Climate instruments in comparison

On December 9, 2020, the EU Main Committee will meet before the European Council negotiations on new emission reduction targets for 2030 take place from December 10 to 11.

Current forecasts do not assume that Austria will meet its targets by 2030. A tightening of the emission reduction targets by 2030, which the EU is trying to achieve, will further exacerbate the problem in Austria. Instead of the current target of a 40% reduction, an increase to 55% or even 60% compared to 1990 is being debated. European emissions certificate trading currently ensures that CO2 emissions targets are met in the energy and industry sectors. If this target is increased, it can be assumed that the national reduction target of currently 36% compared to 2005 will also be raised. "What is missing is a national strategy to achieve the reduction in the non-ETS sectors," says EcoAustria Director Monika Köppl-Turyna.

There are considerable pitfalls here: for example, requirements and bans generally take insufficient account of the different avoidance costs of private households and companies and therefore lead to unnecessarily high costs. The large number of requirements and regulations in practice is also associated with considerable uncertainties regarding the achievement of targets. In the case of the CO2 tax, the level of the tax with which the specified emissions target is achieved can at best be estimated. There is therefore a risk that the government will set the tax too low or too high, thereby missing the target or unnecessarily burdening private households and companies. Frequent readjustment of the tax level would therefore be likely, as the example of the CO2 tax in Switzerland shows. With emissions trading, on the other hand, the quantity of emissions can be controlled directly via the quantity of certificates issued. Such a system could also help to ensure that climate targets are achieved accurately at national level in the areas of transport, buildings and agriculture.

However, carbon pricing is also an income for the state that can be used for other economic policy objectives, such as reducing high taxes, in order to stimulate the economy - the so-called "double dividend". "If the revenue from carbon pricing is refunded to employees and companies in the form of tax relief, this can have a positive impact on growth and employment and the double dividend of climate policy can be realized," explains study author Ludwig Strohner.

EcoAustria Policy Note 39, which was published in February 2020, deals with the effects of various climate instruments on the reduction of CO2 emissions as well as a number of economic policy factors.