other fuels by sector and projects fuel use forward in a BAU using:
  - GDP projections;
  - Assumptions about the income elasticity of demand and the price responsiveness of fuel use in different sectors;
  - Assumptions about the rate of technological change that affects energy efficiency and the productivity of different energy sources;
  - Future international energy prices.
- In projections, current carbon pricing, non-pricing policies, and fuel taxes are held fixed in real terms at their 2021 levels or stringency.
- The impact of carbon pricing on fuel use and emissions depends on:
  - (i) the proportionate impact on future fuel prices; and
  - (ii) the price responsiveness of fuel use in different sectors.
- Proportionate price increases depend on BAU prices, carbon emissions factors for fuels, and the pass through of carbon charges into fuel user prices which, for the most part, is taken to be 100 percent.
  - Footnote explanation: fuel supply curves are perfectly elastic in many cases; in countries with SOEs or regulated pricing, pass through rates for fossil fuels are estimated based on historical relationships and taken to be 0.25, 0.5, or 0.75, though most are estimated at 1.0.
  - In power generation, carbon charges, including from ETSs with free allowance allocation, are assumed to be fully reflected in higher electricity prices.
- Power sector modelling:
  - Results are averaged over two models:
    - A simplified model of fuel generation choices, parametrized to match fuel price responsiveness of more complicated models.
    - A technology-explicit, hybrid economic-engineering model where forward-looking agents choose dispatch and investment to minimize levelized costs.
  - Carbon prices reduce dispatch from fossil fuel plants and shift investment towards renewable generation, subject to constraints (notably a maximum increase in annual scale-up of renewables).
  - The engineering model adopts a functional form accounting for inertia in decision making and distribution of costs within generation sources, producing gradual switching between sources.
- Industrial sector:
  - Disaggregated into eight industries (e.g., iron and steel, machinery, cement).
  - Carbon pricing reduces emissions intensity through cleaner or more energy-efficient technologies and reduces production levels as carbon charges are reflected in higher consumer prices.
- Transport sector:
  - Fuel consumption from gasoline and diesel vehicles declines as individuals switch to more fuel-efficient vehicles and reduce vehicle miles travelled.
  - Fuel consumption in railways, domestic aviation, and domestic shipping modelled equivalently.
- Buildings sector:
  - Fuel and electricity demand decomposed into responses reflecting changes in energy and CO2 intensity (e.g., insulation upgrades, shifting from fossil to electric heating, adoption of energy-efficient appliances) and behavioral changes.
- Capital turnover models for new investment policies:
  - Light-duty vehicle sector distinguishes ICEVs and EVs in the vehicle stock, with vehicle fleet turnover rates of 6.7 percent a year based on an assumed 15-year life.
  - In building sector, commercial and residential buildings are distinguished with 1.8 and 1.2 percent of these stocks replaced annually (based on assumed building lives of 55 and 85 years respectively).
  - The CO2 and electricity intensity of new buildings is initially assumed to be 30 percent of that of the existing building stock (with new building policies progressively reducing that, usually to 0 percent by 2030).
- Data and calibration:
  - CPAT populated using energy consumption data by country and sector compiled from the IEA and other sources (latest data is for 2019).
  - GDP projections are from the latest IMF forecasts.
  - Data on energy taxes, subsidies, and prices by energy product and country compiled from publicly available and IMF and World Bank sources, with inputs from proprietary and third-party sources.
  - International prices for coal, oil, and natural gas projected forward using IMF price projections as of 2022.
  - Fuel and electricity price responsiveness parameterized to be broadly consistent with empirical evidence and results from energy models (fuel and electricity price elasticities over the longer term are generally between -0.5 and -0.8).
  - Carbon emissions factors by fuel product are from IIASA (2021).
  - Emissions in 2019 are calibrated to match those implied by UNFCCC GHG and emissions in 2020-1 calibrated to match those of EC-JRC (Crippa and others 2018), Global Carbon Budget (Friedlingstein and others 2021), and various sources.
- Mitigation commitments among G20 countries are converted into absolute emissions targets for 2030 by CPAT to provide consistent comparisons with BAU projections.
- Caveats:
  - Fuel price responses become very uncertain for large policy changes that might drive non-linear adoption of technologies like CCS and direct air capture.
  - Fuel price responsiveness is approximately similar across countries in CPAT but may differ in practice.
  - CPAT implicitly accounts for general equilibrium effects such as the (modest) feedback effect on energy demand from policy-induced changes in GDP, but does not explicitly account for international feedback effects (e.g., changes in trade patterns) and changes in international fuel prices from simultaneous reforms in large countries.
  - The model is parameterized to be broadly consistent with more detailed energy and computable general equilibrium models.

### (ii) Calculating CO2 reductions and carbon price equivalence for alternative mitigation approaches
- Economywide CO2 reductions of alternative approaches are obtained by subtracting economywide emissions in 2030 under the policy or target from economywide BAU CO2 emissions in 2030.
- The ECPE and SCPE of the other policy is obtained by modelling in CPAT the equivalent carbon price at economywide and sectoral level respectively required to achieve the equivalent CO2 reduction.
- Economywide pricing involves applying new charges on all fossil fuel use across the four energy sectors in proportion to their carbon content, while partial pricing limits these new charges to a subset of sectors.
- Renewables targets are modelled by a renewable generation subsidy funded by a tax on electricity consumption (this promotes shifting towards renewables while approximately neutralizing any impact on overall electricity production). The subsidy is set to achieve a given target for the future renewable generation share.
- Coal phaseout modelled by a tax on coal use with impacts on electricity demand approximately neutralized through using revenues to subsidize electricity consumption.
- Policies to reduce direct CO2 intensity of industrial production are modelled by a charge on the carbon content of fuel inputs with revenues returned in output-based subsidies (reducing emissions intensity while approximately neutralizing output effects); charges are set to achieve a given reduction in CO2 intensity of production.
- CO2/km standards for new vehicles are modelled by a ‘virtual’ or ‘shadow’ price that cost-effectively promotes reductions in CO2/km through both shifting to more efficient ICEVs and from ICEVs to EVs without any change in fleet turnover rates; the shadow price is set to achieve target reductions in CO2/km.
- Additional emissions reductions from EV targets are calculated from the supplementary dynamic model of vehicle turnover.
- Supplementary building model used to calculate direct and indirect reductions in CO2 emissions from emissions targets for new and existing buildings.
- ECPE of countries’ pre-existing fuel tax/subsidy systems is computed by:
  - First setting the tax/subsidy on all fossil fuels across different sectors gradually to zero by 2030 (which in most cases increases economywide emissions).
  - Then imposing an economywide carbon price equal to the emissions reductions sufficient to achieve the original BAU level (the BAU with pre-existing fuel taxes/subsidies kept fixed at 2021 levels).

*Source: Annex C. The IMF-WB Climate Policy Assessment Tool (CPAT) (excerpt).*

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_Source: https://www.imf.org/-/media/files/publications/wp/2022/english/wpiea2022254-print-pdf.pdf_