Overlapping Climate Policies

Abstract

Countries around the world are enacting climate policies such as coal phase-outs, aviation taxes and renewable energy support. These policies often overlap with a wider multi-jurisdictional carbon-pricing system like the EU's Emissions Trading System. We develop a general framework to study how effectively such 'overlapping climate policies' can help combat climate change - depending on their design, location and timing. We find that some policies are truly complementary, while others backfire by raising aggregate emissions. At a conceptual level, our model encompasses the market design of most carbon-pricing systems used in practice and a wide range of popular unilateral climate policies.