Back Matter

Author(s):
Ruud Mooij, Michael Keen, and Ian Parry
Published Date:
September 2012
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    Glossary of Technical Terms and Abbreviations

    Additionality.

    An emissions reduction is called “additional” if that reduction would not have occurred in the absence of a crediting (or other climate) program.

    Afforestation.

    The conversion of former agricultural and abandoned croplands back into forests.

    Air-capture technologies.

    These involve bringing air into contact with a sorbent material that binds chemically with CO2 and extracts the CO2 from the sorbent for underground, or other, disposal. Conceivably, if these technologies could be scaled-up globally (and funded publicly), they might be used to slow atmospheric GHG accumulations, although only in high-warming scenarios, given their high costs.

    Biomass generation coupled with carbon capture and storage (BECS).

    A potential technology (as yet unproven) for capturing the CO2 released when biomass is fired with other power generation fuels. This would result in negative emissions, given that biomass growth takes CO2 out of the atmosphere.

    BRIC countries.

    Refers to the group of large, rapidly industrializing countries—Brazil, Russia, India, and China—that are projected to account for a large share of the future global growth in GHG emissions.

    British thermal unit (Btu).

    Measurement of energy based on heat content.

    Carbon budget.

    Specifies a maximum allowable amount of CO2 emissions that a country can emit, cumulated over a long period (say 10 years).

    Carbon capture and storage (CCS).

    An (as yet unproven) technology for extracting CO2 emissions from smokestacks and transporting them via pipelines to underground geological storage sites.

    Carbon dioxide (CO2).

    The predominant GHG. To convert tonnes of CO2 into tonnes of carbon, divide by 3.67. To convert a price per tonne of CO2 into a price per tonne of carbon, multiply by 3.67.

    Carbon tax.

    A tax imposed on CO2 releases emitted largely through the combustion of carbon-based fossil fuels. Administratively, the easiest way to implement the tax is through taxing the fossil fuels—coal, oil, and natural gas—on the basis of their carbon content.

    CO2 equivalent.

    The warming potential of a GHG over its atmospheric lifespan (or over a long time period) expressed in terms of the amount of CO2 that would yield the same amount of warming.

    Clean Development Mechanism (CDM).

    Under this program, emission-reduction projects in developing countries can earn certified emission reduction credits that can be purchased by industrialized countries to meet a part of their emission reduction targets under the Kyoto Protocol.

    Clean energy standard.

    A proposed policy to lower the CO2 intensity of the power generation sector through requiring a shift toward clean, or relatively clean, fuels (in effect, it provides similar incentives for fuel switching as would a CO2 per kWh standard).

    Common but differentiated responsibilities.

    A principle of the UN Framework Convention on Climate Change calling for developed economies to bear a disproportionately larger burden of mitigation costs (e.g., by funding emissions reduction projects in developing economies), given that they are relatively wealthy and contributed most to historical atmospheric GHG accumulations.

    Computable general equilibrium model.

    A model of the whole economy that captures how changes in one market interact with other markets, the government sector, and (usually) choices over labor supply and investment.

    Conference of the Parties (COP).

    The governing body of the UN Framework Convention on Climate Change that advances implementation of the convention through decisions taken at its annual meetings.

    Credit trading.

    In cap-and-trade systems, credit trading allows firms with high pollution abatement costs to do less mitigation by purchasing allowances from relatively clean firms with low abatement costs. Similarly, in regulatory systems, credit trading allows firms with high compliance costs to fall short of an emissions (or other) standard by purchasing credits from other firms that exceed the standard.

    Deforestation.

    Clearance of forests, mostly in tropical countries, and mostly for the preparation of land for use as pasture or crops.

    Discount rate.

    In the present context, this mainly refers to the rate at which future climate change damages are discounted back to the present. There are two alternative notions of the appropriate discount rate. One is the descriptive rate, which is inferred from observations of people’s actual behavior (e.g., saving versus consumption decisions over time, allocations of investment among more and less risky assets). The other is the prescriptive rate, which is based on a decision maker’s judgment over how the well-being of future generations should be weighed against that of the present generation.

    Downstream policy.

    This refers to an emissions policy imposed at the point where CO2 emissions are released from stationary sources (primarily from smokestacks at coal plants and other facilities).

    Emissions leakage.

    This refers to a possible increase in emissions in other regions in response to an emissions reduction in one country or region. Leakage could result from the relocation of economic activity, such as the migration of energy-intensive firms away from countries whose energy prices are increased by climate policy. Alternatively, it could result from price changes, such as increased demand for fossil fuels in other countries as world fuel prices fall in response to reduced fuel demand in countries taking mitigation actions.

    Emissions standard.

    Sets an allowable emissions rate for producers of energy or energy-using products. For vehicles, this would be CO2 per kilometer averaged across a manufacturers’ sales fleet, while for a power generator, it would be CO2 emissions per kilowatt-hour averaged across plants. Allowing firms to trade credits among themselves and across different periods of time is important for containing the cost of the policy.

    Emissions trading system or scheme (ETS).

    A market-based policy to reduce emissions. Covered sources are required to hold allowances for each tonne of their emissions or (in an upstream program) embodied emissions content in fuels. The total quantity of allowances is fixed and market trading of allowances establishes a market price for emissions. Auctioning the allowances provides a valuable source of government revenue.

    Energy Modeling Forum (EMF).

