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Reflections on Economics and Policy Making in the Environmental Domain

This past week, I was privileged to participate in a workshop, “Climate Science in a Time of Political Disruption,” sponsored by the Harvard Program on Science, Technology and Society. The workshop began with a keynote address by former U.S. Environmental Protection Agency Administrator Gina McCarthy, now Professor of Practice at the Harvard T. H. Chan School of Public Health. Following Gina McCarthy’s down-to-earth but quite inspiring remarks (with her usual Yankee humor adding spice to the proceedings), the others on the panel were asked to comment on the topic at hand. The panelists included Joe Goffman, Executive Director of the Environmental Law Program at Harvard Law School; Peter Huybers, Professor of Earth and Planetary Sciences; Sheila Jasanoff, Pforzheimer Professor of Science and Technology Studies at the Harvard Kennedy School; Lucas Stanczyk, Assistant Professor of Philosophy; and myself.

Given the subject of the workshop, most of the panelists focused their comments on the current political scene and the current U.S. administration’s apparent disdain for climate science. I took a broader, somewhat historical view, and as the only economist on the panel, I commented on the relationship of economic research to policy making. I did this via reflections on experiences I’ve had over the past three decades. I tried to make three points: first, economic research results can be used as a light bulb or a rock, and either can be effective; second, it is important to move quickly when windows of opportunity open in the policy world to implement research ideas; and third, politics matter, and should not be ignored.

Research Results Can be Used as a Light Bulb or a Rock

I cannot speak for the natural sciences, but it is clearly the case that economic evidence can be used either as a “light bulb” – to illuminate an issue and possibly persuade policy makers of the wisdom of a particular course of action – or as a “rock,” that is, as ammunition to support a policy maker’s predisposed position. Is this cynical? I think not, because such economic ammunition can help win a policy battle. I was just reminded by Paul Krugman in his New York Times column of a somewhat less charitable metaphor, where he characterized some politicians as using economists “the way a drunkard uses a lamppost: for support, not illumination.”

Related to this reality was a session I chaired in 2001 at the annual meetings of the American Economic Association – a roundtable of former chairs and members of the U.S. Council of Economic Advisers (CEA), including George Eads (Charles River Associates), the late William Niskanen (then of the Cato Institute), William Nordhaus (Yale University), and Joseph Stiglitz (Columbia University). A repeated theme from this set of economists was the reality that CEA typically had more influence by helping others in the Executive Office of the President in their efforts to stop bad ideas than by itself promoting good ideas.

When Windows of Opportunity Open, Move Quickly

Two examples stand out for me of the importance of moving quickly when windows of opportunity open in the policy world to implement research ideas. One is the work I carried out in the late 1980s under the sponsorship of the late Republican Senator John Heinz of Pennsylvania and former Democratic Senator Timothy Wirth of Colorado in the form of research that led to a report, “Project 88: Harnessing Market Forces to Protect the Environment.” One of the proposals in the report was to address the then politically prominent problem of acid rain with what is now called a cap-and-trade system. This idea resonated with the incoming administration of President George H. W. Bush, particularly with the Counsel to the President, Boyden Gray. In parallel with work being carried out by Joe Goffman and Dan Dudek (both then at the Environmental Defense Fund), I followed up the Project 88 report with numerous White House and other Washington meetings (commuting weekly from my Harvard perch), which eventually contributed to the Bush Administration’s proposal (to an initially resistant Democratic Congress) of the Clean Air Act Amendments of 1990, including its path-breaking sulfur dioxide allowance trading program.

The other example I mentioned to highlight the importance of moving quickly when windows of opportunity open in the policy world is associated with the negotiations carried out annually under the United Nations Framework Convention on Climate Change (UNFCCC). At the seventeenth Conference of the Parties of the UNFCCC in Durban, South Africa, in 2011, the delegates agreed to the “Durban Platform for Enhanced Action,” which broke with nearly twenty years of UNFCCC policy by mandating a new approach in which all countries, not just the richest nations, would participate in addressing the need for greenhouse gas (GHG) emissions reductions. The key challenge for climate negotiators was how to meet this new mandate while still observing the fundamental UNFCCC principle of “common but differentiated responsibilities,” which had previously been interpreted to mean that rich countries alone would shoulder the burden of reducing emissions.

