ifo Institute: Economists Advocate Extending EU Emissions Trading
Among German economists, the extension of CO2 emissions trading is the preferred policy for achieving climate targets. This is the result of the current ifo-FAZ Economists Panel, a survey of around 160 economics professors conducted by the ifo Institute in cooperation with Frankfurter Allgemeine Zeitung.
“Germany cannot solve the climate problem alone. It’s a matter of getting the big CO2 offenders like China, the United States, and India to change course,” explains Niklas Potrafke, Director of the ifo Center for Public Finance and Political Economy and initiator of the Economists Panel. “If Germany opts for a particularly expensive and inefficient climate policy, then it will simply not be setting a good example.”
The economics professors consider extending EU emissions trading to other areas such as transport and buildings to be the most efficient and ecologically effective measure for achieving climate targets. Economists believe that a national CO2 tax, on the other hand, would be politically the easiest to implement. Almost one-third of participants also support both instruments when distributional effects are factored in. However, the economists point out that the distributional effects of the individual measures depends on how they are actually designed. They believe that refunding the higher costs as a per capita lump sum would be the most widely accepted option among the general public. Other options would be to repeal or reduce the EEG surcharge and to repeal or reduce the energy and electricity tax.
Only one-fifth of the participants consider carbon pricing to be sufficient and do not propose any further measures; three-quarters of the participants support further instruments and measures. These include the promotion of climate-friendly technical progress and the expansion of infrastructure. Only a few economists see global emissions trading, energy-efficient building renovation, and the promotion of climate-friendly agriculture as appropriate ways to combat climate change.
The survey was conducted in cooperation with Professor Andreas Löschel at the University of Münster and the ifo Center for Energy, Climate, and Resources.
