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Climate Change Mitigation Strategies in Fast-Growing Countries: The Benefits of Early Action

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  • Valentina Bosetti
  • Carlo Carraro
  • Massimo Tavoni

Abstract

This paper builds on the assumption that OECD countries are (or will soon be) taking actions to reduce their greenhouse gas emissions. These actions, however, will not be sufficient to control global warming, unless developing countries also get involved in the cooperative effort to reduce GHG emissions. This paper investigates the best short-term strategies that emerging economies can adopt in reacting to OECD countries’ mitigation effort, given the common long-term goal to prevent excessive warming without hampering economic growth. Results indicate that developing countries would incur substantial economic losses by following a myopic strategy that disregards climate in the short-run, and that their optimal investment behaviour is to anticipate the implementation of a climate policy by roughly 10 years. Investing in innovation ahead of time is also found to be advantageous. The degree of policy anticipation is shown to be important in determining the financial transfers of an international carbon market meant to provide incentives for the participation of developing countries. This is especially relevant for China, whose recent and foreseeable trends of investments in innovation are consistent with the adoption of domestic emission reduction obligations in 2030.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2742.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2742

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Keywords: energy-economy modelling; climate policy; developing countries;

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References

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  1. Bosetti, Valentina & Carraro, Carlo & Massetti, Emanuele & Tavoni, Massimo, 2007. "Optimal Energy Investment and R&D Strategies to Stabilise Greenhouse Gas Atmospheric Concentrations," CEPR Discussion Papers 6549, C.E.P.R. Discussion Papers.
  2. Richard Tol, 1999. "Spatial and Temporal Efficiency in Climate Policy: Applications of FUND," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 14(1), pages 33-49, July.
  3. Valentina Bosetti & David Tomberlin, 2004. "Fondazione Eni Enrico Mattei," Working Papers 2004.102, Fondazione Eni Enrico Mattei.
  4. Carlo Carraro & Valentina Bosetti & Alessandra Sgobbi & Massimo Tavoni, 2008. "Delayed Participation of Developing Countries to Climate Agreements: Should Action in the EU and US be Postponed?," Working Papers 2008_28, Department of Economics, University of Venice "Ca' Foscari".
  5. Valentina Bosetti, Carlo Carraro, Marzio Galeotti, Emanuele Massetti, Massimo Tavoni, 2006. "A World induced Technical Change Hybrid Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 13-38.
  6. Bosetti, Valentina & Carraro, Carlo & Massetti, Emanuele & Sgobbi, Alessandra & Tavoni, Massimo, 2009. "Optimal energy investment and R&D strategies to stabilize atmospheric greenhouse gas concentrations," Resource and Energy Economics, Elsevier, vol. 31(2), pages 123-137, May.
  7. Huifang Tian & John Whalley, 2008. "China's Participation in Global Environmental Negotiations," NBER Working Papers 14460, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Warwick J McKibbin & Adele C. Morris & Peter J. Wilcoxen, 2014. "The Economic Consequences of Delay in U.S.Climate Policy," CAMA Working Papers 2014-49, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Vogt-Schilb, Adrien & Hallegatte, Stephane & de Gouvello Christophe, 2014. "Long-term mitigation strategies and marginal abatement cost curves : a case study on Brazil," Policy Research Working Paper Series 6808, The World Bank.
  3. Michael Funke & Yu-Fu Chen, 2009. "Booms, Recessions and Financial Turmoil: A Fresh Look at Investment Decisions under Cyclical Uncertainty," Quantitative Macroeconomics Working Papers 20908, Hamburg University, Department of Economics.
  4. Valentina Bosetti & Carlo Carraro & Massimo Tavoni, 2012. "Timing of Mitigation and Technology Availability in Achieving a Low-Carbon World," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 51(3), pages 353-369, March.
  5. William D. Nordhaus, 2011. "Integrated Economic and Climate Modeling," Cowles Foundation Discussion Papers 1839, Cowles Foundation for Research in Economics, Yale University.
  6. Alice Favero & Enrica De Cian, 2010. "Fairness, Credibility and Effectiveness in the Copenhagen Accord: An Economic Assessment," Working Papers 2010.21, Fondazione Eni Enrico Mattei.
  7. Emanuele Massetti, 2011. "Carbon tax scenarios for China and India: exploring politically feasible mitigation goals," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 11(3), pages 209-227, September.
  8. Valentina Bosetti & David G. Victor, 2011. "Politics and Economics of Second-Best Regulation of Greenhouse Gases: The Importance of Regulatory Credibility," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-24.
  9. Elisabeth Gsottbauer & Jeroen den Bergh, 2013. "Bounded rationality and social interaction in negotiating a climate agreement," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 13(3), pages 225-249, September.
  10. Valentine, Scott Victor, 2011. "Emerging symbiosis: Renewable energy and energy security," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4572-4578.
  11. Stephen Howes & Paul Wyrwoll, 2012. "Climate Change Mitigation and Green Growth in Developing Asia," Working Papers id:5059, eSocialSciences.
  12. Howes, Stephen & Wyrwoll, Paul, 2012. "Climate Change Mitigation and Green Growth in Developing Asia," ADBI Working Papers 369, Asian Development Bank Institute.

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