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Supply-Side Crediting to Manage Climate Policy Spillover Effects

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  • Mehling, M. A.

Abstract

Two types of spillover effects influence progress towards decarbonization: greenhouse gas emissions leakage as well as low-carbon technology innovation and diffusion. Emissions leakage caused by uneven imposition of carbon constraints limits their climate benefits, undermines political support, and gives rise to equity concerns. Solutions to address emissions leakage, meanwhile, are incompatible with global decarbonization or face serious implementation challenges. Diffusion of low -carbon technology averts emissions leakage, but depends on scaled up investment in research, development and deployment to drive down technology cost. Supply-side crediting can address both spillover effects, reducing emissions leakage by increasing global fossil fuel prices, and generating revenue for investment in lowcarbon technologies to accelerate their diffusion and further limit emissions leakage.

Suggested Citation

  • Mehling, M. A., 2023. "Supply-Side Crediting to Manage Climate Policy Spillover Effects," Cambridge Working Papers in Economics 2345, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2345
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    More about this item

    Keywords

    Climate change; spillover effects; emissions leakage; supply-side approaches; technology; offset credits;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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