Clean-Development Investments: An Incentive-Compatible CGE Modelling Framework
AbstractThe 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 modelling 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 the CDM as sectoral emissions trading, our framework adopts a microeconomically consistent representation of the CDM incentive structure and its investment characteristics. In our empirical application we show that incentive compatibility implies that the sectors implementing CDM projects do not suffer, and that overall cost savings from the CDM tend to be lower than suggested by conventional modelling approaches.
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Bibliographic InfoPaper provided by ZenTra - Center for Transnational Studies in its series ZenTra Working Papers in Transnational Studies with number 23 / 2013.
Length: 29 pages
Date of creation: Dec 2013
Date of revision: Dec 2013
Clean Development Mechanism; Computable General Equilibrium Modelling;
Other versions of this item:
- Christoph Böhringer & Thomas F. Rutherford & Marco Springmann, 2013. "Clean-Development Investments: An Incentive-Compatible CGE Modelling Framework," Working Papers V-354-13, University of Oldenburg, Department of Economics, revised Mar 2013.
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-01-10 (All new papers)
- NEP-CMP-2014-01-10 (Computational Economics)
- NEP-ENE-2014-01-10 (Energy Economics)
- NEP-ENV-2014-01-10 (Environmental Economics)
- NEP-PPM-2014-01-10 (Project, Program & Portfolio Management)
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