Discussion Paper
No. 2017-34 | June 16, 2017
Gregor Schwerhoff, Thang Dao Nguyen, Ottmar Edenhofer, Gianluca Grimalda, Michael Jakob, David Klenert and Jan Siegmeier
Policy options for a socially balanced climate policy
(Published in The Sustainable Development Goals—Assessing interlinkages, trade-offs and synergies for policy design)


Climate policies, including removing fossil fuel subsidies or imposing carbon prices, can be designed in a way that is both efficient in addressing climate change and results in a fair distribution of the associated costs.

JEL Classification:

D62, E62, H21, H22


Cite As

[Please cite the corresponding journal article] Gregor Schwerhoff, Thang Dao Nguyen, Ottmar Edenhofer, Gianluca Grimalda, Michael Jakob, David Klenert, and Jan Siegmeier (2017). Policy options for a socially balanced climate policy. Economics Discussion Papers, No 2017-34, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2017-34

Comments and Questions

Anonymous - Referee report
June 16, 2017 - 10:29
• Very relevant theme• The paper covers a wide array of relevant policy options. To what extent these options are merely theoretical considerations and to what extent they have been tested/implemented - and with which results - remains unclear in many instances. It would be important to expand on this in a longer version of the paper.• The key practical findings – in the sense of “implementable solutions for the G20” – of this paper should be highlighted better. For instance, the abstract merely says that “climate policies… can be designed…. in a way… and results in…”. This leaves one guessing of what in concrete terms should be done. One would wish here for a sentence or two of how they can be designed and to what extent this builds on extant evidence of relevant measures, how they these measures can be replicated/scaled up etc, and specifically, what G20 should do that countries or other entities cannot do by themselves.• In the “Proposals” section, too, the key messages as highlighted (bold, underscored) tend to be statements that are (academic) findings rather than (policy) recommendations. It might help to simply change the wording here (e.g. “should” instead of “can”) to carry the message more strongly.• There is a wealth of concrete options / (potentially?) implementable solutions in the paper, but they would benefit much from being highlighted more strongly. A table, overview, clearer categorization etc would help here. Also, as mentioned above it remains often unclear whether they are merely theoretical considerations or practical cases. • The final section (5) addresses the probably crucial point: most experts and policy makers would agree that fossil fuel subsidies are bad and carbon pricing is good and that climate policies can be designed in a socially balanced way; but the political economy question of how – if it at all – reforms can be implemented is the real challenge. One would have wished far more emphasis on this in this paper and a more practical key messages than the obvious “need to be designed in a way to overcome political resistance” – even though there are some examples in the text of what specifically could be done / has been done. So again – a question of presentation / wording / highlighting. • There are still some typos, duplication of words.

Anonymous - Invited reader comment
June 19, 2017 - 08:34
This is a short paper that discusses how climate policy, in particular carbon pricing and the removal of fossil fuel subsidies, can be designed in a socially balanced way, or accompanied by other policies to achieve that goal. In doing so, the paper also summarizes relevant literature and briefly explains how different countries have already addressed this issue quite successfully. In my opinion, this is a relevant contribution for a wider audience, including policy makers and other stakeholders. It clarifies that climate policy may well be designed in a fair way, with progressive rather than regressive effects in terms of income. Although the arguments provided are not radically new, the paper summarizes the most relevant insights in a clear and concise way. It is worth mentioning that the paper also addresses some of the main political obstacles to a successful implementation of carbon pricing or fossil fuel subsidy removal. This is especially important, given that the policy instrument of carbon taxation or carbon pricing more generally is well understood and highly recommended by many economists, while it is still not implemented on a sufficient scale to have a serious impact on global carbon emissions.

Gregor Schwerhoff, Thang Dao Nguyen, Ottmar Edenhofer, Gianluca Grimalda, Michael Jakob, David Klenert, and Jan Siegmeier - Response to referee report - Responses to report and invited reader comment
June 23, 2017 - 09:24
see attached file