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Productivity Trends and the Cost of Reducing CO2 Emissions

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  • William W. Hogan
  • Dale W. Jorgenson
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    Abstract

    Adequate control of CO2 emissions may require a significant increase in energy price, which in turn wilt create long-term economic costs. This paper explores the effects of long-term productivity trends in the U.S. economy and relates them to the cost of reducing CO2 emissions. Technology change has been negatively correlated with energy prices and positively correlated with materials prices. Thus, if all prices remain constant expenditures on materials per unit of output will decline, and expenditures on energy per unity of output will increase. If energy prices increase, the rate of productivity growth will decrease. This trend will be very small, if measured on an annual basis, but eventually could be quite significant. A comparison with recent cost estimates of CO2 emission control suggests that this otherwise ignored productivity effect could be the largest component of a complete cost analysis.

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    Bibliographic Info

    Article provided by International Association for Energy Economics in its journal The Energy Journal.

    Volume (Year): Volume 12 (1991)
    Issue (Month): Number 1 ()
    Pages: 67-86

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    Handle: RePEc:aen:journl:1991v12-01-a05

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    Cited by:
    1. Lester C Hunt & Guy Judge & Yasushi Ninomiya, 2003. "Modelling Underlying Energy Demand Trends," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 105, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
    2. McKibbin, W.J. & Bok, T.J., 1995. "The Impact on the Asia-Pacific Region of Fiscal Policy in the United States and Japan," Papers 120, Brookings Institution - Working Papers.
    3. Saunders, Harry D., 2008. "Fuel conserving (and using) production functions," Energy Economics, Elsevier, vol. 30(5), pages 2184-2235, September.
    4. Bergman, Lars, 2005. "CGE Modeling of Environmental Policy and Resource Management," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 24, pages 1273-1306 Elsevier.
    5. Fatih Karanfil & Yasser Yeddir-Tamsamani, 2009. "Is technological change biased toward energy? -A multi-sectoral analysis for the French economy," Documents de Travail de l'OFCE 2009-12, Observatoire Francais des Conjonctures Economiques (OFCE).
    6. Webster, Mort & Paltsev, Sergey & Reilly, John, 2008. "Autonomous efficiency improvement or income elasticity of energy demand: Does it matter?," Energy Economics, Elsevier, vol. 30(6), pages 2785-2798, November.
    7. Luisanna Onnis & Patrizio Tirelli, 2010. "Challenging the popular wisdom. New estimates of the unobserved economy," Working Papers 184, University of Milano-Bicocca, Department of Economics, revised Apr 2010.
    8. Warwick McKibbin & David Pearce & Alison Stegman, 2004. "Long Run Projections For Climate Change Scenarios," CAMA Working Papers 2004-01, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. Saunders, Harry D., 2000. "A view from the macro side: rebound, backfire, and Khazzoom-Brookes," Energy Policy, Elsevier, vol. 28(6-7), pages 439-449, June.
    10. Dimitropoulos, John, 2007. "Energy productivity improvements and the rebound effect: An overview of the state of knowledge," Energy Policy, Elsevier, vol. 35(12), pages 6354-6363, December.
    11. Steve Sorrell, 2014. "Energy Substitution, Technical Change and Rebound Effects," Energies, MDPI, Open Access Journal, vol. 7(5), pages 2850-2873, April.
    12. Wagner, Gernot, 2010. "Energy content of world trade," Energy Policy, Elsevier, vol. 38(12), pages 7710-7721, December.
    13. Henrik Klinge Jacobsen, 2000. "Technology Diffusion in Energy-Economy Models: The Case of Danish Vintage Models," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 43-71.
    14. Paul Ekins, 1995. "Rethinking the costs related to global warming: A survey of the issues," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(3), pages 231-277, October.
    15. Newell, Richard G. & Jaffe, Adam B. & Stavins, Robert N., 2006. "The effects of economic and policy incentives on carbon mitigation technologies," Energy Economics, Elsevier, vol. 28(5-6), pages 563-578, November.
    16. Smith, Clare & Hall, Stephen & Mabey, Nick, 1995. "Econometric modelling of international carbon tax regimes," Energy Economics, Elsevier, vol. 17(2), pages 133-146, April.
    17. Dowlatabadi, Hadi & Oravetz, Matthew A., 2006. "US long-term energy intensity: Backcast and projection," Energy Policy, Elsevier, vol. 34(17), pages 3245-3256, November.

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