20221208-IMF-Climate_Policy_Options_A_Comparison_of_Economic_Performance_48页_998kb

Climate Policy Options: Economic Performance Comparison

This paper compares the economic performance of alternative climate policies using a global computable general equilibrium (CGE) model. Carbon pricing (carbon tax or feebate) is generally the first-best policy due to its cost-effectiveness and ability to allocate emission reductions efficiently, while also preserving competitiveness in energy-intensive industries through revenue recycling into lower labor taxes. Non-pricing policies like regulations and feed-in subsidies are good alternatives in certain contexts but often have higher costs due to inefficiencies such as over-the-demand rebound effects.

Key Findings:

1. Carbon Tax: Achieves lower overall economic costs than most regulations. Small GDP losses (<0.6% across all countries) and moderate electricity price increases (under 10%) are typical.
2. Regulations: (e.g., on fossil fuel share) are more costly, especially in industries with heterogenous abatement costs or rigid supply chains, due to inefficient implementation masking economic damage.
3. Feed-in Subsidies: Benefit energy-intensive trade-exposed (EITE) industries by lowering electricity prices but require higher taxes, leading to greater costs than carbon pricing unless combined with complementary measures.

Cross-Border Effects:

• Carbon Leakage: Minimal (~0.1–7%) when major economies collaborate. Competitiveness concerns arise from asymmetric policies, with carbon pricing featuring slightly better than regulation in some cases due to flexibility.
• Energy Security: Both carbon pricing and regulations reduce fossil fuel imports, improving energy security.

Policy Recommendations:
Carbon pricing is generally superior, but its design must ensure revenue recycling to minimize economic harm. For rigid industries like iron and steel, regulations may be necessary but should avoid hard-to-tailor constraints. Synergistic policy mixes (carbon pricing + feed-in subsidies) can enhance effectiveness and reduce costs. International coordination, e.g., a carbon floor, helps mitigate competitiveness risks.

Annex Notes:
The IMF-ENV model highlights technological heterogeneity’s impact on policy ranking. Feebates balance carbon tax features with incentive-based energy shifts. Sector-specific modeling confirms carbon pricing’s efficiency for cross-border industries while accounting for fragmentation risks.