Ural federal university: Economists Publish a Study on Designing an Effective Climate-Policy Mix

An international research team, with the participation of a scientist from the Ural Federal University, evaluated data from theoretical modeling, empirical and experimental studies on how interactions between different instruments affect the overall reduction of carbon dioxide emissions into the atmosphere. Such interactions take the form of negative, zero or positive synergistic effects. Instruments considered include technical standards, a carbon tax, subsidies for the purchase of environmental goods, measures to support innovation, and the provision of information and examples of behavior.

The results of the study, supported by a grant from the Russian Science Foundation, are published in the journal Climate Policy.

Based on the findings, they developed four climate policy scenarios and examined their strengths and weaknesses. In assessing climate policy, they considered factors such as efficiency in terms of reducing CO2 emissions to the atmosphere and in terms of the associated costs, as well as the potential for harmonizing international policies. The authors concluded that a combination of a carbon certifications market, subsidies for low-carbon products, and provision of examples of behavior best fit these criteria.

According to UrFU professor Ivan Savin, there are several reasons why caution should be exercised when combining instruments into a set of policies.

“As we show in detail in the article, climate policy instruments can overlap and create negative synergies. This can even lead to the fact that together they perform worse than a separate tool. Given that each policy instrument requires additional costs for the regulator in terms of costs and human resources, including transaction costs, monitoring and control costs, and sometimes significant budget spending (for example, in the case of subsidies), it is advisable for governments to limit the number of simultaneously used instruments. Moreover, when countries try to harmonize the instruments they use (as in the case of the EU or the CIS), combinations of instruments cause additional difficulties compared to individual instruments, ” explains Dr. Ivan Savin.

The most productive options, according to scientists, combine support for innovation, providing information with either a carbon tax and subsidies for low-carbon goods, or a carbon certificate market. At the same time, the latter option has great potential for harmonizing international policy, since today there are already successful examples of a single market for CO2 emissions certificates in the EU and North America.

“Some countries are hesitant to introduce tough and effective climate policy measures, fearing to reduce the competitiveness of their economies. Therefore, it is important that these measures are harmonized among as many countries as possible. The need for global policy harmonization can be seen as an argument for limiting the number of instruments, for a transparent and simple mix of measures that will be easier to compare and integrate across countries. If, on the other hand, countries have a very complex set of instruments, it is difficult to compare and contrast them, which, in turn, will prevent the introduction of more stringent and effective regulations in the future. Moreover, complex combinations of political instruments that are widespread throughout the world can be used by politicians as an excuse to say “we are already doing a lot,” even when the overall effectiveness of the combination of instruments leaves much to be desired,” explains Ivan Savin.

Therefore, it is logical to assess the feasibility of introducing new regulatory instruments based on their potential synergy with existing measures

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