Economic effects of differentiated climate action
AbstractWe analyze existing definitions of carbon leakage and provide a new rigorous one. This is then tested using computable general equilibrium analysis for unilateral carbon dioxide abatement programs in the EU. Our model of the global economy is disaggregated into three regions. The analysis includes a decomposition of change in carbon emission. While some anti-leakage measures reduce carbon leakage significantly, some of them are less effective. We identified a list of parameters which affect not only the magnitude but also the sign of carbon leakage rate. Manipulating with elasticities of substitution in production function suggests that in reaction to the unilateral action of the EU, the other regions may both increase or decrease their carbon emissions. Even though we are positive about computable general equilibrium models’ application in this policy area, their policy simulations cannot be directly treated as policy recommendations without a careful validation of their assumptions.
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Bibliographic InfoPaper provided by Faculty of Economic Sciences, University of Warsaw in its series Working Papers with number 2012-12.
Length: 33 pages
Date of creation: 2012
Date of revision:
CO2 abatement; CGE models; EU climate policy; decomposition analysis;
Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-25 (All new papers)
- NEP-CMP-2012-06-25 (Computational Economics)
- NEP-ENE-2012-06-25 (Energy Economics)
- NEP-ENV-2012-06-25 (Environmental Economics)
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