    Based at Stanford University, the EMF provides a forum for discussing modeling results related to energy and environmental policy.

    Equilibrium climate sensitivity.

    A parameter summarizing the projected long-term climate response (i.e., warming) to a doubling of atmospheric CO2 (equivalent) concentrations over their preindustrial levels.

    Feebate.

    This policy imposes a fee on firms with emission rates (e.g., CO2 per kilowatt-hour) above a “pivot point” level and provides a corresponding subsidy for firms with emission rates below the pivot point. Alternatively, the feebate might be applied to energy consumption rates (e.g., gasoline per kilometer) rather than emission rates. Feebates are the pricing analog of an emissions (or energy) standard, but they circumvent the need for credit trading (across firms and across time periods) to contain policy costs.

    Feed-in tariff.

    This policy accelerates investment in renewable energy technologies by offering long-term, guaranteed-price contracts to renewable energy producers.

    Fiscal cushioning.

    In the present context, this refers to adjustments to broader energy taxes or subsidies that offset some of the environmental effectiveness of a formal carbon tax. It would be potentially important to monitor (and perhaps penalize) fiscal cushioning in an international carbon tax agreement.

    Forest management.

    In a climate mitigation context, this refers to management practices that affect the amount of carbon sequestered in a forest. These practices might include conversion of forestland to plantations, postponing timber harvests, planting trees rather than allowing natural regeneration, thinning trees and undergrowth to enhance forest growth, controlling forest fires and other disturbances, and fertilizing.

    Geo-engineering.

    This refers to the (potential) use of technologies for altering the global climate system to counteract the effect of higher temperatures. Most prominently, these technologies include “solar radiation management,” the deflection of incoming sunlight through shooting reflective particles into the stratosphere. Geo-engineering technologies may be very inexpensive to deploy, but could involve severe downside risks (e.g., radically altering precipitation patterns, overcooling the planet), and they do not address the problem of ocean acidification.

    Gigatonne (Gt).

    1 billion (109) tonnes.

    Greenhouse gas (GHG).

    A gas in the atmosphere that is transparent to incoming solar radiation but traps and absorbs heat radiated from the earth. CO2 is easily the most predominant GHG.

    Green Climate Fund (GCF).

    This is a proposed fund to transfer money from developed countries to the developing world in order to assist the latter with climate adaptation and mitigation projects.

    Integrated Assessment Model (IAM).

    A model that combines a simplified representation of the climate system with a model of the global economy to project the impacts of mitigation policy on future atmospheric GHG concentrations and temperature.

    Interagency Working Group on the Social Cost of Carbon (SCC).

    A group of representatives from U.S. executive branch agencies and offices tasked with developing consistent estimates of the SCC for use in regulatory analysis.

    Intergovernmental Panel on Climate Change (IPCC).

    The IPCC assesses the scientific, technical, and socioeconomic information relevant for understanding climate change. Its Fifth Assessment Report (AR5) is to be published in 2014.

    International Civil Aviation Organization (ICAO).

    A specialized agency of the United Nations whose objectives include providing safe, secure, sustainable, and efficient global civil aviation while minimizing aviation’s adverse environmental effects.

    International Maritime Organization (IMO).

    Another specialized agency of the United Nations whose main purpose is to develop and maintain a regulatory framework for addressing environmental, safety, and other issues related to international shipping.

    Kyoto gases.

    This refers to the six gases for which emission reduction pledges were made under the Kyoto Protocol. They include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6), and two groups of gases, hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs).

    Kyoto Protocol.

    Under this protocol, 37 “Annex 1” or developed countries committed themselves to reducing CO2 and five other GHGs to about 5 percent below 1990 levels by 2012 (China was not part of the protocol and the United States never ratified it).

    Light detection and ranging (LIDAR).

    This refers to aerial photography used to measure forest volume.

    Market failure.

    A situation where the private sector by itself would not make production and consumption decisions that would be efficient from society’s perspective. The present focus is primarily on the market failure caused by excessive generation of GHG emissions that are not priced for their environmental damages. However, other market failures, such as those causing underinvestment in clean technologies (in spite of carbon pricing) are also focused on.

    Negative emissions technology.

    A technology that results in a net reduction in atmospheric concentrations of GHGs (e.g., BECS, air-capture technologies).

    Offset.

    A reduction in GHG emissions in other countries, or in unregulated sectors, that is made (and credited) in order to reduce the tax liability or permit requirements for emissions covered by a formal climate mitigation program.

    Overshooting.

    In the present context, this refers to a transitory increase in atmospheric GHG concentrations over and above some long-term target before projected concentrations eventually fall back to the target.

    Parts per million (ppm).

    Units for measuring the concentration of GHG molecules in the atmosphere by volume.

    Radiative forcing.

    The difference between incoming and outgoing radiation energy (expressed in watts per square meter). An increase in radiative forcing tends to warm global temperatures. Radiative forcing changes with changes in incoming solar radiation, in atmospheric concentrations of GHGs (which prevent outgoing radiation), and in aerosols like suspended particulates (which deflect incoming radiation).

    Reduced form model.

    A system of equations used to define the relationship between variables in a simplified form.

    Reducing emissions from deforestation and forest degradation (REDD).

    This is an effort to create a financial value for the carbon stored in forests and thereby offer incentives for developing countries to reduce CO2 emissions from deforestation and forest degradation. “REDD+” goes further and rewards forest conservation and management practices that sequester carbon.

