Governments implement policies and measures to achieve particular objectives that they believe will not be achieved in the absence of government intervention, possibly because externalities or public goods are involved. Policies and measures can be generic, such as a general carbon tax or emissions trading, or sector-specific, such as a regulation applied to the construction sector, or a subsidy for green farming practices. The objective of this chapter is to assess different types of policies and measures, not to provide a complete list of these, so sector-specific policies and measures are discussed only in general terms.
Chapter 5 draws a distinction among five types of policy targets, each of which refers to a different interpretation (definition) of the concept of barriers to technological change: market potential, economic potential, socioeconomic potential, technological potential, and physical potential. Policies and measures can differ in the type of potential they aim to reach, but it is difficult to link specific policy instruments and specific potentials, because the potential achieved through virtually any policy instrument depends upon the degree to which that instrument is employed. For example, an emissions tax can be set at various levels; depending upon the level at which the emissions tax is set, it could have the effect (if perfectly implemented) of achieving any of the types of potential defined in Chapter 5.10 For this, among other reasons, the prime focus in this section is on the possible criteria for policy instrument choice and evaluation.
Evaluation criteria are required both for the ex-ante choice of instruments and for the ex-post assessment of implementation and performance. Each government may apply different weights to the criteria when it evaluates GHG mitigation policy options.11 Moreover, a government may apply different weights to the criteria when it evaluates national and international policy instruments, and the appropriateness of the criteria may vary depending on the degree of uncertainty about the pollution abatement cost and pollution damage functions. This general remark should be kept in mind when the various domestic and international policies, instruments, and measures discussed in this chapter are evaluated against the background of these criteria.
The criteria identified in SAR for the evaluation of policy options (Fischer et al., 1998) are:
The literature (e.g., OECD, 1997d) identifies some additional criteria, such as:
The above lists of criteria guide the discussion of national and international policies and measures related to GHG abatement. However, the economics literatureparticular theory developmentfocuses more on the cost-effectiveness criterion than on the other criteria mentioned, and there is a similar emphasis in this chapter, which is a review of the best available scientific literature. Wherever possible, literature on the potential equity impact of policies and measures is referred to. In addition, specific attention is paid to the political economy literature that describes policy choice (Section 6.1.5), the interactions of policy instruments with fiscal systems (Section 6.5.2), and the impacts on technological change (Section 6.5.3).
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