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The Great Carbon Arbitrage

Author

Listed:
  • Mr. Tobias Adrian
  • Mr. Patrick Bolton
  • Alissa M. Kleinnijenhuis

Abstract

We measure the gains from phasing out coal as the average social cost of carbon times the quantity of avoided emissions. By comparing the present value of benefits from avoided emissions against the present value of costs of ending coal and replacing it with renewables, our conservative baseline estimate is that the world can realize a net gain of $85 trillion. This global net social benefit can be attained through an international agreement to phase out coal. We also explore how this net benefit is distributed across countries and find that most countries would benefit from a global coal phase-out even without any compensatory cross-country transfers. Finally, we estimate the size of public funds that must be committed under a blended finance arrangement to finance the cost of replacing coal with renewables.

Suggested Citation

  • Mr. Tobias Adrian & Mr. Patrick Bolton & Alissa M. Kleinnijenhuis, 2022. "The Great Carbon Arbitrage," IMF Working Papers 2022/107, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2022/107
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    Cited by:

    1. Green, Daniel & Vallee, Boris, 2025. "Measurement and effects of bank exit policies," Journal of Financial Economics, Elsevier, vol. 172(C).
    2. Patrick Bolton & Lee Buchheit & Mitu Gulati & Ugo Panizza & Beatrice Weder & Jeromin Zettelmeyer, 2023. "On Debt and climate," Oxford Open Economics, Oxford University Press, vol. 2, pages 307-316.
    3. Siele Jean Tuo & Chang Li & Ettien Fulgence Brou & Diby Francois Kassi & Yobouet Thierry Gnangoin, 2024. "Estimating the carbon dioxide emission levels of G7 countries: A count data approach," Energy & Environment, , vol. 35(4), pages 1753-1772, June.
    4. O'Connell, Marguerite & Abraham, Laurent & Oleaga, Iñigo Arruga, 2023. "The legal and institutional feasibility of an EU Climate and Energy Security Fund," Occasional Paper Series 313, European Central Bank.

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