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

Nature Climate Change volume 5, pages 235239 (2015) | Download Citation

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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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).

Author information

Affiliations

  1. Potsdam Institute for Climate Impact Research, Telegraphenberg A31, 14473 Potsdam, Germany

    • Christoph Bertram
    • , Gunnar Luderer
    • , Robert C. Pietzcker
    • , Eva Schmid
    • , Elmar Kriegler
    •  & Ottmar Edenhofer
  2. Technische Universität Berlin, Economics of Climate Change, Straße des 17. Juni 145, 10623 Berlin, Germany

    • Christoph Bertram
    •  & Ottmar Edenhofer
  3. Mercator Research Institute on Global Commons and Climate Change, Torgauer Straße 12-15, 10829 Berlin, Germany

    • Ottmar Edenhofer

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Contributions

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.

Competing interests

The authors declare no competing financial interests.

Corresponding author

Correspondence to Christoph Bertram.

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DOI

https://doi.org/10.1038/nclimate2514

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