    Renewable portfolio standard.

    A regulation that requires that a minimum share of power generation comes from renewable sources such as wind and solar. These policies are difficult to justify on climate grounds alone, as other instruments (e.g., comprehensive carbon taxes) are far more effective at exploiting emission reduction opportunities across the economy.

    Rental payment for CO2.

    In the present context, this refers to an annual payment for carbon sequestered in forests.

    Sigmoid growth function.

    A relationship describing the growth/age profile of trees. Growth initially increases with age up to a maximum; beyond that point, it then decreases with age.

    Social cost of carbon (SCC).

    This refers to the net present value of damages (e.g., to agriculture, human health) due to the change in future global climate resulting from an additional tonne of CO2 emissions in a given year. It is expressed in monetary units and usually reflects worldwide damages (rather than damages to a particular country).

    Social welfare function.

    A representation of the overall well-being of a population, given their consumption and other factors like the quality of the environment.

    United Nations Framework Convention on Climate Change (UNFCCC).

    This is an international environmental treaty produced at the 1992 Earth Summit. The treaty’s objective is to stabilize atmospheric GHG concentrations at a level that would prevent “dangerous interference with the climate system.” The treaty itself sets no mandatory emissions limits for individual countries and contains no enforcement mechanisms. Instead, it provides for updates (called “protocols”) that would set mandatory emission limits.

    Upstream policy.

    In the present context, this refers to an emissions pricing policy imposed approximately at the point where fossil fuels enter the economy (e.g., on refined petroleum products or at the mine mouth for coal).

    Contributors

    Valentina Bosetti

    Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo per i Cambiamenti Climatici (CMCC), Italy

    Carlo Carraro

    University of Venice, Italy

    Ruud de Mooij

    Fiscal Affairs Department, International Monetary Fund

    Robert Gillingham

    Independent Consultant, formerly Fiscal Affairs Department, International Monetary Fund

    Charles Griffiths

    National Center for Environmental Economics, U.S. Environmental Protection Agency

    Michael Keen

    Fiscal Affairs Department, International Monetary Fund

    Elizabeth Kopits

    National Center for Environmental Economics, U.S. Environmental Protection Agency

    Alan Krupnick

    Resources for the Future, Washington, D.C., United States

    Alex Marten

    National Center for Environmental Economics, U.S. Environmental Protection Agency

    Robert Mendelsohn

    Yale University, Connecticut, United States

    Chris Moore

    National Center for Environmental Economics, U.S. Environmental Protection Agency

    Steve Newbold

    National Center for Environmental Economics, U.S. Environmental Protection Agency

    Sergey Paltsev

    Massachusetts Institute of Technology (MIT), United States

    Ian Parry

    Fiscal Affairs Department, International Monetary Fund

    Rick van der Ploeg

    University of Oxford, United Kingdom

    John Reilly

    Massachusetts Institute of Technology, United States

    Roger Sedjo

    Resources for the Future, Washington, D.C., United States

    Brent Sohngen

    Ohio State University, United States

    Tom Tietenberg

    Colby College, Maine, United States

    Roberton Williams

    University of Maryland and Resources for the Future, United States

    Ann Wolverton

    National Center for Environmental Economics, U.S. Environmental Protection Agency

    Index

    [Page numbers followed by b, f, n or t refer to boxed text, figures, footnotes or tables, respectively.]

