Integrated Carbon Policy Design for Achieving Net-Zero Targets

Abstract

Several countries have set net-zero targets, and many more will announce in the next few years. Countries have used carbon pricing as an instrument to cut Greenhouse Gas (GHG) emissions and provide a price signal to attract private investments to achieve net-zero targets. However, current carbon policy in countries with net-zero targets remains inadequate and asymmetrical to overcome net-zero challenges; there are visible gaps in the carbon price level, sectoral coverage, and mechanism to reward carbon-neutral initiatives. This paper proposed an integrated carbon policy design covering economic, technical, and social dimensions and discussed how an integrated policy design approach could be effective in helping countries achieve net-zero objectives. The paper makes recommendations for net-zero policymakers. First, a stable and appropriate carbon price must be in place to attract private investments in carbon offset measures and commercialize clean technologies. Second, governments should use an effective revenue recycling mechanism to engage firms and citizens in mitigating the side effects of the carbon price regime and win their trust. Third, countries should promote behavioral changes and carbon footprint reduction measures through citizen participation.