Home > Publications and Papers
 |
Price Caps and Price Floors in Climate Policy- A Quantitative Assessment | |
| 2008 | ||
| Executive Summary | Size: 585 KB | |
| Table of Contents | ISBN: N/A | |
| No. of Pages: 53 | ||
| Download the PDF | Type of Document: free | |
This study assesses the long-term economic and environmental effects of introducing price caps and price floors in hypothetical climate change mitigation architecture, which aims to reduce global energy-related CO2 emissions by 50% by 2050. Based on abatement costs in IPCC and IEA reports, this quantitative analysis confirms what qualitative analyses have already suggested: introducing price caps could significantly reduce economic uncertainty. This uncertainty stems primarily from unpredictable economic growth and energy prices, and ultimately unabated emission trends. In addition, the development of abatement technologies is uncertain. With price caps, the expected costs could be reduced by about 50% and the uncertainty on economic costs could be one order of magnitude lower. Reducing economic uncertainties may spur the adoption of more ambitious policies by helping to alleviate policy makers’ concerns of economic risks. Meanwhile, price floors would reduce the level of emissions beyond the objective if the abatement costs ended up lower than forecasted. If caps and floors are commensurate with the ambition of the policy pursued and combined with slightly tightened emission objectives, climatic results could be on average similar to those achieved with “straight” objectives (i.e. with no cost-containment mechanism). Related links: Assessing the value of price caps and floors, November 2009 Presentation at Poznan Special Session on CO2 Cost Containment Mechanisms Certainty versus Ambition |
||
Feedback, comments suggestions on this publication? Please contact us at this link.