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Arbeitsgruppe Politik-Instrumente

Welcome to the Homepage of the Policy Instruments Modelling group.

We are a subunit of Research Domain III, established in 2009. We study the role of policy instruments as incentives: how can individually rational behavior aimed at maximizing profits or utility lead to socially efficient outcome - rather than a „market failure“? Our research is based on decentralized models (as opposed to social planner models) which allow an explicit representation of all agents‘ behavior. The following topics are addressed in our work:

  • financial markets, investor behavior, and implications for climate policy
  • horizontal and vertical fiscal federalism
  • carbon pricing and sustainable development
  • distributional and welfare implications of tax policies
  • taxation of economic rents (land, fossil resources, etc.)
  • international cooperation on climate change

In terms of methodology, we make use of micro- and macroeconomic formal analysis, numerical modeling and game theory.


Former members here.

Key publications and ongoing work

Franks, Max, Ottmar Edenhofer, and Kai Lessman (2017): "Why Finance Ministers Favor Carbon Taxes, Even if They Do Not Take Climate Change into Account." Environmental and Resource Economics 68(3), 445–472, DOI 10.1007/s10640-015-9982-1, working paper PDF

Edenhofer, O., Roolfs, C., Gaitan, B., Nahmmacher, P., Flachsland, C. (2017): Agreeing on an EU ETS Price Floor to Foster Solidarity, Subsidiarity and Efficiency in the EU. In Parry, I.; Pittel, L.; Vollebergh, H. (Eds.): Energy Tax and Regulatory Policy in Europe: Reform Priorities, MIT press, link.

Lessmann, K., U. Kornek, V. Bosetti, R. Dellink, J. Emmerling, J. Eyckmans, M. Nagashima, H.-P. Weikard, Z. Yang (2015): "The stability and effectiveness of climate coalitions: A comparative analysis of multiple integrated assessment models". Environmental and Resource Economics, Volume 62, Issue 4, pp 811-836, doi:10.1007/s10640-015-9886-0updated manscript.

For a complete list of publications by current members you can query the PIK Document Database.

Current research projects

  • FINFAIL (Financial market failures, investor behavior, and their implications for climate policy). BMBF funded research group as part of Nachwuchsgruppen Globaler Wandel – 4 + 1.
  • KLIF (Integrierte Finanz- und Klimapolitik: Handlungsspielräume für Nationalstaaten unter Wettbewerbsdruck). DFG funded joint project with TU Berlin's Public and Health Economics.

Past projects

  • CAPRI-SD (Carbon Pricing and Sustainable Development). Joint project with working groups Climate and Development and Governance of MCC, funded by GIZ's Sektorvorhaben Klima in cooperation with BMZ. Role of PI group: project lead.
  • CREW (Climate Policy in a Reluctant World, BMBF Förderschwerpunkt "Ökonomie des Klimawandels"). Joint project with Marco Runkel (TU Berlin) and Roland Strausz (HU Berlin). Role of PI group: project lead.
  • ENTRACTE (Economic iNsTRuments to Achieve Climate Targets in Europe), project under EU FP7 ENV. Joint project coordinated by ZEW with various European partners, e.g. FEEMLSE Grantham Institute, FCO, Tilburg. Role of PI group: leader of Work Package 5, contributor to Work Package 2.
  • LIMITS (Low climate IMpact scenarios and the Implications of required Tight
    emission control Strategies), project under EU FP7 ENV. Joint project with various European partners, e.g. FEEM, IIASA, LSE Grantham Institute, ECN. Role of PI group: contribution to Work Package 2, in particular "Regional policies under second-best conditions".
  • EntDekEn (Klimaschutz, Entwicklung und Gerechtigkeit: Dekarbonisierung in Entwicklungs- und Schwellenländern), funded by BMBF. Joint project with the GIGA institute and the Chair of Development Economics at University of Göttingen. Role of PI group: project lead.
  •  Ökonomik einer integrierten und langfristigen Klima- und Energiepolitik (WGL Pakt für Forschung und Innovation 2010). Joint project with Environmental Economics group of ZEW Mannheim. Role of PI group: contributing partner.


  • MICA: a model of international cooperation on climate change
  • PRIDE: a model for finding first and second best policies in the presence of strategic interactions of multiple actors