Economic policies to foster green growth

Economics of Climate Change Mitigation


Major publication:

Summaries / Policy Briefs:

  • OECD Policy Brief: Cost-Effective Actions to Tackle Climate Change


The OECD has been working on climate change economics and policy since the late 1980s. We are using economic models and quantitative assessments to inform policy makers of the costs, benefits and potential tradeoffs of climate change mitigation scenarios. OECD’s modelling work supports governments in identifying least-cost policies or policy mixes to reduce greenhouse gas (GHG) emissions, and assesses the cost and impacts of possible post-2012 international frameworks.


Costs, Revenues and Effectiveness of the Copenhagen Accord: Emission Pledges for 2020
By Rob Dellink, Gregory Briner and Christa Clapp
Tackling the problem of global climate change requires a high level of international cooperation. Many countries have pledged targets or actions to reduce greenhouse gas emissions in the Appendices to the Copenhagen Accord. This analysis examines the costs and effectiveness of these pledges, using the OECD’s ENV-Linkages computable general equilibrium model. Several scenarios are analysed to evaluate the impacts of the range of pledges, the use of offsets, and linking emission trading systems. The results show that while the emission targets currently pledged by a wide range of countries under the Accord are an important and welcome start to a global solution, the pledges are not ambitious enough to put us on a pathway to limit average global temperature increase to below 2°C.

Summary flyer: .


Working Papers on the Economics of Climate Change Mitigation

The following is a series of working papers developed jointly by the OECD Economic and Environment Policy Committees.


Towards Global Carbon Pricing: Direct and Indirect Linking to Carbon Markets
By R.B. Dellink, S. Jamet, J. Chateau and R. Duval
Emissions trading systems (ETS) can play a major role in a cost-effective climate policy framework. Both direct linking of ETSs and indirect linking through a common crediting mechanism can reduce costs of action. We use a global recursive-dynamic computable general equilibrium model to assess the effects of direct and indirect linking of ETS systems across world regions. The analysis in this paper shows, however, that the potential gains to be reaped are so large, that substantial efforts in this domain are warranted.

The Economics of Climate Change Mitigation: How to Build the Necessary Global Action in a Cost-effective Manner
By Jean-Marc Burniaux, Jean Chateau, Rob Dellink, Romain Duval and Stéphanie Jamet
This paper outlines key steps towards the development of a single international carbon price -- including phasing out fossil fuel subsidies, and expanding and linking regional carbon markets through direct linking of existing emission trading systems, scaled-up CDM, use of sectoral crediting mechanisms, and incorporation of the forest sector. It examines the incentives for action, including possible financing flows to support action in developing countries.


The Economics of Climate Change Mitigation: Policies and Options for the Future 
By Jean Marc Burniaux, Jean Château, Romain Duval and Stéphanie Jamet.
Considering the costs and risks of inaction, ambitious action to reduce greenhouse gas emissions is economically rational. However, success in abating world emissions will ultimately require a least-cost set of policy instruments that is applied as widely as possible across all emission sources (countries, sectors and greenhouse gases).


Assessing the Impacts of Climate Change: A Literature Review
By Stéphanie Jamet and Jan Corfee-Morlot
Climate change is expected to have significant implications for the world economy and for many areas of human activity. A main conclusion of the review is that there are large uncertainties, which are not fully reflected in existing estimates of global impacts of climate change in monetary units.


Co-benefits of climate change mitigation policies: literature review and new results
By Johannes Bollen, Bruno Guay, Stéphanie Jamet and Jan Corfee-Morlot
There are local air pollution benefits from pursuing greenhouse gases emissions mitigation policies, which lower the net costs of emission reductions and thereby may strengthen the incentives to participate in a global climate change mitigation agreement.


Long-run GDP Growth Framework and Scenarios for the World Economy
By Romain Duval and Christine de la Maisonneuve.
This paper develops and applies a simple “conditional growth” framework to make long-term GDP projections for the world economy, taking as a starting point recent empirical evidence about the importance of total factor productivity and human capital in explaining current cross-country disparities in GDP per capita levels.


The Role of R&D and Technology Diffusion in Climate Change Mitigation: New Perspectives using the WITCH Model
By Valentina Bosetti, Carlo Carraro, Romain Duval, Alessandra Sgobbi and Massimo Tavoni.
This paper uses the WITCH model, a computable general equilibrium model with endogenous technological change, to explore the impact of various climate policies on energy technology choices and the costs of stabilising greenhouse gas concentrations. With emissions coming from multiple sources, keeping a wide range of options available matters more for stabilisation costs than improving specific technologies. Due to international knowledge spillovers, stabilisation costs could be further reduced through a complementary, global R&D policy. However, a strong price signal is always required.


An Overview of the OECD ENV-Linkages Model 
By Jean-Marc Burniaux and Jean Chateau.
This Working Paper presents a summary description of the OECD ENV-Linkages General Equilibrium model. This model has been developed by the Environment Directorate of the OECD Secretariat in order to assess the economic impact of abating Greenhouse Gases using several different economic instruments.


A Taxonomy of Instruments to Reduce Greenhouse Gas Emissions and their Interactions 
By Romain Duval
This paper reviews alternative (national and international) climate change mitigation policy instruments and interactions across them. Carbon taxes, cap-and-trade schemes, standards and technology-support policies (R&D and clean technology deployment) in particular are assessed according to three broad cost-effectiveness criteria.

The report "Climate Change Mitigation: What to We Do?" [en français: "Atténuation du changement climatique : Que faire ?"] summarises some of the recent OECD analyses, including on the role of technological innovation and the impacts of policies to address carbon leakage. It provides arguments to help policy-makers explain why postponing decisions, using the current economic circumstances as an excuse, would be a short-sighted policy.

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