Description
One critical aspect frequently overlooked in the assessment of climate change policies is the co-benefits. However, if they are left out, we are implicitly assuming they are equal to zero. The objective of this project is to develop a comprehensive methodology to evaluate the co-benefits within the context of the flagship European policy that tackles greenhouse gases (GHGs).
Market-based climate policy decentralises abatement decisions via a carbon price, e.g. by establishing a permit market for CO2 emissions. Since CO2 emissions are often released jointly with conventional air pollutants, CO2 permit trades give rise to implicit trades of various co-pollutants. In contrast to CO2 emissions, co-pollution emissions are not traded on a ton-for-ton basis but they do have local environmental
impacts. Depending on the spatial distribution of polluters and the polluted, these properties can lead to undesirable outcomes. We develop an empirical framework for measuring air pollution trades and evaluating their economic consequences. We apply this framework to provide the first estimates of the welfare and distributional consequences of co-pollution trades on the European carbon market.
When we account for the co-benefits of this policy, measured as the health impacts of other co-pollutants emitted jointly with GHGs, preliminary results indicate that the overall benefits are estimated to be roughly 8 times greater than the costs. This suggests that this type of policies are highly cost-effective and should be implemented and strengthened on a broader scale.
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