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Climate Policy Options: A Comparison of Economic Performance

Author

Listed:
  • Jean Chateau
  • Ms. Florence Jaumotte
  • Gregor Schwerhoff

Abstract

We use a global computable general equilibrium model to compare the economic performance of alternative climate policies along multiple dimensions, including macroeconomic outcomes, energy prices, and trade competitiveness. Carbon pricing which keeps the aggregate cost lower and preserves better the overall competitiveness than across-the-board regulation is the first-best policy, especially in energy intensive and trade exposed industries. Regulations and feebates are good alternatives in the power sector, where technological substitution is possible. Feed-in subsidies, if used alone, are not cost effective.

Suggested Citation

  • Jean Chateau & Ms. Florence Jaumotte & Gregor Schwerhoff, 2022. "Climate Policy Options: A Comparison of Economic Performance," IMF Working Papers 2022/242, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2022/242
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    Cited by:

    1. Ian Parry & Simon Black & Danielle Minnett & Karlygash Zhunussova, 2025. "Policies to Decarbonize Industry While Addressing Competitiveness and Carbon Leakage," CESifo Working Paper Series 12272, CESifo.
    2. Adrien Bilal & James H. Stock, 2025. "A Guide to Macroeconomics and Climate Change," NBER Working Papers 33567, National Bureau of Economic Research, Inc.
    3. Bhadury, Soumya & Pratap, Bhanu & Gajbhiye, Dhirendra, 2025. "Transition to a greener economy: Climate change risks and resilience in a state-space framework," Journal of Asian Economics, Elsevier, vol. 98(C).
    4. Nieddu, Marcello & Raberto, Marco & Ponta, Linda & Teglio, Andrea & Cincotti, Silvano, 2024. "Evaluating policy mix strategies for the energy transition using an agent-based macroeconomic model," Energy Policy, Elsevier, vol. 193(C).

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    Keywords

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    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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