Georgia is committed to various international agreements on climate change, notably the Paris Agreement and the Association Agreement with the European Union. Recently, in 2021, Georgia announced a new Nationally Determined Contribution, pledging to reduce greenhouse gas emissions by 35% compared to 1990 levels.

Pollution is an existential threat to modern society, one which endangers both human and planetary health. It includes contaminating the air with ozone, sulfur, nitrogen-containing nitrous oxides, and delicate particulate matter (PM2.5). Reduction of air pollution is a key aspect of Green Growth, which, together with attaining the goals of the Paris Agreement, could save around a million lives a year worldwide by 2050 (Rijsberman, 2019).

Over the last half-century, air pollution has become an increasingly critical problem globally. The number of harmful emissions connected to human activity has been rising constantly, and, in many locations around the world, the concentrations of individual pollutants are higher than the recommended safe levels. Elevated emission levels are associated with various harmful effects, such as damage to human health and well-being, decreases in productivity, a reduction in land prices, and equally significantly global environmental issues like climate change.

ISET Policy Institute developed an advanced quantitative model to simulate the potential impacts of energy and environmental policies on the Georgian economy, the Climate Policy Analysis (ICPA), and investigated the economy-wide implications of three alternative policy options (the introduction of differentiated – by sector – carbon taxes, sectoral emission standards, and uniform carbon tax), complying with the emission targets defined in Georgia’s Climate Strategy and Action Plan, to find out the most effective measures and their welfare effects.

Three main economic sectors contributing to climate change are: energy (61%), transport (20.1%), and agriculture (8.5%). Interestingly, 25% of human-induced greenhouse gas (GHG) emissions are caused by agriculture, forestry, and the change of land use. Within agriculture, the major contributor is the livestock sector, accounting for 44% of human-induced methane (CH4), 53% of nitrous oxide (N2O), and 5% of carbon dioxide (CO2) emissions.