At the Harvard Project on Climate Agreements, we recognized that negotiators around the world were suddenly open to outside-the-box thinking. Indeed, in Science magazine, my colleague, Joe Aldy, and I wrote an article, “Climate Negotiators Create an Opportunity for Scholars.” Over the following months (and years) we worked hard to help key negotiating countries develop a new policy architecture that could meet the challenge before them. The result was a hybrid approach that combined elements of top-down architecture with a healthy dose of bottom-up “pledge-and-review,” which led eventually, of course, to the Paris Agreement of 2015.

Politics Matter

For the Intergovernmental Panel on Climate Change’s (IPCC) Fifth Assessment Report (AR5), I served as Coordinating Lead Author (with Dr. Zou Ji of China) of the chapter on “International Cooperation: Agreements and Instruments.” I was surprised to find that the process was highly politicized – in two distinct ways. First, whereas I had assumed that the Lead Authors (LAs) serving on our writing team were there only to represent their respective scientific expertise (in economics, legal scholarship, international relations, etc.), some of the LAs seemed to represent the interests of their respective countries.

Second, I was very naive about the final step of the process, when the governments of the world are asked to approve the IPCC’s Summary for Policy Makers line by line. The controversy associated with our chapter on international climate agreements resulted in that entire section of the SPM being eviscerated of all meaningful substance at the Government Approval Sessions for Working Group III (WG III) in Berlin in April, 2014. I was disappointed and dismayed by the process and its outcome.

Fortunately, I learned from that experience and my attitude (and behavior) was quite different just six months later, when I found myself in Copenhagen for what was essentially the final stage of the entire five-year enterprise of research, writing, and government approval of the various reports of IPCC AR5, namely the government approval sessions for the Synthesis Report (SYR), which summarizes and synthesizes the key findings from all three Working Group reports. I had learned my lesson. Rather than disdaining the politics of the occasion, I embraced it and spent the week in Copenhagen in careful negotiations with the key national governments, the result of which was that all of the essential text on international cooperation and agreements was preserved in the Synthesis Report.

Ironically, by recognizing, accepting, and indeed participating in the fundamentally political aspects of the IPCC government approval process, I was able to keep the report of research from itself being politicized.

Summing Up

So, the three points I made regarding the relationship between economic research and policy making at last week’s Harvard workshop were these: first, economic research results can be used as a light bulb or a rock, and either or both can be effective; second, it is important to move quickly when windows of opportunity open in the policy world to implement research ideas; and third, politics matter, and should not be ignored.

I left it to others at the workshop – and I leave it to readers of this essay – to judge whether any of this applies more broadly to “Climate Science in a Time of Political Disruption.”

What Should We Make of China’s Announcement of a National CO2 Trading System?

On December 19, 2017, the government of China announced that it is commencing development of a nationwide CO₂ trading system, that when launched will become the world’s largest carbon trading system, annually covering about 3.5 billion tons of CO₂ emissions in China’s electric power sector. That approaches twice the size of what is currently the world’s largest carbon trading system, the European Union Emissions Trading System, which accounts for about 2 billion tons per year, and is nearly nine times the size of the largest U.S. system, the California AB-32 cap-and-trade system, which covers about 400 million tons of annual emissions.

The ultimate purpose of the newly announced Chinese trading system is to help the country meets its emissions and renewable energy targets which are part of its Nationally Determined Contribution under the Paris Agreement, in particular, peaking its CO₂ emissions by 2030, and achieving 20% of the country’s energy supply from renewables. Note that coal currently accounts for 65% of China’s electricity generation. Wind and solar capacity have been growing rapidly, but still account for only 4% and 1% of generation, respectively.

The Chinese carbon market will double the share of global CO₂emissions covered by worldwide carbon-pricing systems to almost 25 percent. For this and other reasons, the December announcement was greeted with excited praise from climate activists (but simultaneously with disregard and skepticism from conservative opponents of climate action). The most reasonable assessment, however, is between those two extremes, as I explain in this essay. That said, the December announcement by China of its plan to develop and launch a nationwide CO₂ trading system is an important landmark on the long road to addressing the threat of global climate change.

Some Brief History for Context

In 2011, China’s 12^th Five-Year Plan (2011-2015) first included a statement about the government’s intention to develop – gradually – a nationwide carbon market. Subsequently, in 2013 and 2014, seven pilot emissions trading programs were launched in the cities of Beijing, Chongqing, Shanghai, Shenzhen, and Tianjin, plus two provincial systems in Guangdong and Hubei. In total, these covered some 3,000 sources, with total annual CO₂ emissions of 1.4 billion tons. The designs of the systems were intentionally varied, to facilitate learning, and allowance prices ranged from $3 to $10 per ton of CO₂.