    A

    Adaptation policies, x, 73–74b

    Adaptive management, 170–72

    Additionality, 89, 91, 95–96, 100, 137

    Administrative costs of carbon tax, 32, 37

    Advance auctions. See Allowance auctions

    Agriculture

    • climate change effects, 73b

    • cost of mitigation in, 58

    • deforestation related to, 90

    • forest carbon sequestration and, 92, 96–97

    • non-CO2 gas emissions from, 70n, 111

    Allowance auctions, xix, 13, 15, 151–52b, 160, 161–62

    American Clean Energy and Security Act, 166n, 170

    Appliances, household, xi, 2b, 7, 8, 28, 41–42, 80

    Australia, xix, 44, 156–57, 158, 159, 160, 161, 165, 168, 170, 172

    Automatic pricing mechanisms, 121–22, 123b

    B

    Bank taxes, 142

    Bay Area Air Quality Management District, 159, 160

    Biomass generation with carbon capture and storage, 57, 59f, 61

    Border tax adjustments, 35–36, 43–44, 106

    Brazil, 52, 62

    BRIC countries, 52

    Building codes, 7

    C

    California, 168, 170, 176n

    Canada, 44, 154–55, 160, 165

    Cancun Agreements, 49, 134

    Cap-and-trade policies

    • adaptability to changed circumstances, 14, 170–71

    • collusive behavior among sources in, 175–76

    • cost savings, 175–76

    • defining features, 2b

    • experience to date, 151–52b, 155–56

    • gifted emissions provisions, 162–64

    • hybrid programs, xix, 151b, 156–57, 158, 160

    • incentives for innovation and, 18

    • institutional capacity for, xi

    • international trading, 15

    • market capacity for, 10

    • need for transparency in, 173

    • offset provisions, xix–xx, 152b

    • permit banking in, 161

    • permit borrowing in, 161

    • price volatility controls, xi, xix, 14–15, 151–52b, 169–70

    • productive use of revenues, 12–14

    • projected outcomes in U.S., 11–12b

    • rationale, vii–ix

    • with regional price floor, 156, 170

    • temporal flexibility in implementation, 160–61

    • See also Carbon-pricing strategies

    Capital accumulation, 33

    Carbon-pricing strategies

    • adaptability to changed circumstances, 3, 14–16, 170–72

    • choice of instrument, 158

    • for climate finance, 141, 148

    • cost-effectiveness, x, 8–14

    • coverage of sources, 159–60

    • covered gases, 159

    • in developing countries, 106, 112

    • distortions caused by, 141

    • distributional outcomes of policies, 16–18, 141

    • effects of delayed or incomplete global implementation, 59–62

    • effects on corporate risk management, 177–78

    • emissions reductions from, 176–77

    • experiences to date, 151–52b, 174–79

    • hybrid strategy, xix, 151b, 156–57, 158, 160

    • implementation challenges, 1

    • incentives for technology development and diffusion in, 18, 28b, 50b, 178–79

    • international price floor, xiii

    • market evolution, 178

    • modeling policy outcomes, 55–57, 57t

    • modeling price trajectory, 50

    • opposition to, xii

    • policy design considerations, ix, xi–xii, 1, 21, 49–50b, 157–58

    • potential revenue, 141

    • pricing strategy, xiii, xv

    • productive revenue use, xii

    • rationale, x–xi, 1, 28, 133b, 136, 141, 179

    • role of offsets in, 166–68

    • social cost of carbon, xv

    • starting level prices, xvi, 49, 65, 69

    • targeting considerations, xi–xii

    • timeframe for implementation, xvi

    • See also Cap-and-trade policies; Carbon tax

    Carbon tax

    • administrative costs, 32, 37

    • amount, 44–45, 49–50

    • application, 2b, 27

    • avoidance of double taxation, 154, 160, 162

    • border adjustments, 35–36, 43–44

    • British Columbia’s program, 154–55, 160

    • choice of tax base, 29–32

    • clean development mechanism for offset credits, 39

    • collection points, 29, 37–38, 160

    • compensation for adversely affected groups, 27, 35, 162–65

    • consumption charges, 113–14

    • coverage of non-CO2 gases, 38, 159

    • current programs, 44–45

    • in developing countries, 103, 112–16

    • distributional burden, 27, 34–37

    • economic costs, 33–34, 33n

    • effects on coal industry, 36–37

    • effects on energy prices, 30t, 31

    • effects on industry competitiveness, 34–35

    • emissions reductions from, 154

    • future carbon pricing path, 40, 49, 57

    • gifted emissions, 162–64

    • hybrid programs, xix, 151b, 156–57, 158, 160

    • incentives for innovation and, 18

    • industry compensation from, xix

    • interactions with other tax system components, 112

    • international agreement, 42–44

    • international floor, 28b, 43

    • mechanism of effectiveness, 27

    • mitigation goals, 49–50

    • multi-year budget approach, 15, 43

    • objections to, 45

    • offset provisions, xx, 38, 39, 152b

    • policy design considerations, 27–28b, 28–29, 45

    • potential revenue, 12, 32

    • price stability, 15

    • projected outcomes in U.S., 11–12b

    • rationale, vii–ix, 5, 45

    • refunds to encourage carbon capture and storage, 29

    • social cost of carbon and, 83–84, 84f

    • Sweden’s program, 153–54, 159

    • technology development and, 39–42

    • transition to emissions trading program, 156–57, 158

    • use of revenues, xii, xix, 12–14, 27, 32–34, 152b, 154–55, 157, 161–66

    • welfare cost calculations, 9b

    • See also Carbon-pricing strategies

    Cement production, 58

    Charismatic offsets, 167b

    China, viii, 42, 45, 52, 62, 108, 118

    Chlorofluorocarbons, 53n

    Clean development mechanism, 39, 124–25, 168, 178

    Clean Energy Standard, 7

    Climate change

    • benefits of, 73b

    • catastrophic event risk, 70–71

    • causes and consequences, vii, viii, 69, 70–71

    • geographic variation in effects of, 70

    • global warming, viii, xiii, xiv, 49–50, 53–55, 55t, 70, 71, 73b

    • intergenerational course, xv

    • international response to date, vii

    • modeling economic impacts of, 72–74, 74t

    See also Greenhouse gases; Mitigation policy

    Climate Framework for Uncertainty, Negotiation, and Distribution, 72–73, 73b

    Coal

    • carbon content, 37

    • carbon tax collection points, 37

    • cost-effectiveness of mitigation strategies, 10–11

    • effectiveness of taxes in emissions mitigation, 31–32

    • effects of carbon tax, 31, 36–37

    • industry transition to emissions trading market, 157

    • tax on, versus carbon tax, 6

    • usage trends in developing countries, 108

    Conservation Reserve Program, U.S., 93–94

    Copenhagen Accord, 49–50b, 62, 124, 134

    Corporate Average Fuel Economy standards, 12b

    Cost of energy

    • automatic pricing mechanisms, 121–22, 123b

    • carbon tax effects, 5, 29–30, 30t, 31

    • cost-effectiveness of U.S. gasoline taxes, 12b

    • distributional outcomes of policies, 16–18

    • effects of carbon-pricing policies, 13

    • feebate effects, 7

    • fossil fuel subsidies, xviii, 103–4b

    • incentives for renewable generation and, 6n

    • mitigating negative effects of, xii

    • policy design considerations, xi

    • price ceilings and floors in carbon-pricing programs, xiii, 28b, 43, 156, 157, 170

