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Mr. Nicolas Arregui and Ian W.H. Parry

, they can play a reinforcing role when carbon pricing is subject to acceptability constraints. Third, they may be needed to meet sectoral targets that are more ambitious than nationwide targets. Feebates are a promising reinforcing instrument . Feebates provide a (revenue-neutral) sliding scale of fees on products or activities with above average emission rates and a sliding scale of rebates for products or activities with below average emission rates. They can provide strong incentives to reduce emissions intensity without (unlike fuel taxes or carbon pricing) a

Nicoletta Batini, Ian W.H. Parry, and Mr. Philippe Wingender

energy-intensive trade-exposed (EITE) sectors or adopt comprehensive taxation of all embodied carbon in Danish consumption; and (ii) whether there would be legal constraints on either approach, including applying the BCA to products from EU countries. Additional mitigation instruments, that do not impose first-order tax burdens on households and firms, will be needed to reinforce carbon pricing at the sectoral level, especially where emissions have relatively low price-responsiveness . This paper recommends feebates (rather than more traditional regulations) to