Then, in the lead-up to the Paris climate negotiations, on September 25, 2015, President Xi Jinping met at the White House with U.S. President Barack Obama, and announced that China would launch its nationwide CO₂ trading system in 2017, presumably covering electricity, iron and steel, chemicals, cement, and paper production.

The announcement last month was the culmination of this brief history, as China seeks to move ahead with its “pledges” under the Paris Agreement, at the same time as the Trump administration in the United States intends to withdraw altogether from the Agreement (in November, 2020, the soonest that such withdrawal can take place under the rules of the Agreement).

What’s Known about the Chinese Carbon Trading System

China’s December announcement that it is commencing development of a nationwide CO₂ trading system, beginning with the electric power sector only, provided few details. Apparently, the system is intended to eventually include electricity, building materials, iron and steel, non-ferrous metal processing, petroleum refining, chemicals, pulp and paper, and aviation, but will start with the electricity sector alone. Like most operating systems in the world, it will regulate only CO₂, not other greenhouse gases (GHGs), which in China’s case means potentially addressing more than 80% of its total GHG emissions.

The system will not be a cap-and-trade system per se (unlike the CO₂ trading systems in Europe and California, for example), because there will not be an administratively set mass-based cap of some quantity of emissions. Rather, the trading system will be rate-based, meaning that it will be in terms of emissions per unit of electricity output. This is also called a tradable performance standard, whereby the government sets a performance standard (a benchmark emissions rate per unit of output), sources receive permits (allowances) based on their electricity output and their benchmark, and sources are allowed to trade. Such tradable performance standards have been used previously in a variety of contexts, including the U.S. EPA leaded gasoline phasedown in the 1990s, U.S. Corporate Average Fuel Economy (CAFE) standards to regulate motor-vehicle fuel efficiency, the Obama Administration’s Renewable Fuel Standard, and California’s Low Carbon Fuel Standard.

One objective of using this approach is to insulate – or at least cushion – the (electricity) sector and the larger economy from “carbon market shock.” By regulating the emissions rate (per unit of product output), rather than emissions per se, the rate-based approach may help mitigate the political worry about constraining economic growth, but does so by essentially rewarding (subsidizing) higher levels of output. This relative inefficiency of China’s rate-based system, compared with a mass-based cap-and-trade approach is highlighted in a new paper by Lawrence Goulder (Stanford University) and Richard Morgenstern (Resources for the Future) and one by William Pizer (Duke University)and Xiliang Zhang (Tsinghua University). (There is a parallel impact and concern – in cap-and-trade systems – with an output-based updating allocation, which can address competitiveness impacts but also introduces inefficiencies by subsidizing dirty production. This mechanism – which affects only energy-intensive and trade-exposed industries – was proposed in the Waxman-Markey climate legislation and is employed in California’s system.)

The rate-based approach is intended to have a smaller impact on marginal production costs than the mass-based cap-and-trade approach, and thereby is likely to have a smaller impact on the price of products (whether electricity or manufactured goods). This is the motivation for using this approach in an output-based updating allocation, as described above, and it carries with it the parallel disadvantage of insulating consumers from (some of) the social costs of their consumption decisions. The problem is exacerbated in the case of China’s evolving system because the performance standards (emission benchmarks) are set not only by sector, but by various categories of electricity production within the sector. As some categories are, in effect, subsidized by other categories, the cost-effectiveness of the overall system declines. There is a lack of incentive for the carbon market to move energy consumption from coal to natural gas, for example, because of the multi-benchmark approach.

Finally, it appears that allowances will be allocated without charge, at least in the early stages of the program, which has been typical of emissions trading systems in other parts of the world, and may lessen political resistance while also sacrificing potential efficiency gains associated with auctioning allowances and recycling revenues.

What’s Unknown about the Chinese Carbon Trading System

Among the key design elements that are unknown as of now (at least to me) are the following:

(1) What will the total allocation of allowances initially be and how will it change (presumably decrease) over time? Apparently the overall “cap” will be set by adding up the expected emissions of compliance entities, based on their historical emissions. Then, allocations will be reduced, presumably based on technology performance benchmarks.

(2) When will trading commence?

(3) What share of allowances will be distributed for free, and how many – if any – will be auctioned (and how will any auctions operate)?