    • pricing strategies for developing countries, xvii, 113–19, 121–22

    • transparency in tax policy, 123–24

    • vehicle fuel prices, 116–17, 117f

    Cost of mitigation

    • cost-effectiveness of policy options, 8–14, 80

    • in developing countries, 63–64

    • economic costs of carbon tax, 33–34, 33n

    • effectiveness of existing programs, 174–76

    • forest sequestration mechanisms, 90–91, 92–94, 95–96

    • forest sequestration monitoring, 95

    • international equity concerns, 62–63

    • measuring, 58

    • modeling carbon-pricing policy outcomes, 56, 58–59, 59f

    • productive use of carbon-pricing policy revenues, 13

    • projected outcomes of U.S. policies, 11–12b

    • role of offsets in reducing, 166–68

    • variation among countries, 64

    See also Financing of mitigation efforts

    Credit trading

    • cross-sectoral, 11

    • institutional capacity for carbon-pricing, xi

    • rationale, xi, 10

    • in regulatory regime, 1

    • taxation of international aviation and maritime traffic and, 144, 147

    • See also Cap-and-trade policies

    D

    Deficit reduction, carbon tax revenues for, 13–14, 33

    Deforestation, viii, 52, 56n, 89b, 90, 92, 93, 96. See also Forest sequestration

    Denmark, 44, 62, 165

    Developing countries

    • administrative burden of carbon tax, 38

    • carbon emissions from, 38, 42, 52, 103b, 105, 105f, 106, 107t, 108

    • carbon tax programs in, 103, 112–16

    • classification of countries by income, 126–27t

    • definition, 104

    • delayed or incomplete mitigation policy implementation, 60, 61

    • electricity prices, 118–19

    • energy consumption trends, 108, 111

    • energy efficiency in, 109–11

    • financial flows from developed countries for mitigation, 124–25, 133, 135–36, 147

    • fuel subsidy reforms, 119–21

    • fuel taxes and subsidies, xvii, 103–4b, 113–17

    • gasoline and diesel prices, 116–17, 117f, 118f

    • global mitigation goals and, xvii, 42, 103b, 104, 125

    • informal economy, 115–16

    • mitigation policy design, xvii, 103–4b

    • mitigation policy disincentives, 105–6

    • mitigation policy rationale, 106

    non-CO2 gas emissions from, 111–12

    • public transportation subsidies, 119

    • purchase of emissions offsets from, 15, 104, 124

    • tax on international aviation and maritime traffic and, 134b, 144, 145–46

    • vulnerability to climate change, 69, 71

    Distributional outcomes of policies

    • burden on firms, xii, 17

    • burden on households, 16–17

    • burden sharing of climate finance, 62–63, 137

    • carbon tax, 34–35, 34n, 141

    • carbon tax policy design to reduce, 27

    • compensation to developing countries for mitigation costs, 63–64

    • forest sequestration programs, 98–99

    • fuel subsidy policies, 119–21

    • strategies for ameliorating, 17–18, 35–37, 50b, 162–65

    Durban meeting, vii, 2, 61–62

    Dynamic Integrated Climate Economy, 72–73, 73–74b, 84n

    E

    Efficiency standards

    • in combination with emissions standards, xi

    • cost-effectiveness, 10

    • environmental effectiveness, x–xi, 7, 8

    • limitations of, as policy instrument, 8

    • power sector, 4–5, 8

    • See also Emissions standards; Fuel economy, vehicle

    Electricity

    • carbon tax effects on price of, 31

    • consumption tax, 154

    • effectiveness of taxes in emissions mitigation, xii, 6, 31–32

    • feebate policies, 7

    • pricing in developing economies, 118–19

    Emission Gap Report, 62

    Emissions intensity

    • calculations, 29n

    • carbon tax design, 29

    • economic status of countries and, 109–11, 110t

    • reduction, 4–5

    • trends in developing countries, 108, 111

    Emissions standards

    • cost-effectiveness, 10

    • credit trading rationale, 10

    • effectiveness of, as mitigation strategy, 7

    • incentives for innovation and, 18

    • power sector, 2b

    • in transition to carbon pricing regime, xi

    • See also Feebates

    Energy efficiency improvements, x, 36, 109–10, 156, 165. See also Efficiency standards

    Equilibrium climate sensitivity, 76, 77

    European Commission, 142

    European Union Emissions Trading Program, ix, 154, 155, 159, 163–64, 169, 174

    • emissions source coverage, 5–6, 31

    Excise taxes on electricity, xvii, 2b, 6, 27, 29n, 31–32, 32n, 35

    F

    Feebates

    • advantages, xi, 1, 21

    • cost-effectiveness, 10–11, 16

    • cross-sectoral harmonization, 11

    • definition, 3b, 7

    • incentives for innovation and, 18

    • limitations, 36

    • mechanism of action, 7, 36

    • transition to market-based instruments, 17–18

    • vehicle fuel efficiency programs, 7

    Financial activities tax, 142–43

    Financial transaction tax, 142–43

    Financing of mitigation efforts

    • additionality concerns, 137

    • assistance to developing countries, xv, 124–25, 133, 134, 135–36, 147

    • burden sharing agreements, 137

    • carbon-pricing strategies, 141, 148

    • catalyzing private sources of, 136

    • charismatic offsets for, 167b

    • fuel subsidy reforms for, 133b, 141–42

    • innovative strategies for, xv, 141–43, 148

    • international aviation and maritime traffic tax for, xvii–xviii, 134b, 143, 148

