Where is it Cheapest to Cut Carbon Emissions?
AbstractThe relative cost of carbon emissions reductions across regions depends on whether we measure cost by marginal or total cost, private or economy-wide cost, and using market or purchasing power parity exchange rates. If all countries are on the same marginal carbon abatement cost curve then lower marginal costs of abatement are associated with higher energy intensities and higher total costs of abatement in achieving proportional cuts in emissions, equal emissions per capita, or common global carbon price targets. We test this conjecture using the results of the GTEM computable general equilibrium model as presented in the climate change economics review conducted by the Australian Treasury Department. Rankings of countries by costs do differ depending on whether marginal or total cost is used. But some regions, including OPEC and the former USSR, have high marginal costs and high emissions intensities and, therefore, high total costs and others like the EU relatively low marginal and total costs. Under a global emissions trading regime real economy-wide costs of abatement are higher in developing economies with currencies valued below purchasing power parity and large differences between private and economy-wide costs such as India contributing to the high GDP losses experienced in those countries.
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Bibliographic InfoPaper provided by Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University in its series Environmental Economics Research Hub Research Reports with number 1063.
Date of creation: Jun 2010
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Climate change; costs; developing countries; computable general equilibrium;
Other versions of this item:
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-26 (All new papers)
- NEP-CMP-2010-06-26 (Computational Economics)
- NEP-ENE-2010-06-26 (Energy Economics)
- NEP-ENV-2010-06-26 (Environmental Economics)
- NEP-RES-2010-06-26 (Resource Economics)
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- World Bank, 2011. "Climate Change and Fiscal Policy : A Report for APEC," World Bank Other Operational Studies 2734, The World Bank.
- Howes, Stephen & Wyrwoll, Paul, 2012. "Climate Change Mitigation and Green Growth in Developing Asia," ADBI Working Papers 369, Asian Development Bank Institute.
- Stephen Howes & Paul Wyrwoll, 2012. "Climate Change Mitigation and Green Growth in Developing Asia," Working Papers id:5059, eSocialSciences.
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