Compensation External Costs A policy instrument for climate change mitigation

The CEC has significant advantages compared to other climate change policy instruments, such as the EU ETS, a carbon tax or an energy tax. However, the CEC is also accompanied by disadvantages. Nevertheless, the CEC seems to be a promising instrument in the transition towards the low carbon future that is needed to achieve the goals as stipulated in the Paris Agreement. The instrument is unique in the sense that it incentivises greenhouse gas emission reduction along the entire production and supply chain, whilst simultaneously encouraging consumers to purchase products with a lower carbon footprint.