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International Monetary Fund. European Dept.

2. Complementary Policies 3. Environmental Taxation 4. Effective Carbon Pricing 5. Carbon Pricing Scenario 6. Transport Sector Emissions 7. Fuel Duties 8. Distributional Implications of Higher Fuel Taxes 9. Acquisition Taxes 10. Circulation Tax 11. Road Transport Fiscal Revenues 12. Efficiency Standards 13. Electromobility Adoption 14. Purchase Subsidies Distributional Considerations 15. Population Density, Air Pollution, and Public Transportation 16. Transport Modes 17. Residential Emissions 18. Housing Stock Characteristics 19

Jean Chateau, Ms. Wenjie Chen, Ms. Florence Jaumotte, and Karlygash Zhunussova

expenditure surveys that are embedded in CPAT. The results ( Figure 16 ) from the incidence analysis on the full policy scenario show poorer households tend to be disproportionately affected by carbon pricing policies compared to wealthier households (this also holds true across other policy scenarios), consistent with long-established results that the impact on households from carbon pricing tends to be regressive. 29 Source: IMF Staff calculations. Note: the panel shows relative to consumption impact of the carbon pricing scenarios on consumption deciles before

International Monetary Fund. Asia and Pacific Dept

sample of large corporates and SMEs covering about 5 percent of total non-bank loans, UOB found that under a high carbon price scenario credit rating of companies included in the sample would deteriorate by two notches. Most carbon-intensive sectors like building materials would be hit the most. A similar assessment for the real estate portfolio (about 6 percent of non-bank loans) suggested negligible deterioration of credit ratings. Overall, while acknowledging the limitations of the methodology and data availability, UOB concluded that the resulting credit risk for

Jean Chateau, Ms. Wenjie Chen, Ms. Florence Jaumotte, and Karlygash Zhunussova
This paper presents ways for China to achieve its climate goals while also attain high-quality growth—growth that is balanced, inclusive, and green. Using a dynamic computable general equilibrium model that is calibrated to China, multiple scenarios are considered that incorporate a sequence of layered policies: (i) frontloading mitigation with an earlier emissions peak, (ii) power market reforms, and (iii) economic rebalancing. The results highlight that these policies can significantly contribute to the success of the climate strategy overall, including by lowering the shadow price of carbon as well as the associated mitigation costs. Distribution analysis offers proposals to lessen the impact on vulnerable households.
Mr. Jiaqian Chen, Maksym Chepeliev, Mr. Daniel Garcia-Macia, Ms. Dora M Iakova, Mr. James Roaf, Ms. Anna Shabunina, Dominique van der Mensbrugghe, and Mr. Philippe Wingender

(relative to the “lump-sum transfers” scenario). Border Adjustment and Global Carbon Price Scenarios Strict emission policies at the EU level without international coordination can lead to carbon leakage to the rest of the world. According to the model simulation, a uniform carbon tax cutting emissions by 50 percent in the EU would increase emissions by 15 percent in the rest of the world for each unit of EU emissions avoided, as the EU would turn to importing or outsourcing energy-intensive goods instead of producing them domestically. A carbon border adjustment

Baoping Shang

only a small portion from across-the-board price increases. In addition, behavioral responses by consumers may vary across income groups ( Muller and Yan, 2018 ; Moshiri and Santillan, 2018 ). However, empirical estimates of such effects appear to vary substantially across studies due to differences in methodologies and data ( Zhu and others, 2019b ). The rebound effect has been extensively discussed in the context of energy efficiency and needs to be take into account in estimating consumer responses, in both the baseline and the carbon pricing scenario. 11 The

Baoping Shang
Addressing the poverty and distributional impacts of carbon pricing reforms is critical for the success of ambitious actions in the fight against climate change. This paper uses a simple framework to systematically review the channels through which carbon pricing can potentially affect poverty and inequality. It finds that the channels differ in important ways along several dimensions. The paper also identifies several key gaps in the current literature and discusses some considerations on how policy designs could take into account the attributes of the channels in mitigating the impacts of carbon pricing reforms on households.
International Monetary Fund. Monetary and Capital Markets Department

rates experienced during the oil price decline of 2014–16. This said, dynamics under a carbon price scenario can be expected to differ from past episodes since perceptions of the persistence of the shock will be different in case of a permanent policy change. Risk Monitoring and Data 29. The authorities are encouraged to further strengthen their own analysis of financial sector vulnerabilities . While data availability is generally good, in the context of the stress testing work some important gaps emerged. In particular, authorities should establish a

Mr. Jiaqian Chen, Maksym Chepeliev, Mr. Daniel Garcia-Macia, Ms. Dora M Iakova, Mr. James Roaf, Ms. Anna Shabunina, Dominique van der Mensbrugghe, and Mr. Philippe Wingender
This paper aims to contribute to the debate on the choice of policies to reach the more ambitious 2030 emission reduction goals currently under consideration. It provides an analysis of the macroeconomic and distributional impacts of different options to scale up the mitigation effort, and proposes enhancements to the existing EU policies. A key finding is that a well-designed package, consisting of more extensive carbon pricing across EU countries and sectors, combined with cuts in distortionary taxes and targeted green investment support, would allow the EU to reach the emission goals with practically no effects on aggregate income. To enhance the social and political acceptance of climate policies, part of the revenue from carbon pricing should be used to compensate the most vulnerable households and to support the transition of workers to greener jobs. A carbon border adjustment mechanism could complement the package to avoid an increase in emissions outside the EU due to higher carbon prices in the EU (“carbon leakage”). From a risk-reward perspective, the benefits of reducing the risk of extreme life-threatening climate events and the health benefits from lower air pollution clearly outweigh the costs of mitigation policies.