Emission Targets and Coalition Options for a Small, Ambitious Country: An Analysis of Welfare Costs and Distributional Impacts for Norway

Arbeitspapier

We theoretically and numerically analyse the impacts for a small, open country with carbon abatement ambitions of joining a coalition with allowance trading. Besides welfare impacts for both the coalition and the small, open economy joining the coalition, we scrutinise how the studied policy options differ with respect to their distributional impacts across domestic income groups. Our example is the EU 2030 policies and Norway’s linking to it. In spite of theoretical ambiguity, the findings suggest that the tighter the links with the EU, the lower the abatement costs for Norway. The distributional profile of the welfare costs tends to be progressive regardless of the choice of linking options; however, the less progressive, the lower the overall welfare cost. This indicates a trade-off between efficiency and distribution concerns. A national cap-and-trade system without linking to the EU is the least cost-effective option for Norway but also the most progressive as the higher income deciles face lower capital return and wages.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8874

Classification and Topics

• Classification: Wirtschaft ; Computable General Equilibrium Models ; Energy and the Macroeconomy ; Energy: Government Policy ; Climate; Natural Disasters and Their Management; Global Warming ; Environmental Economics: Government Policy
• Subject: carbon policies ; distributional impact ; Emission Trading System ; Effort Sharing Regulation ; Computable General Equilibrium model

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Faehn, Taran ; Yonezawa, Hidemichi
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/232471
• Last update: 10.03.2025, 11:42 AM CET