Four main criteria are used to evaluate policies and instruments: environmental
effectiveness, cost effectiveness, distributional effects, including equity, and
institutional feasibility.
Integrating climate policies in broader development policies makes
implementation and overcoming barriers easier.
Regulations and standards generally provide some certainty about emission
levels. They may be preferable to other instruments when information or other
barriers prevent producers and consumers from responding to price signals.
However, they may not induce innovations and more advanced technologies.
Taxes and charges can set a price for carbon, but cannot guarantee a particular
level of emissions. Literature identifies taxes as an efficient way of
internalizing costs of GHG emissions.
Tradable permits will establish a carbon price. The volume of allowed
emissions determines their environmental effectiveness, while the allocation of
permits has distributional consequences. Fluctuation in the price of carbon
makes it difficult to estimate the total cost of complying with emission permits.
Financial incentives (subsidies and tax credits) are frequently used by
governments to stimulate the development and diffusion of new technologies.
While economic costs are generally higher than for the instruments listed
above, they are often critical to overcome barriers.
Voluntary agreements between industry and governments are politically
attractive, raise awareness among stakeholders, and have played a role in the
evolution of many national policies. The majority of agreements has not
achieved significant emissions reductions beyond business as usual. However,
some recent agreements, in a few countries, have accelerated the application of
best available technology and led to measurable emission reductions.
Information instruments (e.g. awareness campaigns) may positively affect
environmental quality by promoting informed choices and possibly
contributing to behavioural change, however, their impact on emissions has not
been measured yet.
RD&D can stimulate technological advances, reduce costs, and enable progress
toward stabilization.
