Authors: Victoria Alexeeva-Talebi, Andreas Löschel and Sebastian Voigt

This paper explores macroeconomic impacts of sectoral approaches as a set of options to engage emerging economies such as China, Mexico and Brazil in setting policies for a lower emission path and to address potentially adverse impacts of stringent environmental policies on key industries in the European Union. Drawing on the example of the cement sector, this paper analyses alternative designs of sectoral approaches by means of a computable general equilibrium (CGE) model of the global economy. For this purpose, we apply advanced techniques to disaggregate the sectoral coverage of a standard version of a CGE framework and use bottom-up marginal abatement cost curves from relevant sectoral studies. Our results suggest that sectoral approaches can contribute to the reduction of global emissions, albeit to a small extent. This calls for the extension of sectoral approaches to further sectors and countries in order to fully exploit the efficiency gains.