Scaling up Climate Mitigation Policy in Germany
IMF Working Papers, September 27, 2021
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Bibliographic details
- Authors: Simon Black, Ruo Chen, Aiko Mineshima, Victor Mylonas, Ian W.H. Parry, Dinar Prihardini
- Published: September 27, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513594958.001
National targets and policy context
- Germany has national greenhouse emissions targets of a 65 percent reduction below 1990 levels by 2030 and net zero emissions by 2045, along with various sectoral emissions goals.
- The government has introduced multi-pronged policy measures, including a national emissions trading system (ETS), which complements the ETS at the EU level.
Key findings on emissions and price responsiveness
- The paper shows substantial variation in the price responsiveness of emissions across sectors and thus prices implied by sectoral targets.
- Sectoral differences imply differing marginal abatement costs and therefore differing carbon prices needed to meet sectoral goals.
Policy recommendations to meet targets with greater certainty and cost effectiveness
- Further strengthen carbon pricing, for example through automatically rising price floors for the national ETS after 2026.
- Harmonize carbon pricing to reduce cross-sector differences in marginal abatement costs.
- Introduce feebates (revenue neutral tax–subsidy schemes) to reinforce incentives at the sectoral level.
Distributional effects and mitigation
- The paper studies the distributional impact of higher carbon pricing.
- It suggests that reducing social security contributions can mitigate the regressive direct impact of higher carbon pricing on lower-income households.
Competitiveness and leakage concerns
- Concerns with carbon leakages and firms’ competitiveness are best addressed through agreeing on an international carbon price floor.
Subjects and keywords
- Subjects: Carbon tax, Climate change, Environment, Greenhouse gas emissions, Taxes
- Keywords include: carbon mitigation policy, Carbon tax, Climate change, climate mitigation, Climate mitigation, electric vehicles, emissions surcharge, emissions trading system, feebate, forest carbon storage., Germany meet emissions target, Global, Greenhouse gas emissions, policy measure, policy option, price floor, renewables
IMF Working Paper No. 2021/241 (Simon Black, Ruo Chen, Aiko Mineshima, Victor Mylonas, Ian W.H. Parry, Dinar Prihardini), September 27, 2021; Pages: 36; Volume: 2021; Issue: 241; DOI: https://doi.org/10.5089/9781513594958.001
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