Diversification and Cooperation Strategies in a Decarbonizing World

Fossil fuel importers can apply various climate and trade taxes to encourage fossil fuel–dependent countries to cooperate on climate mitigation, and fossil fuel–dependent countries can respond with alternative diversification and cooperation strate...

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Main Authors: Peszko, Grzegorz, van der Mensbrugghe, Dominique, Golub, Alexander
Format: Working Paper
Language:English
Published: World Bank, Washington, DC 2020
Subjects:
Online Access:http://documents.worldbank.org/curated/en/705881593750058987/Diversification-and-Cooperation-Strategies-in-a-Decarbonizing-World
http://hdl.handle.net/10986/34056
id okr-10986-34056
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spelling okr-10986-340562022-09-20T00:11:36Z Diversification and Cooperation Strategies in a Decarbonizing World Peszko, Grzegorz van der Mensbrugghe, Dominique Golub, Alexander LOW CARBON DEVELOPMENT LOW CARBON TRANSITION CLIMATE CLUBS CLIMATE COOPERATION DIVERSIFICATION FOSSIL FUEL-DEPENDENT COUNTRY CARBON POLICY DECARBONIZATION CARBON TAX Fossil fuel importers can apply various climate and trade taxes to encourage fossil fuel–dependent countries to cooperate on climate mitigation, and fossil fuel–dependent countries can respond with alternative diversification and cooperation strategies. This paper runs macroeconomic model simulations of alternative strategies that the global community and fossil fuel–dependent countries can pursue to encourage and enable their participation in a global low-carbon transition. The following are the findings from the simulations. (i) Fuel importers’ unilateral carbon taxes capture fossil fuel–dependent countries’ resource rents and accelerate their emission-intensive diversification. (ii) Border taxes on the carbon content of imports from fossil fuel–dependent countries do not induce comprehensive cooperation, but broader trade sanctions do. (iii) Cooperative wellhead carbon taxes can achieve cooperation without trade wars. (iv) Lower-income fossil fuel–dependent countries with large untapped reserves need additional incentives and enablers to cooperate and diversify into low-carbon assets. (v) Incentives to cooperate are misaligned between different fossil fuel–dependent countries and between owners of different fuels. (vi) The strategies that maximize consumption and growth in fossil fuel–dependent countries reduce the value of assets in extractive and heavy industries. (vii) Asset diversification is a robust, long-term strategy but faces the tragedy of the horizon. 2020-07-09T12:38:36Z 2020-07-09T12:38:36Z 2020-07 Working Paper http://documents.worldbank.org/curated/en/705881593750058987/Diversification-and-Cooperation-Strategies-in-a-Decarbonizing-World http://hdl.handle.net/10986/34056 English Policy Research Working Paper;No. 9315 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic LOW CARBON DEVELOPMENT
LOW CARBON TRANSITION
CLIMATE CLUBS
CLIMATE COOPERATION
DIVERSIFICATION
FOSSIL FUEL-DEPENDENT COUNTRY
CARBON POLICY
DECARBONIZATION
CARBON TAX
spellingShingle LOW CARBON DEVELOPMENT
LOW CARBON TRANSITION
CLIMATE CLUBS
CLIMATE COOPERATION
DIVERSIFICATION
FOSSIL FUEL-DEPENDENT COUNTRY
CARBON POLICY
DECARBONIZATION
CARBON TAX
Peszko, Grzegorz
van der Mensbrugghe, Dominique
Golub, Alexander
Diversification and Cooperation Strategies in a Decarbonizing World
relation Policy Research Working Paper;No. 9315
description Fossil fuel importers can apply various climate and trade taxes to encourage fossil fuel–dependent countries to cooperate on climate mitigation, and fossil fuel–dependent countries can respond with alternative diversification and cooperation strategies. This paper runs macroeconomic model simulations of alternative strategies that the global community and fossil fuel–dependent countries can pursue to encourage and enable their participation in a global low-carbon transition. The following are the findings from the simulations. (i) Fuel importers’ unilateral carbon taxes capture fossil fuel–dependent countries’ resource rents and accelerate their emission-intensive diversification. (ii) Border taxes on the carbon content of imports from fossil fuel–dependent countries do not induce comprehensive cooperation, but broader trade sanctions do. (iii) Cooperative wellhead carbon taxes can achieve cooperation without trade wars. (iv) Lower-income fossil fuel–dependent countries with large untapped reserves need additional incentives and enablers to cooperate and diversify into low-carbon assets. (v) Incentives to cooperate are misaligned between different fossil fuel–dependent countries and between owners of different fuels. (vi) The strategies that maximize consumption and growth in fossil fuel–dependent countries reduce the value of assets in extractive and heavy industries. (vii) Asset diversification is a robust, long-term strategy but faces the tragedy of the horizon.
format Working Paper
author Peszko, Grzegorz
van der Mensbrugghe, Dominique
Golub, Alexander
author_facet Peszko, Grzegorz
van der Mensbrugghe, Dominique
Golub, Alexander
author_sort Peszko, Grzegorz
title Diversification and Cooperation Strategies in a Decarbonizing World
title_short Diversification and Cooperation Strategies in a Decarbonizing World
title_full Diversification and Cooperation Strategies in a Decarbonizing World
title_fullStr Diversification and Cooperation Strategies in a Decarbonizing World
title_full_unstemmed Diversification and Cooperation Strategies in a Decarbonizing World
title_sort diversification and cooperation strategies in a decarbonizing world
publisher World Bank, Washington, DC
publishDate 2020
url http://documents.worldbank.org/curated/en/705881593750058987/Diversification-and-Cooperation-Strategies-in-a-Decarbonizing-World
http://hdl.handle.net/10986/34056
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