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Mr. Serhan Cevik
Global warming is the most significant threat to ecosystems and people’s health and living standards, especially in small island states in the Caribbean and elsewhere. This paper contributes to the debate by analyzing different options to scale up climate change mitigation and adaptation. In particular, the empirical analysis indicates that increasing energy efficiency and reducing the use of fossil fuel in electricity generation could lead to a significant reduction in carbon emissions, while investing in physical and financial resilience would yield long-run benefits. From a risk-reward perspective, the advantages of reducing the risks associated with climate change and the health benefits from higher environmental quality clearly outweigh the potential cost of climate change mitigation and adaptation in the short run. The additional revenue generated by environmental taxes could be used to compensate the most vulnerable households, building a multilayered safety net, and strengthening structural resilience.
Mr. Serhan Cevik

reforms aimed at reducing CO2 emissions, as well as adapting to the worst effects of climate change. From a risk-reward perspective, the benefits of reducing the risks of climate change and the health benefits from higher environmental quality outweigh the potential cost of climate change mitigation in the short run. A carbon tax and “feebates”—fees on products with high emissions combined with rebates on products with low emissions—could raise considerable revenue, which can support revenue mobilization and provide additional funding to compensate the most vulnerable

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.
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.

Mr. Serhan Cevik

financial resilience would yield long-run benefits. From a risk-reward perspective, the advantages of reducing the risks associated with climate change and the health benefits from higher environmental quality clearly outweigh the potential cost of climate change mitigation and adaptation in the short run. The additional revenue generated by environmental taxes could be used to compensate the most vulnerable households, building a multilayered safety net, and strengthening structural resilience. JEL Classification Numbers: O40; O44; Q40; Q48; Q51; Q54; Q58

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

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. 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. To enhance the social and political acceptance of climate policies, part of the revenue from carbon pricing should be used to compensate the most

International Monetary Fund. European Dept.

efficiency could lead to a significant reduction in CO 2 emissions and improve energy security throughout Europe. From a risk-reward perspective, the benefits of reducing the risks of climate change and strengthening energy security clearly outweigh the potential cost of mitigation policies in the short run. Environmental taxes, including a comprehensive, economy-wide carbon tax on fossil fuels, could also raise considerable revenues, which can expand the post-pandemic fiscal space and provide additional funding to compensate the most vulnerable households, build a

Mr. Serhan Cevik

lead to a significant reduction in CO 2 emissions and improve energy security throughout Europe. 9 From a risk-reward perspective, the benefits of reducing the risks of climate change and strengthening energy security clearly outweigh the potential cost of mitigation policies in the short run. Environmental taxes, including a comprehensive, economy-wide carbon tax on fossil fuels, could also raise considerable revenues, which can expand the post-pandemic fiscal space and provide additional funding to compensate the most vulnerable households, build a multilayered

Mr. Serhan Cevik
This paper investigates the connection between climate change and energy security in Europe and provides empirical evidence that these issues are the two faces of the same coin. Using a panel of 39 countries in Europe over the period 1980–2019, the empirical analysis presented in this paper indicates that increasing the share of nuclear, renewables, and other non-hydrocarbon energy and improving energy efficiency could lead to a significant reduction in carbon emissions and improve energy security throughout Europe. Accordingly, policies and reforms aimed at shifting away from hydrocarbons and increasing energy efficiency in distribution and consumption are key to mitigating climate change, reducing energy dependence, and minimizing exposure to energy price volatility.