The SoMBI Project

Background

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 (GHG) emissions compared to 1990 by 20% and 40% respectively, for 2050 an emission reduction by at least 80% 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 Member State level and should be reduced by 30% by 2030, with differentiated reduction targets for the individual Member States. 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 Member States level.

Objectives of the project

The project SoMBI aims at contributing to the research on the potential of carbon pricing for reducing GHG emissions in the EU Member States. Specifically, we will focus on two research questions:

  • What are the effects of an EU-wide carbon price for the Non-ETS sectors that allows achieving the 30% reduction target in different Member States? I.e. what are the impacts on Member States' Non-ETS emissions, what are the macroeconomic impacts and what are the distributional impacts?
  • What are the effects of different revenue recycling options in the different Member States?

To answer these questions, we will perform a model-based analysis with the new 'ADAGIO-DYNK' model. The CO2 price necessary to achieve the 30% EU-wide reduction target for the Non-ETS sectors will be estimated. Also, detailed results for two case study countries will be discussed. The countries (Austria and Poland) differ considerably in terms of the structure of their energy systems and economies. First, we will focus on the macroeconomic, emission and distributional impacts of the tax. Then, the effects of different revenue recycling options will be assessed and policy recommendations for the introduction of a carbon tax will be developed.

Work Packages

WP1: Foundations

WP2: Model development

WP3: Simulation of CO2 taxation and recycling scenarios

WP4: Discussion and Policy Recommendations

Contact

Claudia Kettner-Marx

Austrian Institute of Economic Research

A-1030 Wien, Arsenal, Objekt 20

claudia.kettner@wifo.ac.at

Last update: November 2020

This research was funded by the Jubiläumsfonds of the Oesterreichische Nationalbank (OeNB).