To drastically reduce GHG emission, numerous specific measures are required in all sectors of the economy. These measures, and the GHG consequences of their implementations, are not independent one from the other because of sectoral linkages. For instance, the carbon footprint of electric vehicles depends on the electricity mix, an issue that have received considerable attention but few economic analysis. The present paper address the issue of sectoral policy coordination, especially with pigovian carbon pricing is unavailable.

It analyzes the optimal allocation of mitigation effort among two vertically connected sec- tors, an upstream (e.g. electricity) and a downstream (e.g. transportation) one. The clean downstream technology (e.g. electric vehicle) consumes the upstream production and may shift production to that sector. Using a simple partial equilibrium model, we connects the concept of Marginal Abatement Cost (MAC) and Life-Cycle-Assessment. We propose a characteriza- tion that indicates the order of options implementations, which is relevant for policy making. The decentralized version of the model allows us to characterize optimal second-best policy in presence of imperfect GHG taxation. We find conditions of policy coordination for various price and quantity instruments settings.