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Complementing carbon prices with technology policies to keep climate targets within reach

Abstract

Economic theory suggests that comprehensive carbon pricing is most efficient to reach ambitious climate targets1, and previous studies indicated that the carbon price required for limiting global mean warming to 2 °C is between US$16 and US$73 per tonne of CO2 in 2015 (ref. 2). Yet, a global implementation of such high carbon prices is unlikely to be politically feasible in the short term. Instead, most climate policies enacted so far are technology policies or fragmented and moderate carbon pricing schemes. This paper shows that ambitious climate targets can be kept within reach until 2030 despite a sub-optimal policy mix. With a state-of-the-art energy–economy model we quantify the interactions and unique effects of three major policy components: (1) a carbon price starting at US$7 per tonne of CO2 in 2015 to incentivize economy-wide mitigation, flanked by (2) support for low-carbon energy technologies to pave the way for future decarbonization, and (3) a moratorium on new coal-fired power plants to limit stranded assets. We find that such a mix limits the efficiency losses compared with the optimal policy, and at the same time lowers distributional impacts. Therefore, we argue that this instrument mix might be a politically more feasible alternative to the optimal policy based on a comprehensive carbon price alone.

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Figure 1: Relationship between carbon prices and total GHG emissions in 2030.
Figure 2: Global electricity generation by technology.
Figure 3: Economic indicators for the long-term challenges of achieving the 2 °C target after 2030.
Figure 4: The effect of technology policies on the emissions gap and the climate action gap.

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Acknowledgements

The research leading to these results has received funding from the European Union’s Seventh Framework Programme (FP7/2007-2013) under grant agreement no. 308329 (ADVANCE).

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C.B. and G.L. designed the research with input by R.C.P., E.K. and O.E.; C.B. performed the modelling and data analysis; C.B. wrote the paper with contributions and edits by all authors.

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Correspondence to Christoph Bertram.

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The authors declare no competing financial interests.

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Bertram, C., Luderer, G., Pietzcker, R. et al. Complementing carbon prices with technology policies to keep climate targets within reach. Nature Clim Change 5, 235–239 (2015). https://doi.org/10.1038/nclimate2514

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