(4) What provisions will there be for monitoring and enforcement, and will there be fines or other penalties for non-compliance?

(5) How will the system interact with other Chinese climate policies? This is an important question, because so-called “complementary policies” that seek to regulate sources under the cap of a cap-and-trade system can lead to perverse outcomes, as in the European Union and California.

(6) What is the time-path for expanding the scope of the system to include more sectors, and what sectors will be added?

(7) When and how, if at all, will China seek to link its system with carbon-pricing and other climate policies in other parts of the world?

Given all of these open questions plus the limited sectoral scope of the announced system, it is reasonable to ask: what should we make of all this?

How Significant was the Chinese Announcement?

The announcement, despite all the caveats, was a significant step along the road of climate change policy developments, because the Chinese system will eventually be very important, because of its magnitude and because of the importance of China in CO₂ emissions and climate change policy. However, the announcement was not a launch per se, but a statement about a forthcoming launch.

More broadly, the announcement and the eventual launch of the system will have significant effects on other governments around the world – regional, national, and sub-national. Some will be encouraged to launch or maintain their own carbon trading systems, and to increase the ambition of their systems. Why do I say this?

A frequently stated fear of adopting climate policies, including carbon pricing, is the competitiveness effects of those policies, due to emission, economic, and employment leakage. This is more a political issue than a real economic one, but it is nevertheless important. Since the greatest fear in this realm is that domestic factories will relocate to China, that concern will be greatly reduced – or at least it should be – when and if China has put in place a serious climate policy, whether through carbon markets or otherwise.

China is moving slowly and cautiously, which is wise. Not long ago, they were considering launching a system that would initially cover 7,000 companies in several sectors, but the 2017 announcement is of a system that covers 1,700 companies in the electricity sector alone. Of course, it is still important, given that the electricity sector (with its large coal and natural gas plants) accounts for fully a third of China’s CO₂ emissions.

During the next two years, the Chinese government – apparently through its National Development and Reform Commission (NDRC), which will administer the trading system – will begin by developing systems for data reporting, registration, & trading – gathering and verifying plant-level emissions data. This will facilitate the establishment of baselines for allocations of allowances. Beyond this, a wide range of rules will need to be established. Following some tests, the actual spot market may launch in 2020 (the same year the Paris Climate Agreement essentially replaces the Kyoto Protocol).

The Path Ahead

As inevitably seems to be the case, the best assessment of this new policy lies somewhere between the extremes. The December announcement by China was neither as exciting as some of the applause from climate activists might suggest, nor was the announcement as meaningless as conservatives have claimed.

Rather, cautious optimism seems to be in order. China is serious about climate change, and is thinking long-term. The country appears to be methodically working to develop a meaningful carbon trading system. What is important now is developing a robust system that can be effective, expanded in scope, and gradually made more stringent. Among the greatest challenges will be achieving the cooperation of the provincial governments, not to mention the compliance of the regulated entities.

Development of the system has begun, with the real launch of trading likely to take place in 2020, which is a key year for Chinese climate policy for other reasons, as well. In that year, China will release its next Five-Year Plan, and it will submit its updated Nationally Determined Contribution to the UNFCCC under the Paris Agreement. What will the United States be doing that year? Not much, just electing a President!

Linking Heterogeneous Climate Policies (and Activities at COP-23 in Bonn)

It’s well known that the Paris Agreement has achieved broad participation by countries accounting for some 97% of global GHG emissions (in contrast to the 14% of global emissions associated with countries taking on responsibilities under the current commitment period of the Kyoto Protocol). That is a very important accomplishment, but as negotiations begin to elaborate key details of the Agreement (as they will in Bonn in November), a critical question is how to create incentives for countries to increase ambition over time. The ability to link different climate policies, such that emission reductions undertaken in one jurisdiction can be counted toward the mitigation commitments of another jurisdiction, may help Parties increase ambition over time. A new paper from the Harvard Project on Climate Agreements by Michael Mehling of MIT, Gilbert Metcalf of Tufts University, and myself explores options and challenges for facilitating such linkages in light of the considerable heterogeneity that is likely to characterize regional, national, and sub-national efforts to address climate change. The full paper is available for downloading, as is a two-page summary.

We will be presenting our results on November 13^th and 14^th in Bonn at the Twenty-Third Conference of the Parties (COP-23) of the United Nations Framework Convention on Climate Change. At the end of this blog essay, I offer some details about these and other forthcoming activities of the Harvard Project on Climate Agreements at COP-23 in Bonn.

