Conference Agenda

We study how climate, industrial and trade policies should be coordinated to improve efficiency and level the playing field while achieving a global greenhouse gas emissions target. We distinguish between cost-effectiveness—the cost of achieving the target—and allocative efficiency—the realization of gains from trade across countries. When trading partners face heterogeneous carbon prices, a carbon border adjustment mechanism (CBAM) can level the playing field and improve cost-effectiveness, but at the expense of allocative efficiency. Although a CBAM generally reduces global emissions, it may in some cases increase them. When emissions fall, lowering the carbon price when the CBAM is introduced improves both efficiency and fair competition while preserving the global emissions outcome. We further analyze how CBAMs should be adapted to different policy regimes, including cap-and-trade systems with free allowance allocation and emissions-intensity standards. Finally, we consider a setting in which one trading partner subsidizes decarbonization (green industrial policy) rather than pricing carbon. In this case, applying the full carbon price to imports reduces efficiency; cost-effective emission reductions require charging only the carbon price net of the subsidy. We illustrate our results using quantitative simulations calibrated to the iron and steel industry, focusing on the European Union and China.

This paper analyzes the effects of a border adjustment tax on aggregate emissions in a framework where firms choose abatement endogenously while competing in differentiated-product markets. Within this setting, the policy induces producers with high baseline emissions to intensify abatement, thereby reducing emission intensity at the product level. These abatement responses, however, modify relative prices and redirect consumer substitution across varieties, so aggregate emissions do not necessarily fall. A decomposition into scale, technique, and composition effects reveals that market-level reallocation can dominate technological improvements in emission intensity. This BAT paradox underscores how the interaction between consumer substitution patterns and firm-level abatement choices governs the environmental effectiveness of border carbon adjustments.

This paper develops a formal theoretical framework to analyze the link between product durability and extended producer responsibility (EPR) within the transition toward a circular economy (CE). By extending the durable goods model of Bulow (1986), we investigate how a deposit-refund system (DRS) and emission taxes interact with the intertemporal incentives of both firms and consumers to shape equilibrium durability. We identify a novel behavioral mechanism, the ``refund discount effect," where consumers’ desire to accelerate deposit recovery incentivizes firms to further reduce product lifespan. This effect acts as a ``double distortion" by complementing the classical Coase conjecture, providing a new theoretical explanation for planned obsolescence under environmental regulation. We derive the welfare-maximizing policy mix, demonstrating that a DRS calibrated to marginal recycling effort costs, combined with a collection fee and an emission tax, can effectively mitigate these durability distortions. By integrating consumer discounting and producer commitment problems, this study contributes to the microeconomic foundations of CE policy design and advances the theory of durable goods under environmental policy.

Carbon credit markets have since long been plagued by problems in monitoring, reporting and verification. For assessing the level of removed carbon more accurately, new monitoring and measurement technologies are being developed. We argue that, besides accuracy, an important quality of a technology is its robustness to gaming, i.e. how hard it is to strategically manipulate measurement data. Based on Frankel and Kartik (2022), we develop a theoretical model to determine the relative merits of accuracy and gaming robustness. We demonstrate that improving gaming robustness is often more valuable than increasing accuracy. To illustrate our model, we apply it to a real-world dataset of cookstove carbon credit projects.

The EU ETS2 is highly contended in the political discourse because of potentially high prices. Complementary policies and market rules might dampen demand for emission permits and reduce future prices. This paper proposes a dynamic cal- ibrated model of the ETS2 that facilitates a transparent examination of these price effects accounting for (i) changing abatement costs over time and (ii) dif- ferent designs of price stabilization mechanisms in a modular way. We develop a conceptual framework for calculating carbon-price equivalents and welfare costs of complementary policies. We find ETS2 prices for 2027 of 365 EUR/tCO2 for our main calibration. Complementary policies consisting of national carbon prices, EU vehicle regulation and international offsets can reduce the ETS2 price by up to 60 EUR/tCO2 in total at an additional welfare cost of 0.1-0.6%. Front- loading allowances via an intertemporal trading ratio can deliver substantially larger price relief, but its welfare cost rises steeply: suppressing the 2027 price to 45 EUR/tCO2 would cost 12% of total abatement costs. The proposed one-year delay of the ETS2 increases carbon prices in subsequent periods if the cumulative emissions cap remains unchanged.

Energy storage is emerging as a critical component of the energy transition, allowing

intertemporal arbitrage of power and addressing challenges raised by the intermittency of the growing share of renewable energy. In this paper, we combine theory and empirical methods to assess the market and welfare implications of battery storage adoption and battery storage policies. Our theoretical exercise enables us to decompose the key welfare effects in a Marginal Value of Public Funds framework, while our empirical exercise leverages a natural experiment in California (the Moss Landing fire in 2025) to estimate key parameters and causal effects. Unsurprisingly, battery storage lowers peak power prices, but importantly we show that a key role of storage is that it reduces renewable curtailment, generating emission savings that would have otherwise gone to waste. Preliminary calculations of the first-order components of the MVPF suggest a value of 1.56 for battery storage subsidies in California. While greater than one, the MVPF is substantially smaller than for renewable subsidies (wind in particular), reflecting the relatively clean grid in California and relatively high levelized cost of storage.

The European Union's Carbon Border Adjustment Mechanism (CBAM), fully operationalized in 2026, raises a fundamental distributional question: who should receive its revenues? This study evaluates four recycling architectures — EU household rebates, non-fossil energy subsidies, labor tax relief, and direct household transfers to recipient regions — using a multi-regional computable general equilibrium model calibrated to GTAP-Power 11. Three findings emerge. First, the recycling mechanism, not the border tariff itself, determines environmental outcomes: non-fossil energy subsidies deliver the largest global CO2 reduction through a supply-side channel that restructures the energy mix, while demand-side transfers achieve comparable welfare gains with substantially smaller emission reductions. Second, when welfare is measured relative to GDP, the poorest recipient regions gain up to ten times more than the EU retains under its own recycling scenario — a disparity invisible in absolute terms. Third, EU revenue retention worsens global distributional outcomes, while all outward recycling designs reduce inter-regional inequality. These results reframe the policy question from whether to redistribute CBAM revenues to how recycling architecture jointly determines climate and equity outcomes.