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Economic effects of differentiated climate action

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Author Info

  • Leszek Kąsek

    () (World Bank)

  • Olga Kiuila

    () (University of Warsaw, Faculty of Economic Sciences)

  • Krzysztof Wójtowicz

    () (UPolish Ministry of Economy, Strategy and Analyses Department)

  • Tomasz Żylicz

    () (University of Warsaw, Faculty of Economic Sciences)

Abstract

We 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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File URL: http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP78.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by Faculty of Economic Sciences, University of Warsaw in its series Working Papers with number 2012-12.

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Length: 33 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:war:wpaper:2012-12

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Related research

Keywords: CO2 abatement; CGE models; EU climate policy; decomposition analysis;

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