Emission reductions between 5 and 21%: this is the empirically measured effect of carbon pricing systems in the first years of operation. A research team now identifies these results for 17 climate policies real world-wide, condensing the state of knowledge more comprehensively than ever before. The team uses artificial intelligence to collect existing surveys, making them comparable using a new computing concept.
The importance of carbon pricing
The main meta-study was conducted by the Berlin-based climate research institute MCC (Mercator Research Institute on Global Commons and Climate Change) and published in the journal Nature Communications.
“This research can help get the debate about the fundamental direction of climate policy back on track,” says Ottmar Edenhofer, director of the MCC and co-author of the study.
“Politicians have repeatedly questioned the effectiveness of curbing greenhouse gas emissions through pricing, and often focus excessively on bans and regulations instead. As a rule, a policy mix is certainly necessary, but the conflict of beliefs about the optimal central instrument of climate policy can be resolved. resolved with facts.”
The starting point of the meta-study is a laboratory experiment-type question: How did emissions change after the start of carbon pricing, compared to a simulated business-as-usual scenario?
Using a keyword search in literature databases, the research team identified almost 17,000 potentially useful studies and then, with the support of machine learning methods, narrowed them down to 80 that were truly relevant to this question.
These included 35 studies on pilot systems in China alone, 13 on emissions trading in the EU, 7 and 5 on larger pilot systems in British Columbia, Canada, and the “Regional Greenhouse Gas Initiative” in the United States, respectively, as well as studies on other pilot systems in Australia, Canada, Finland, Japan, Sweden, Switzerland, South Korea, the United Kingdom and the United States. Prior to this, the largest meta-study included just under half of the studies.
In a second step, key data were extracted from the surveys, including statistical indicators on the effect of the rollout of carbon pricing, the type of implementation (tax or emissions trading), the extent and timing of the introduction, and the follow-up period. observation, which varied by survey. In the meta-study these measurements are standardized and therefore made comparable.
Additionally, the results are corrected for weaknesses in primary investigations, such as a design that deviates from the standard setup of a laboratory experiment or a tendency to publish only statistically significant effects and ignore mini-effects.
The research team makes the specially developed calculation concept public, emphasizing that it is also suitable as a framework for future use, so that the effect on emissions can be continuously updated in the context of more comprehensive and higher carbon pricing.
So far, empirical data shows, among other things, that the introduction of carbon pricing in some Chinese provinces has had an above-average effect on the emissions balance. In general, the effect tends to be particularly strengthened by an offensive political design (“advertisement effect”) and by a favorable environment (low costs to avoid CO2).
In contrast, according to the research team, the question of whether carbon pricing is implemented through emissions trading or a tax is less significant in the results than in the political debate.
The meta-study also highlights the need for further empirical research on this topic. “The emissions impacts of more than 50 other carbon pricing systems have not yet been scientifically assessed,” reports Niklas Döbbeling-Hildebrandt, Ph.D. student in the MCC Applied Sustainability Science working group and lead author.
“Furthermore, the recent significant increase in carbon prices has not yet been taken into account. Our systematic literature review also highlights the potential for methodological improvement for precise and error-free investigations.
“New standards and further field work in this area are therefore important. Comprehensive and meaningful research syntheses are needed, including on the effectiveness of other policy tools, so that climate policymakers know what works.”
How carbon removal fits into the architecture of EU climate policy
The EU has recently taken far-reaching decisions on rapidly reducing greenhouse gas emissions. For example, starting from 2027, as in the energy and industry sectors, it will also limit emissions in the problematic heating and transport sectors through emissions trading and gradually reduce them towards zero.
But how can the EU also achieve rapid growth in “negative emissions”, i.e. the large-scale removal of carbon from the atmosphere, without which its goal of “climate neutrality by 2050” cannot be achieved?
A new study by the Berlin-based climate research institute MCC (Mercator Research Institute on Global Commons and Climate Change) and the Potsdam Institute for Climate Impact Research sheds light on this. The study has now been published in the journal FinanzArchiv.
“Carbon removal as the second pillar of climate protection will be very costly in the second half of the century: estimates range from 0.3% to 3% of global economic output,” says Ottmar Edenhofer, director of MCC and PIK and one of the authors.
“The scientific literature on this topic, however, has so far focused on the technological aspects rather than the economic question of efficiently tackling this herculean task. Meanwhile, this is precisely what is being intensely discussed in Brussels, the EU capital. We now provide a theoretical vision of a solid and very specifically developed governance concept.”
The study offers a brief overview of the technical methods with the costs and conceivable quantities, but then begins with a fundamental economic consideration: just as the State makes CO 2 emissions more expensive to limit their negative consequences, it should subsidize the removal of CO 2 .
As a fundamental cost minimization principle, the same price as for emitting one tonne of CO 2 into the atmosphere should apply for each tonne of CO 2 removed and permanently stored. Furthermore, the research team analyzes the consequences of natural inadequacy: Since removals are not always permanent, climate gas often has to be removed again.
Seemingly cost-effective land-based options, such as afforestation or carbon sequestration on agricultural land, can therefore become significantly less attractive than, for example, air filtration systems with permanent underground storage.
To illustrate this, the study calculates that if non-permanent CO 2 storage lasts only 10 years, with storage costs increasing by 1% per year and a real interest rate of 2%, then the provider of such a procedure should effectively set aside 10 times the amount of the original investment for subsequent investments.
This poses challenges for policymakers, for example regarding the regulation of carbon pricing and removal subsidies, as well as in terms of risk management and accountability. It is in this context that the research group develops its concept of governance.
For example, it seems sensible for the EU to link subsidies to the permanence of removals from the outset (“upstream pricing”). Only when CO 2 emissions in the land sector are also comprehensively monitored and priced will it be possible to fairly promote removal.
“For such governance to be successful, it is important that responsibilities are anchored transparently and solidly in the EU power structure,” says Artur Runge-Metzger, member of the MCC and also one of the authors. “The four crucial levers are quantitative control of net emissions, liability regulation for non-permanent removals, financial support for carbon removal expansion and innovation, and supplier certification.”
For the first two tasks, the study proposes a European Central Carbon Bank, plus two additional authorities for financing and quality control.
Runge-Metzger held the role of director in the European Commission’s Directorate-General for Climate Action for many years and has strengthened the MCC in its interface with politics since 2022. He emphasizes: “We believe that this proposal is feasible within the current political architecture of the EU.”
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