November 15, 2011

Investments and Financial Flows Induced by Climate Mitigation Policies

On Monday November the 14th I presented the highlights of the paper "Investments and financial flows induced by climate mitigation polcies" at the International Business Green Economies Dialogue session at the OECD in Paris.

  • We show that investments in the power sector increase in all but the moderate carbon tax scenarios, in the long term.
  • Investments increase as the price of the carbon tax increases above 50$ per ton of CO2-eq.
  • However the ratio of investments in the power sector to investments in all other sector does not increase with respect to the present level, with the only exception being the very high tax scenario.
  • Investments in R&D increase about 4-fold in the high tax scenarios.
  • Revenues from carbon taxes reach about 3 trillions $ in 2045 in the highest tax scenario. Revenues decline after 2050 because the tax base disappears.
  • With the right signals markets can provide sufficient investments in the power sector.
  • Governments should finance frontier research in new carbon-free technologies.
  • Revenues from carbon taxes are large and can be used to reduce distortionary taxes or provide fundings to cover increased spending for pensions.

The presentation can be downloaded here.

An older version of the paper is here.