The cost of reducing CO2 emissions: Integrating abatement technologies into economic modeling
AbstractWe explore two methods of incorporating bottom-up abatement cost estimates into top-down modeling: an economy-wide method and a sector-specific method. Carbon emissions generally depend on technology and scale. Given the technology options, abatement is possible without a substantial reduction in scale. Otherwise the change must come purely through a reduction in demand. Our analysis shows that the cost of environmental policy is considerably overestimated by top-down models if a bottom-up abatement cost curve is not included. Using the data for the Swiss economy, we demonstrate two techniques of representing an abatement function explicitly in a computable general equilibrium model: a traditional and a hybrid (discrete technology modeling) approach. The results suggest that the current climate policy in Switzerland will not be able to move the economy towards the required 10% CO2 reduction. Both approaches provide virtually the same results when the calibration process is precisely executed, which contradicts the results of previous studies.
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Bibliographic InfoArticle provided by Elsevier in its journal Ecological Economics.
Volume (Year): 87 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/ecolecon
Cost curve; Elasticity of substitution; Computable general equilibrium model; Hybrid modeling; Carbon tax;
Other versions of this item:
- Olga Kiuila & Thomas F. Rutherford, 2011. "The cost of reducing CO2 emissions: Integrating abatement technologies into economic modeling," Working Papers 2011-26, Faculty of Economic Sciences, University of Warsaw.
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
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