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Clean-development investments: an incentive-compatible CGE modeling framework

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  • Springmann, Marco
  • Böhringer, Christoph
  • Rutherford, Thomas F.

Abstract

The Clean Development Mechanism (CDM) established under the Kyoto Protocol allows industrialized Annex I countries to offset part of their domestic emissions by investing in emissions-reduction projects in developing non-Annex I countries. We present a novel CDM modeling framework which can be used in computable-general-equilibrium (CGE) models to quantify the sector-specific and macroeconomic impacts of CDM investments. Compared to conventional approaches that mimic CDM as sectoral emission trading, our framework adopts a micro consistent representation of the CDM incentive structure and its investment characteristics. In our empirical application based on GTAP data we show that incentive compatibility implies that CDM-implementing sectors do not suffer and overall welfare gains tend to be lower than suggested by conventional modeling approaches.

Suggested Citation

  • Springmann, Marco & Böhringer, Christoph & Rutherford, Thomas F., 2013. "Clean-development investments: an incentive-compatible CGE modeling framework," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79939, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:79939
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    Citations

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    Cited by:

    1. Montaud, Jean-Marc & Pécastaing, Nicolas, 2015. "Clean Development Mechanism (CDM) as a funding opportunity for development: A macroeconomic CGE analysis of the Peruvian experience," Economics Discussion Papers 2015-6, Kiel Institute for the World Economy (IfW Kiel).
    2. Kim, Jiyoung & Nakano, Satoshi & Nishimura, Kazuhiko, 2017. "Multifactor CES general equilibrium: Models and applications," Economic Modelling, Elsevier, vol. 63(C), pages 115-127.
    3. Linnenluecke, Martina K. & Smith, Tom & McKnight, Brent, 2016. "Environmental finance: A research agenda for interdisciplinary finance research," Economic Modelling, Elsevier, vol. 59(C), pages 124-130.
    4. Pécastaing, Nicolas & Dávalos, Jorge & Inga, Andy, 2018. "The effect of Peru's CDM investments on households’ welfare: An econometric approach," Energy Policy, Elsevier, vol. 123(C), pages 198-207.
    5. Yadira Mori-Clement & Stefan Nabernegg & Birgit Bednar-Friedl, 2018. "Can preferential trade agreements enhance renewable electricity generation in emerging economies? A model-based policy analysis for Brazil and the European Union," Graz Economics Papers 2018-19, University of Graz, Department of Economics.
    6. Springmann, Marco, 2013. "Addressing emission transfers: carbon tariffs vs. clean-development financing," Conference papers 332294, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Satoshi Nakano & Kazuhiko Nishimura, 2017. "Structural propagation in a production network with restoring substitution elasticities," Papers 1701.02216, arXiv.org, revised Apr 2018.
    8. Bakry, Walid & Mallik, Girijasankar & Nghiem, Xuan-Hoa & Sinha, Avik & Vo, Xuan Vinh, 2023. "Is green finance really “green”? Examining the long-run relationship between green finance, renewable energy and environmental performance in developing countries," Renewable Energy, Elsevier, vol. 208(C), pages 341-355.
    9. Christoph Boehringer & Jan Schneider & Marco Springmann, 2017. "Economic and Environmental Impacts of Raising Revenues for Climate Finance from Public Sources," Working Papers V-406-17, University of Oldenburg, Department of Economics, revised Nov 2017.
    10. Kim, Jiyoung & Nakano, Satoshi & Nishimura, Kazuhiko, 2017. "Multifactor CES elasticity and productivity growth : a cross-sectional approach," IDE Discussion Papers 632, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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