More competition in green products markets can help save the planet

To reach net-zero emissions, firms will depend on the relative cost of decarbonising their production lines. However, the abatement goods sector – the sector providing climate change mitigation goods – exhibits low competition and thus high prices. Eric Jondeau, Gregory Levieuge, Jean-Guillaume Sahuc, and Gauthier Vermandel argue that subsidies financed by a carbon tax are an efficient instrument to promote firm entry in the abatement goods sector, fostering competition and lowering the cost of abating carbon emissions. They estimate that such a subsidy would reduce the cost of the net-zero transition, saving $2.9 trillion in world GDP each year until 2060.