Conference Agenda

Norway has positioned itself as a climate policy forerunner by aiming to reach net-zero emissions already by 2030. However, the net-zero ambition is not well-defined, not legally binding, nor substantiated by action plans. In a first, interdisciplinary, analysis we scrutinise the net-zero concept and discuss unilateral options. Second, we provide an economic analysis with a global computable model, SNOW, of the costs and macroeconomic impacts of various policy scenarios. It explores how the net-zero ambition interacts with other 2030 goals and quantifies the impacts of emphasising domestic abatement and carbon removal measures vs. paying for emissions mitigation abroad. Finally, the 2030 results are revisited to assess how well they align with Norwegian and global climate targets for 2050.

The main findings are that pursuing the net-zero ambition, on top of other binding 2030 goals Norway is already committed to, will increase costs by 25-100% depending on the use of domestic measures. On the margin, domestic measures are found to have only small, uncertain, and costly mitigation potential, thus, buying international carbon credits will be inevitable. Besides being significantly cheaper, carbon trading can have the potential benefits of developing the credit markets and the individual projects’ qualities. Even if domestic measures can play but a modest part in the net-zero strategy towards 2030, we identify several steps governments unilaterally can take today to expand abatement opportunities towards mid-century. We also find measures that seem cost-effective in pursuing 2030 goals but look less attractive against a global 2050 backdrop

Carbon taxes have recently emerged as a common response to the dealing with challenges of climate change. Products with a higher carbon content or footprint necessitate a higher rate of taxation than those with lower carbon levels. However, the rules of the World Trade Organization (WTO) for international trade are based on non-discrimination, as carbon pricing of foreign produced goods can be seen as a form of protectionism. We provide a formal analysis of how domestic carbon pricing would interact with both import tariffs and border adjustment taxes (BATs) for carbon, as well as how free trade agreements affect external tariffs and carbon pricing (at and behind the border). We also examine how carbon pricing shapes the welfare gains and composition of these trade agreements. To examine these relationships, we use competing exporters framework and develop a model of multiple asymmetric countries which have comparative advantages in the goods of different carbon intensities. We allow countries to be active in domestic carbon taxes (taxes on the domestic producers of carbon-intensive goods), non-discriminatory international tariffs, and potentially “discriminatory” border adjustment carbon taxes.

Climate mitigation demands enhanced international cooperation, but current global efforts fall short of expectations. The concept of “climate club” has been proposed aiming at incentivizing broader collaboration with carbon tariffs and transfer payments. Predicting the effectiveness of a climate club involves a high degree of uncertainty and instability, due to the interdependence in countries’ strategies. This study establishes a hybrid model framework, linking a macroeconomic model with an Agent-Based Model to analyze the national behavior endogenously within a comprehensive global economy representation. By simulating 900 expansion pathways on the basis of tradeoff conditions from 6144 macroeconomic scenarios, we find that a climate club is capable of facilitating global collaboration towards the 2℃ goal. Expansion of a club is beneficial to its members, but some countries require subsidies to encourage participation. Joint initiation by major economies, especially developed economies can effectively limit the demand for subsidy within the carbon tariff revenue. While in other cases, the initiators may need to transfer part of their incremental economic and climate benefits from club expansion to new members. Even so, this would represent a Pareto improvement over the no-collaboration scenario. Setting scientifically grounded national targets, fully implementing NDCs and using global carbon market to encourage early action are also helpful for the climate club to facilitate global collaboration. However, the 1.5℃ target entails excessive abatement costs for all the countries, which hinders global collaboration. The findings of this study identify effective pathways for achieving global climate cooperation. The discussions on the elements of the climate club provide direction for the coming round of international climate negotiations.

This paper conceptualizes the geopolitical externality of climate policy and estimates its plausible magnitudes. By reducing global fossil fuel prices, domestic demand reductions lower export revenues in resource-rich autocratic nations with high military expenditures. Climate policy can thus help reduce geopolitical and security burdens on Western democracies, offering a potential “peace dividend” as a co-benefit. Exploiting the link between the European Union’s oil consumption and the EU’s costs of the Russian war in Ukraine as a case study, we underscore the significance of this externality. We estimate that each euro spent on oil in the EU indirectly generated costs ranging from 11 cents to 7.5 euros in domestic military spending and financial support to Ukraine. From a European security perspective, implementing a carbon price on oil in the range of 21-1,471 EUR/tCO2 would internalize the geopolitical costs. Our analysis demonstrates that, even under conservative assumptions, the geopolitical externality offers a compelling argument for strong unilateral policies to reduce EU’s fossil fuel demand

We study how revenue allocation influences public attitudes for carbon pricing. Surveying over 20,000 citizens across Germany, France, Italy, Poland, and Romania, we find that while many remain undecided, direct support does not exceed 50 percent. Using a split-sample experimental design, we show that earmarking revenues for green investments or refunding them domestically increases support by about seven percentage points. Directing revenues to the poorest EU citizens does not increase support. Notably, revenue use is especially influential among respondents with low trust in their government, for whom progressive refunds further raise support. We also find comparatively high support for taxing aviation fuels.

International environmental agreements have historically been plagued with low or unstable membership, weak regulations, and ineffective enforcement. In a seeming attempt to combat these deficiencies, we have witnessed in recent years a significant increase in the inclusion of environmental coordination provisions in

preferential trade agreements (PTAs). This follows from the fact that environmental regulation or the lack thereof, impact the competitiveness of firms and thus have important implications for international trade. As such, a country entering a pure trade-only (or “shallow”) agreement with a country with weaker environmental

regulations may weaken or delay stronger regulations in an attempt to manipulate trade markets at the expense of their partner countries. By adding environmental provisions to trade agreements (or “deep” trade agreements), countries can avoid this “beggar thy neighbor” policy manipulation by all member countries. In this paper, we investigate the relationship between PTAs and environmental policy. We show that shallow and deep trade agreements have very different implications on tariff setting for both member countries (on non-members) and non-members (on members), suggesting that globalization and world welfare are impacted

differently by the nature of these agreements. To empirically examine these relationships, we construct a unique, large dataset with industry-level bilateral trade and tariff data with all preferential trade agreements which were in force (for at least one year) in the world over the period 1988-2019, as well as the nature of

the agreement and the number of unique environmental “norms” or provisions within each agreement.