Background

Linkage is important, in part, because it can reduce the costs of achieving a given emissions-reduction objective. Lower costs, in turn, may make it politically feasible to embrace more ambitious objectives. In a world where the marginal cost of abatement – that is, the cost to reduce an additional ton of emissions – varies widely, linkage improves overall cost-effectiveness by allowing jurisdictions with relatively higher abatement costs to finance reductions from jurisdictions with relatively lower costs. In effect, linkage drives participating jurisdictions toward a common cost of carbon, equalizing the marginal cost of abatement and producing a more efficient distribution of abatement activities. These benefits are potentially significant: The World Bank has estimated that international linkage could reduce the cost of achieving the emissions reductions specified in the initial set of NDCs submitted under the Paris Agreement 32% by 2030 and 54% by 2050.

Article 6 of the Paris Agreement provides a foundation for linkage by recognizing that Parties to the Agreement may “choose to pursue voluntary cooperation in the implementation of their” NDCs through “the use of internationally transferred mitigation outcomes” (ITMOs). In contrast to the Kyoto Protocol (which likewise included provisions for international cooperation), the voluntary and flexible architecture of the Paris Agreement allows for wide variation, not only in the types of climate policies countries choose to implement, but in the form and stringency of the abatement targets they adopt.

Heterogeneous Linkage

Linkage is relatively straightforward when the policies involved are similar. However, linkage is possible even when this is not the case: for example, when one jurisdiction is using a cap-and-trade system to reduce emissions while another jurisdiction is relying on carbon taxes. There are several potential sources of heterogeneity: type of policy instrument used (for example, taxes vs. cap-and-trade vs. performance or technology standard); level of government jurisdiction involved (for example, regional, national, or sub-national); status under the Paris Agreement (that is, whether or not the jurisdiction is a Party to the Agreement – or within a Party); nature of the policy target (for examle, absolute mass-based emissions vs. emissions intensity vs. change relative to business-as-usual); and operational details of the country’s NDC, including type of mitigation target, choice of target and reference years, and sectors and greenhouse gases covered.

Analyzing Potential Linkages (Consistent with the Paris Agreement)

The full paper examines five specific cases of linkage, with various combinations of features, to identify which types of linkage are feasible, which are most promising, and what accounting mechanisms are needed to make their operation consistent with the Paris Agreement. Each of the cases maps to a real-world example.

Most forms of heterogeneity – including with respect to policy instruments, jurisdictions, and targets – do not present insurmountable obstacles to linkage. However, some of these characteristics present challenges and call for specific accounting guidance if linkage is to include the use of ITMOs under the Paris Agreement. In particular, robust accounting methods will be needed to prevent double-counting of GHG reductions, to ensure that the timing (vintage) of claimed reductions and of respective ITMO transfers is correctly accounted for, and to ensure that participating countries make appropriate adjustments for emissions or reductions covered by their NDCs when using ITMOs. Additional issues under Article 6 include how to quantify ITMOs and how to account for heterogeneous base years, as well as different vintages of targets and outcomes.

Issues for the Climate Negotiators

Broader questions that bear on the opportunities for linkage under Article 6.2 include the nature of NDC targets and whether these are to be treated as strict numerical targets that need to be precisely achieved; the nature and scope of ITMOs, which have yet to be defined, let alone fully described, under the Paris Agreement; and finally, whether transfers to or from non-Parties to the Agreement (or sub-national jurisdictions within non-Parties) are possible, and if so, how they should be accounted for. Parties have differing views, however, on whether the guidance on Article 6.2 should extend to such issues.

Clear and consistent guidance for accounting of emissions transfers under Article 6 can contribute to greater certainty and predictability for Parties engaged in voluntary cooperation, thereby facilitating expanded use of linkage. At the same time, too much guidance, particularly if it includes restrictive quality or ambition requirements, might impede linkage and dampen incentives for cooperation. Given their limited mandate, Parties should exercise caution when developing guidance under Article 6.2 that goes beyond key accounting issues. This does not mean that concerns about ambition and environmental integrity should be neglected. However, if the combination of a set of common accounting rules and an absence of restrictive criteria and conditions can accelerate linkage and allow for broader and deeper policy cooperation, it can also increase the potential for Parties to scale up the ambition of their NDCs. And that may ultimately foster stronger engagement between Parties (and non-Parties), as well as with regional and sub-national jurisdictions.