    • public financing strategies, 136–39

    • public funding needs, 134–35

    • sources, xvii–xviii, 134

    • tax strategies, 133b, 147

    Finland, 165

    Fiscal policies and performance

    • implications of emissions mitigation strategies, ix–x

    • productive use of carbon-pricing policy revenues, xii, xix, 12–14, 13, 27, 32–34

    • See also Financing of mitigation efforts

    Fluorinated gases, 38, 39, 53, 53n

    Forest Carbon Partnership Facility, 90

    Forest sequestration

    • additionality issues, 89, 91, 95–96, 100

    • administrative and accounting challenges, 39, 89b, 90b, 91, 94–99, 100

    • afforestation to increase, 90, 92, 93

    • agriculture and, 92, 96–97

    • baseline setting, 89b

    • carbon tax program design, 39

    • costs, 90–91, 92–94, 95–96

    • current estimates, 90

    • discount factors, 97

    • dynamic nature of, 94, 100

    • forestry management to increase, 92, 93

    • global capacity distribution, 93

    • incentive design, 90b

    • international agreements on monitoring and enforcement, 90b, 97, 99

    • land ownership and interest issues, 98–99

    • leakage issues, 96–97, 100

    • measurement issues, 94–95

    • mechanisms for increasing, 89b, 90, 92

    • methods, xvi

    • offsets generated by, 167b, 168

    • policy design considerations, xvi–xvii, 91, 100

    • potential capacity, xvi, 89b, 90–91, 92–93

    • rationale for national programs for, xvi, 89–90b, 99, 100

    • rental payments for, 94, 96, 98

    • scaling-up, 89b, 91, 93–94

    • temporary nature of, 97–98

    • unintended consequences, 39

    Fuel economy, vehicle

    • credit trading rationale, 10

    • effectiveness of standards for, 8, 32n

    • efficiency standards, 2b, 7

    • hybrid vehicle subsidies, 12b

    • U.S. standards, 12b

    • See also Feebates; Gasoline and diesel

    Fuel switching

    • effectiveness of incentives for renewable generation, 6–7

    • effects of carbon-pricing policies, x

    • electricity taxes and, 31–32

    • passenger vehicle options, 12b

    • power sector, 4–5

    • trends in developing countries, 108

    G

    Gasoline and diesel

    • carbon tax effects on price of, 31

    • economic status of countries and prices of, 117

    • environmental effectiveness of taxes on, 12b

    • price patterns and trends, 129t, 130f

    • prices in low-income countries, 116–17, 117f, 118f

    • pricing strategies for developing countries, 121–22

    • subsidy reform implementation, 119–21

    • tax policy transparency, 123–24

    G-20 countries, 134, 135, 142

    General equilibrium modeling, 72

    Germany, 82–83b, 168

    Ghana, 121–22

    Gifted emissions, 162–64, 165

    Global warming, viii, xiii, xiv, 49–50, 53–55, 55t, 70, 71, 73b

    Global Warming Potentials, 159

    Green Climate Fund, xv, 134, 134n

    Greenhouse gases

    • concentration stabilization levels, viii, xiii–xiv, 49–50, 54–57, 57t, 60, 61, 64

