Social Aspects of Market-Based Instruments for Greenhouse Gas Emission Reductions (SoMBI)

Climate change is one of today's grand challenges. The EU has committed itself to ambitious emission reduction targets: for 2020 and 2030, the EU aims at reducing its greenhouse gas emissions compared to 1990 by 20 percent and 40 percent, respectively, for 2050 an emission reduction by at least 80 percent is strived for. For large emitters in industry and energy generation the EU has established the European Emission Trading System (EU ETS) in 2005 defining an EU-wide reduction target. Emissions from other sources, most notably from the household and transport sectors, are instead regulated at EU member countries level and should be reduced by 30 percent by 2030, with differentiated reduction targets for the individual EU member countries. To achieve the emission reduction targets in the Non-ETS sectors the issue of carbon pricing has recently gained in momentum in the political discussion at EU as well as at EU member countries level. The project SoMBI focuses on two research questions: What are the effects of an EU-wide carbon price for the Non-ETS sectors that allows achieving the 30 percent reduction target in different EU member countries? What are the effects of different revenue recycling options in the EU member countries? To answer these questions, we perform a model-based analysis with the new ADAGIO-DYNK model. The CO2 price necessary to achieve the 30 percent EU-wide reduction target for the Non-ETS sectors is estimated. Also, detailed results for two case study countries are discussed. The countries (Austria and Poland) differ considerably in terms of the structure of their energy systems and economies. First, we focus on the macroeconomic, emission and distributional impacts of the tax. Then, the effects of different revenue recycling options are assessed and policy recommendations for the introduction of a carbon tax are developed.