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Using the Market to Address Climate Change: Insights from Theory & Experience

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  • Stavins, Robert Norman
  • Aldy, Joseph Edgar

Abstract

Emissions of greenhouse gases linked with global climate change are affected by diverse aspects of economic activity, including individual consumption, business investment, and government spending. An effective climate policy will have to modify the decision calculus for these activities in the direction of more efficient generation and use of energy, lower carbon-intensity of energy, and a more carbon-lean economy. The only technically feasible and cost-effective approach to achieving this goal on a meaningful scale is carbon pricing: that is, market-based climate policies that place a shadow-price on carbon dioxide emissions. We examine alternative designs of three such instruments: carbon taxes, cap and trade, and clean energy standards. We note that the U.S. political response to possible market-based approaches to climate policy has been, and will continue to be, largely a function of issues and structural factors that transcend the scope of environmental and climate policy.

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  • Stavins, Robert Norman & Aldy, Joseph Edgar, 2012. "Using the Market to Address Climate Change: Insights from Theory & Experience," Scholarly Articles 10605425, Harvard Kennedy School of Government.
    • Handle: RePEc:hrv:hksfac:10605425
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    Cited by:

    1. Jenkins, Jesse D., 2014. "Political economy constraints on carbon pricing policies: What are the implications for economic efficiency, environmental efficacy, and climate policy design?," Energy Policy, Elsevier, vol. 69(C), pages 467-477.
    2. Xiaochen Gong & Yunxia Liu & Tao Sun, 2020. "Evaluating Climate Change Governance Using the “Polity–Policy–Politics” Framework: A Comparative Study of China and the United States," Sustainability, MDPI, vol. 12(16), pages 1-18, August.
    3. Farrell, Niall, 2023. "Policy design for green hydrogen," Renewable and Sustainable Energy Reviews, Elsevier, vol. 178(C).
    4. Jin, Jiayu & Han, Liyan & Wu, Lei & Zeng, Hongchao, 2020. "The hedging effect of green bonds on carbon market risk," International Review of Financial Analysis, Elsevier, vol. 71(C).
    5. Rhodes, Ekaterina & Scott, William A. & Jaccard, Mark, 2021. "Designing flexible regulations to mitigate climate change: A cross-country comparative policy analysis," Energy Policy, Elsevier, vol. 156(C).
    6. Aldy, Joseph, 2017. "Designing and Updating a US Carbon Tax in an Uncertain World," Working Paper Series rwp17-001, Harvard University, John F. Kennedy School of Government.
    7. Dissanayake, Sumali & Mahadevan, Renuka & Asafu-Adjaye, John, 2020. "Evaluating the efficiency of carbon emissions policies in a large emitting developing country," Energy Policy, Elsevier, vol. 136(C).
    8. David Amdur & Donald Dale & Christopher Borick & Barry G. Rabe, 2015. "Individual Discount Rates And Climate Change: Is Discount Rate Associated With Support For A Carbon Tax?," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 6(04), pages 1-14, November.
    9. Lea-Rachel Kosnik, 2018. "Cap-and-trade versus carbon taxes: which market mechanism gets the most attention?," Climatic Change, Springer, vol. 151(3), pages 605-618, December.
    10. Jae-Do Song & Young-Hwan Ahn, 2021. "Price Discovery of Consignment Auctions for Emission Permits," Energies, MDPI, vol. 14(21), pages 1-13, October.

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