    • contribution from developing economies, 42, 52, 103b, 105, 106, 107t, 108

    • determinants of emissions growth, 51

    • economic status of countries and emission of, 105f, 106, 109–11, 109t, 110t

    • effects of delayed or incomplete policy implementation, 53, 54f, 59–62, 70

    • from international aviation and maritime traffic, 143

    • modeling carbon-pricing policy outcomes, 55–57, 57t, 58–59

    • non-CO2, xix, 28, 38, 52–53, 111–12, 151b, 154, 159

    • normal absorption, viii

    • scope of coverage in carbon-pricing strategies, 159

    • sources, viii, 2, 38, 51, 52, 70n, 159–60

    • trends, viii, 51–52, 52f, 70

    • See also Climate change

    H

    Households

    • burden of mitigation policies on, xix, 1, 16–17

    • carbon tax to reduce energy consumption, 6, 29–30

    • energy intensity standards to reduce consumption, 7

    • personal income tax for climate finance, 139–40

    • reducing energy consumption by, 5

    • tax cuts financed by carbon tax, 154–55, 157, 164–65

    Hybrid automobiles, 12b

    I

    India, viii, 42, 52, 62, 105, 108

    Indonesia, 52, 62, 105, 122

    Industry

    • burden of mitigation policies on, 1, 17

    • carbon tax to reduce energy consumption, 29–30

    • compensation from carbon revenues, xix

    • contributions to CO2 emissions, 52

    • effects of carbon tax on competitiveness, 34–35

    • efficiency and emissions standards, xi, 2b

    • excise taxes on energy consumption, 6

    • reducing energy consumption by, 5

    • strategies for ameliorating carbon pricing burden, 162–64

    • See also Power sector; Private sector

    Innovation

    • carbon pricing to promote, 50b

    • deterrents to, 18

    • modeling future emissions trends and, 51

    • outcomes of carbon-pricing programs to date, 178–79

    • patent protection, 41

    • policies to promote, 3, 18, 19b, 28b, 40–41

    • private sector research and development, 40–41

    • protection of infant industries, 19–20

    • See also Technological strategies

    Integrated assessment models, 71, 72–74, 73b, 85, 91

    International agreements

    • burden sharing of climate finance, 137

    • carbon-pricing strategies, xiii

    • carbon tax floor, 28b, 43

    • compensation to developing countries for mitigation costs, 63–64

    • costs of delayed or incomplete implementation, 59–62

    • current efforts and commitments, vii, 2, 61–62

    • emissions offsets trading, 15, 39

    • emissions reduction negotiations, 42–43

    • equity considerations, 50b, 62–63

    • forest sequestration monitoring and enforcement, 90b, 97, 99

    • for taxation of international aviation and maritime traffic, 144–45, 147

    • tax instruments for climate finance, 137–38

    International aviation and maritime traffic tax

    • administration and monitoring, 146–47

    • collection points, 38, 44

    • consideration of developing economies in policy design, 134b, 144, 145–46

    • current, xviii, 143

    • economic effects, 145

    • international cooperation in policy design and implementation, 144–45

    • policy design, xviii, 144

    • potential emissions reductions from, 144

    • potential revenue, 144

    • rationale for, as source of climate financing, xvii–xviii, 134b, 143, 148

    International Civil Aviation Organization, 143, 147

    International Maritime Organization, 143, 147

    International Monetary Fund, ix–x, 134

    K

    Korea, Republic of, 62

    Kyoto Protocol, xix, 53n, 54–55, 90, 124, 143, 151b, 159

    L

    Labor market

    • calculating costs of emissions mitigation policies, 9b

    • distortions from personal income tax for climate finance, 139–40

    • tax distortions, 32–33

    Land ownership, forest carbon sequestration issues, 98–99

    Last-resort technologies, x, xiv

    Lead Phase-Out Program (U.S.), 176

    Leakage, xvi, xvii, xviii, 17, 17n, 34, 60, 91, 96–97, 99, 100, 104, 106, 119, 177

