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Carbon Abatement Costs: Why the Wide Range of Estimates?

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  • Fischer, Carolyn

    ()
    (Resources for the Future)

  • Morgenstern, Richard

    ()
    (Resources for the Future)

Abstract

Estimates of marginal abatement costs for reducing carbon emissions derived from major economic-energy models vary widely. Controlling for policy regimes, we use meta-analysis to examine the importance of structural modeling choices in explaining differences in estimates. The analysis indicates that particular assumptions about perfectly foresighted consumers and Armington trade elasticities generate lower estimates of marginal abatement costs. Other choices are associated with higher cost estimates, including perfectly mobile capital, inclusion of a backstop technology, and greater disaggregation among regions and sectors. Some features, such as greater technological detail, seem less significant. Understanding the importance of key modeling assumptions, as well as the way the models are used to estimate abatement costs, can help guide the development of consistent modeling practices for policy evaluation.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-03-42-rev.

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Date of creation: 01 Sep 2003
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Handle: RePEc:rff:dpaper:dp-03-42-rev

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Keywords: climate models; carbon tax;

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Cited by:
  1. Gerlagh, Reyer, 2007. "Measuring the value of induced technological change," Energy Policy, Elsevier, vol. 35(11), pages 5287-5297, November.
  2. Rick Baker & Andrew Barker & Alan Johnston & Michael Kohlhaas, 2008. "The Stern Review: an assessment of its methodology," Staff Working Papers 0801, Productivity Commission, Government of Australia.
  3. Alan Sanstad & Hans Johnson & Noah Goldstein & Guido Franco, 2011. "Projecting long-run socioeconomic and demographic trends in California under the SRES A2 and B1 scenarios," Climatic Change, Springer, vol. 109(1), pages 21-42, December.
  4. Ho, Mun S. & Morgenstern, Richard & Shih, Jhih-Shyang, 2008. "Impact of Carbon Price Policies on U.S. Industry," Discussion Papers dp-08-37, Resources For the Future.
  5. Strachan, Neil, 2011. "Business-as-Unusual: Existing policies in energy model baselines," Energy Economics, Elsevier, vol. 33(2), pages 153-160, March.
  6. Michel, David, 2009. "Foxes, hedgehogs, and greenhouse governance: Knowledge, uncertainty, and international policy-making in a warming World," Applied Energy, Elsevier, vol. 86(2), pages 258-264, February.
  7. Rezek, Jon P. & Campbell, Randall C., 2007. "Cost estimates for multiple pollutants: A maximum entropy approach," Energy Economics, Elsevier, vol. 29(3), pages 503-519, May.
  8. Wei, Chu & Löschel, Andreas & Liu, Bing, 2013. "An empirical analysis of the CO2 shadow price in Chinese thermal power enterprises," Energy Economics, Elsevier, vol. 40(C), pages 22-31.
  9. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
  10. Strachan, Neil & Pye, Steve & Kannan, Ramachandran, 2009. "The iterative contribution and relevance of modelling to UK energy policy," Energy Policy, Elsevier, vol. 37(3), pages 850-860, March.
  11. Fischer, Carolyn & Fox, Alan, 2004. "Output-Based Allocations of Emissions Permits: Efficiency and Distributional Effects in a General Equilibrium Setting with Taxes and Trade," Discussion Papers dp-04-37, Resources For the Future.
  12. Parry, Ian W.H., 2006. "Are the Costs of Reducing Greenhouse Gases from Passenger Vehicles Negative?," Discussion Papers dp-06-14-rev, Resources For the Future.
  13. Kesicki, Fabian, 2013. "What are the key drivers of MAC curves? A partial-equilibrium modelling approach for the UK," Energy Policy, Elsevier, vol. 58(C), pages 142-151.
  14. repec:hal:journl:halshs-00175090 is not listed on IDEAS
  15. Tavoni, Massimo & Tol, Richard S. J., 2009. "Counting Only the Hits? The Risk of Underestimating the Costs of Stringent Climate Policy," Papers WP324, Economic and Social Research Institute (ESRI).
  16. Jaehn, Florian & Letmathe, Peter, 2010. "The emissions trading paradox," European Journal of Operational Research, Elsevier, vol. 202(1), pages 248-254, April.
  17. Wie, Jiegen & Wennlock, Magnus & Johansson, Daniel J.A. & Sterner, Thomas, 2011. "The Fossil Endgame: Strategic Oil Price Discrimination and Carbon Taxation," Discussion Papers dp-11-26, Resources For the Future.

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