IMF Working Papers

Climate Policy Options: A Comparison of Economic Performance

By Jean Chateau, Florence Jaumotte, Gregor Schwerhoff

December 9, 2022

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Jean Chateau, Florence Jaumotte, and Gregor Schwerhoff. Climate Policy Options: A Comparison of Economic Performance, (USA: International Monetary Fund, 2022) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We use a global computable general equilibrium model to compare the economic performance of alternative climate policies along multiple dimensions, including macroeconomic outcomes, energy prices, and trade competitiveness. Carbon pricing which keeps the aggregate cost lower and preserves better the overall competitiveness than across-the-board regulation is the first-best policy, especially in energy intensive and trade exposed industries. Regulations and feebates are good alternatives in the power sector, where technological substitution is possible. Feed-in subsidies, if used alone, are not cost effective.

Keywords: Carbon leakage, Carbon tax, Climate policy, Policy coordination, Regulation.

Publication Details

  • Pages:

    48

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2022/242

  • Stock No:

    WPIEA2022242

  • ISBN:

    9798400225239

  • ISSN:

    1018-5941