    Light Detection and Ranging, 95

    M

    Market exchange rates, 75n

    Methane, 38, 39, 53, 53n, 111–12, 111t

    Mexico, 62

    Mitigation policy

    • application to non-CO2 gases, 111–12

    • carbon budget approach, 15, 43

    • challenges, 64

    • cost-effectiveness, 3, 80

    • cost of delayed or incomplete implementation, xiv, 50b, 59–62

    • critical requirements, vii

    • current status of efforts, vii, 2

    • disincentives in developing economies, 105–6

    • distributional impacts, 3, 16–18

    • economic cost calculations, 9b

    • emissions growth in absence of, 53, 54f, 70

    • environmental effectiveness evaluation, 3, 4–8

    • goal setting, xiii

    • greenhouse gas stabilization goals, xiii–xiv

    • IMF role in, ix–x

    • performance evaluation, 3–4, 4n, 22–23t

    • performance of market-based efforts to date, xviii–xix, 151–52b

    • promotion of innovation through, 3, 18

    • range of strategies and instruments, 2–3b

    • role of finance ministries in, xx

    • role of low-emitting developing countries, xvii, 103b, 104, 125

    • timeframe for implementation and outcomes, xiv, xv, xvi, 50b, 64–65

    • warming goals, xiii, xiv

    • See also Carbon-pricing strategies; Financing of mitigation efforts

    Montreal Protocol, 170

    N

    Natural gas, 37, 108, 117–18, 155–56

    Negative emission technologies, xiii–xiv, 57, 57n, 59, 63

    Nitrous oxide, 38, 53, 53n, 111–12, 111t, 163b, 176n

    Norway, 44–45, 162, 178

    O

    Offset credits

    • in carbon tax program, 38, 39, 152b

    • charismatic, 167b

    • definition, 39n

    • policy adjustments, 171–72

    • policy design, 166–68

    • policy design trends, 152b

    • purchase in developing countries, 39, 104, 124

    • purpose, xix–xx, 152b, 166

    • quality distinctions in, 168

    • quantitative limits, 168

    Organization for Economic Cooperation and Development, 31, 52, 154

    P

    Pakistan, 105, 113

    Patent protection, 41

    Peat lands, 52

    Permit banking, xix, 14–15, 151–52b, 160, 161, 171–72

    Permit borrowing, xix, 152b, 160, 161

    Pittsburgh Summit, 142

    Policy Analysis for Greenhouse Effect, 72–73, 73b

    Population trends, 51

    Power sector

    • cost-effective policy design, 10–11, 16

    • demand-side mitigation strategies, 5

    • economic status of countries, distribution of energy sources and, 128t

    • effectiveness of emissions mitigation policies focused on, 5–6, 8

    • efficiency and emissions standards, xi, 2b, 7, 8

    • emissions mitigation strategies, 4–5

    • emissions reduction in response to emissions pricing, 58

    • emissions trends, 52

    • financial assistance to, in transition to emissions trading market, 157

    • fuel switching, x, 4–5

    • incentives for renewable generation, 6–7

    • scope of coverage of carbon-pricing strategies, 159–60

    Private sector

    • corporate income tax for climate finance, 139

    • environmental risk management, 177–78

    • financing of mitigation efforts, 136

    • green research and development, 40–41

    • informal economy, 115–16

    • See also Industry

    Property taxes for climate finance, 140

    Public education campaigns, 20b, 41–42, 120–21

    Public transportation subsidies, 119

    Purchasing power parity, 75n

    R

    RECLAIM. See Regional Clean Air Incentives Market

    Refineries, carbon tax collection from, 37

    Regional Clean Air Incentives Market, 169, 174, 176n

    Regional Greenhouse Gas Initiative, 155–56, 159, 160, 164, 165, 168

    Regulatory approaches

    • cost-effectiveness, 10–11, 13

    • design considerations, 1, 3b

    • environmental effectiveness, 6–8

    • incentives for renewable generation, 6–7

    • rationale, xi, 21

    • shortcomings, x–xi

    • welfare cost calculations, 9b

    Renewable fuels

    • cost-effectiveness of U.S. renewable portfolio standard, 11b

    • emissions mitigation strategies, 3b

    • incentive policies, 6–7

    • use of carbon pricing revenue to promote, 165

    Renewable portfolio standard, U.S., 11b

    Risk management, 177–78

    Russia, 52

    S

    Sea-level rise, 70, 71

    Seaports, as carbon tax collection points, 38

    Sequestration

    • carbon tax offset provisions for, 39

    • discount factors, 97

    • See also Biomass generation with carbon capture and storage; Forest sequestration

    Smuggling, 120–21

    Social cost of carbon

    • application, 72, 85

    • in benefit-cost analysis, 80

    • calculation, 72–79

    • in carbon tax calculation, 83–84, 84f

    • current calculations and projections, 69, 79t

    • definition, xv, 69, 72

    • discount rate selection, 76–77, 78f, 80–81, 81b

    • domestic measurement, 81–82

    • equity weighting, 82

    • forest sequestration calculations, 94

    • limitations of analysis with, 85

    • policy cost-effectiveness analysis with, 84–85

    • recommendations for estimating, 69–70

    • use in policy analysis, 79–80

    South Africa, 62

    Stern Review, 82b

    Subsidies, fossil fuel, xvii, xviii, 103–4b, 115, 116, 117, 118–21, 123, 141–42

    Sulfur Allowance Program (U.S.), 169, 173, 173b, 174, 176

    Sulfur hexafluoride, 38

    Sweden, 153–54, 159, 162, 163b, 165, 178–79

    T

    Tar, 37

    Taxes

    • application to non-CO2 gas emissions, 111–12

    • border adjustments to offset carbon tax effects, 35–36, 43–44, 106

    • capital accumulation incentives, 33

    • coal, 6

    • electricity, xii

    • on emissions and pollution, 152, 153t

    • emissions mitigation strategies, 6

    • financial sector, for climate finance, 142–43

    • fossil fuel subsidies, xviii, 103–4b, 115, 116–17, 141–42

    • fuel subsidy reforms, 119–21

    • gasoline, 12b

    • income tax reductions financed by carbon tax, 154–55, 164–65

    • international agreement on climate finance surcharge, 137–38

    • mitigation strategies for low-emitting countries, xvii

    • oil price variation and, 123b

    • policy transparency, 123–24

    • strategies for ameliorating carbon pricing burden, 162–65

    • traditional strategies for climate finance, 138–40

    • vehicle ownership, 6, 32

    • See also Carbon tax; International aviation and maritime traffic tax

    Technological strategies

    • carbon tax policy considerations, 39–42

    • consideration of future developments on policy formulation, 14

    • last resort, x, xiv

    • outcomes of carbon-pricing programs to date, 178–79

    • policies to promote, 19–20b

    • promoting technology diffusion, 41–42

    • public education programs, 20b, 41–42

    • timeline for mitigation policy implementation and, 61

    Temporal flexibility in implementation, 160–61

    Transparency

    • in adaptive management, 172

    • in fuel taxation and subsidization, 123–24

    • importance of, in mitigation policies, 152b, 173–74

    U

    Ukraine, 105

    United Kingdom, 82–83b, 165

    United Nations, xiii, 134, 167b

    United States

    • Clean Energy Standard, 7

    • commitment to mitigation goals, 2

    • compensation to developing countries for mitigation costs, 63–64

    • cost-benefit analysis in, 9b, 69, 79–80

    • forest sequestration program, 93–95

    • Lead Phase-Out Program, 176

    • price volatility in cap-and-trade programs, 169

    • projected emissions, 52

    • projected outcomes of emissions mitigation policies, 11–12b

    • Regional Clean Air Incentives Market, 174

    • Regional Greenhouse Gas Initiative, 155–56, 159, 160, 164, 165, 168

    • social costs of carbon calculations, 75–79

    • Sulfur Allowance Program, 169, 173, 173b, 174, 176

    • transparency of mitigation programs, 173, 173b

    Uzbekistan, 105

    V

    Value-added taxes, xvii, xviii, 32n, 114, 122, 133, 137, 138–39

    Vehicle ownership taxes, 6, 32

    W

    Waxman-Markley bill. See American Clean Energy and Security Act

    Weatherization, 167b

    Welfare cost calculations, 9b

    • case example, 11–12b

    • mitigation cost measurement, 58

    World Bank, 90, 134

    World Wildlife Fund, 167

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