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The Harvard Project on Climate Agreements at COP-23 in Bonn

We will conduct three panel events at the Twenty-Third Conference of the Parties (COP-23) of the United Nations Framework Convention on Climate Change (UNFCCC) in Bonn, Germany, during the week of November 13, 2017. If you have credentials to access the secure area of the COP, you are most welcome to attend any or all of these. Also, COP-23 attendees who wish to meet with the Harvard Project during the conference should email: Jason Chapman (Jason_Chapman@hks.harvard.edu).

Events in Brief:

Heterogeneous Linkage and the Evolution of Article 6
Monday, November 13
12:00 – 1:30 pm
Pavilion of the International Emissions Trading Association (IETA)

Implementing and Linking Carbon Pricing Instruments: Theory and Practice
Tuesday, November 14, 2017
11:30 am – 1:00 pm
Side Event Meeting Room 12

Carbon Pricing Policy Design
Tuesday, November 14, 2017
2:00 – 3:30 pm
Pavilion of the International Emissions Trading Association (IETA)

Events in Detail:

Heterogeneous Linkage and the Evolution of Article 6, Monday, November 13, 12:00 – 1:30 pm, Pavilion of the International Emissions Trading Association (IETA)

Participants:

Jos Delbeke, Director General for Climate Action, European Commission

Kelley Kizzier, Co-Chair, Article 6, Subsidiary Body for Scientific and Technological Advice

Michael Mehling, Deputy Director, Center for Energy and Environmental Policy Research
Massachusetts Institute of Technology

Gilbert Metcalf, Professor of Economics, Tufts University

Robert Stavins, A. J. Meyer Professor of Energy and Economic Development, Harvard Kennedy School

Abstract:

Implementing and Linking Carbon Pricing Instruments: Theory and Practice, Tuesday, November 14, 2017, 11:30 am – 1:00 pm, Side Event Meeting Room 12, Co-Hosts: Harvard Project on Climate Agreements and Enel Foundation

Participants:

Andrei Marcu, Senior Fellow, International Centre for Trade and Sustainable Development

Michael Mehling, Deputy Director, Center for Energy and Environmental Policy Research, Massachusetts Institute of Technology

Gilbert Metcalf, Professor of Economics, Tufts University

Simone Mori, Head of European Affairs, Enel

Robert Stavins, A. J. Meyer Professor of Energy and Economic Development, Harvard Kennedy School

Other participant(s) to be determined

Abstract:

The Paris Agreement has achieved one of two key necessary conditions for ultimate success — a broad base of participation among the countries of the world. But another key necessary condition has yet to be achieved — adequate collective ambition of the individual nationally determined contributions. This panel will consider how this issue might be addressed by international linkage of regional, national, and sub-national policies — that is, formal recognition of emission reductions undertaken in another jurisdiction for the purpose of meeting a Party’s own mitigation objectives. A central challenge is how to facilitate such linkage in the context of the very great heterogeneity that characterizes Nationally Determined Contributions along several dimensions. We consider such heterogeneity among policies, and identify which linkages of various combinations of characteristics are feasible; of these, which are most promising; and what accounting mechanisms would make the operation of respective linkages consistent with the Paris Agreement. The panel will draw in part on a paper by Michael Mehling, Gilbert Metcalf, and Robert Stavins, “Linking Heterogeneous Climate Policies (Consistent with the Paris Agreement),” available here

Carbon Pricing Policy Design, Tuesday, November 14, 2017, 2:00 – 3:30 pm, Pavilion of the International Emissions Trading Association (IETA), Co-Hosts: Harvard Project on Climate Agreements and Enel Foundation

Participants:

Daniele Agostini, Head of Low Carbon Policies and Carbon Regulation, Enel

Joseph Aldy [via videoconference], Associate Professor of Public Policy, Harvard Kennedy School

Gilbert Metcalf, Professor of Economics, Tufts University

Robert Stavins, A. J. Meyer Professor of Energy and Economic Development, Harvard Kennedy School

Other participant(s) to be determined

Abstract:

This panel will review experiences with cap-and-trade and carbon-tax policies, and draw lessons from those experiences. Panelists will also examine the choice between — and design of — such policies, through a political-economy lens, in order to highlight important public policy principles and policy options in carbon-pricing-policy design. The panel will draw in part on a paper by Joseph Aldy, “The Political Economy of Carbon Pricing Policy Design,” available here.