Cost-efficient climate policies for interdependent and uncertain carbon pools

The purpose of this paper is to investigate policy instruments for interdependent carbon pools and how they can be applied in the EU climate policy to 2050. Cost-effective policy instruments for forest products which are adjusted for the impact on carbon pools are identified. A numerical, dynamic, chance-constrained model including the EU-27 countries shows that inclusion of only one forest carbon pool can reduce costs and increase emission reductions. Results also suggest that decentralized policy instruments for both carbon pools are less costly than uniform instruments at the EU level.