The Portfolio of Economic Policies Needed to Fight Climate Change

39 Pages Posted: 15 Nov 2022 Last revised: 18 Nov 2022

See all articles by Olivier J. Blanchard

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peterson Institute for International Economics

Christian Gollier

University of Toulouse 1 - Industrial Economic Institute (IDEI); CESifo (Center for Economic Studies and Ifo Institute)

Jean Tirole

University of Toulouse 1 - Industrial Economic Institute (IDEI); University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ); Centre for Economic Policy Research (CEPR)

Date Written: November 14, 2022

Abstract

Climate change poses an existential threat. The authors argue that carbon pricing and green research and development (R&D) support are good economics, but their implementation can be improved. Even if carbon prices are generalized and given more substance, green R&D is still likely to be smaller than needed. Much more money must be spent on it than is now the case, and this money must be properly allocated in order to have an impact. Moreover, done well, other policies, such as standards, bans, and targeted subsidies, can be good economics. But they have often been incoherent and their implementation is delicate. The authors also argue that domestic and international compensation is key to the acceptability of efficient policies. Finally, although a country’s emissions will not materially alter the course of climate change, individual countries can still show the way ahead: They can develop technologies that can be used by other, poorer, countries. They can provide leadership/momentum on global agreements and on the need to fund climate change policies in developing economies.

Keywords: Climate change, carbon price, green R&D, carbon border adjustment, climate finance

JEL Classification: D61, F18, H23, Q37, Q54

Suggested Citation

Blanchard, Olivier J. and Gollier, Christian and Tirole, Jean, The Portfolio of Economic Policies Needed to Fight Climate Change (November 14, 2022). Peterson Institute for International Economics Working Paper No. 22-18, Available at SSRN: https://ssrn.com/abstract=4276886 or http://dx.doi.org/10.2139/ssrn.4276886

Olivier J. Blanchard (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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Peterson Institute for International Economics ( email )

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Christian Gollier

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Germany

Jean Tirole

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

Place Anatole France
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F-31042 Toulouse Cedex
France
+33 5 61 12 8642 (Phone)
+33 5 61 12 8637 (Fax)

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ) ( email )

Manufacture des Tabacs
21 Allees de Brienne
Toulouse, 31000
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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