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Economics of demand-side and supply-side climate policies

Brookings | 2026-09-23 | energy

Topics: China, Climate, Europe, Indo-Pacific, Trade, United States

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English Summary

The paper argues that effective climate change mitigation requires a comprehensive 'portfolio' of policies, combining both demand-side (e.g., carbon pricing) and supply-side (e.g., extraction pricing) mechanisms. Key reasoning highlights that because carbon is a global pollutant, domestic efforts are insufficient; policies must be designed to prevent emissions 'leakage' by maintaining strong global price signals. The analysis suggests that optimal policy involves combining pricing mechanisms and addressing market imperfections, such as reforming electricity transmission planning. Ultimately, policymakers must navigate complex trade-offs—including distributional consequences and global market dynamics—as no single policy tool provides an unambiguous solution.

中文摘要

本文主張,有效的氣候變遷減緩需要一套全面的「政策組合」,結合需求側(例如碳定價)和供給側(例如開採定價)機制。核心論點指出,由於碳是一種全球污染物,單靠國內努力是不足夠的;政策必須設計成能夠維持強勁的全球價格訊號,從而防止排放「洩漏」。分析建議,最佳政策應結合定價機制並解決市場不完善的問題,例如改革電力傳輸規劃。最終,政策制定者必須權衡複雜的取捨——包括分配影響和全球市場動態——因為沒有單一的政策工具能提供明確的解決方案。

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