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Where in the world is it cheapest to cut carbon emissions?

Author

Listed:
  • Stern, David
  • Pezzey, John
  • Lambie, N.

Abstract

Countries with low marginal costs of abating carbon emissions may have high total costs, and vice versa, for a given climate mitigation policy. This may help to explain different countries’ policy stances on climate mitigation. We hypothesize that, under a common percentage cut in emissions intensity relative to business as usual (BAU), countries with higher BAU emission intensities have lower marginal abatement costs, but total costs relative to output will be similar across countries, and under a common carbon price, relative total costs are higher in emission-intensive countries. Using the results of the 22nd Energy Modeling Forum (EMF-22), we estimate marginal abatement cost curves for the US, EU, China and India, which we use to estimate marginal and total costs of abatement under a number of policy options currently under international debate. This analysis provides support for our hypotheses, although its reliability is limited by the shortcomings of the EMF-22 models and the degree to which our econometric model can adequately account for the substantial differences among them.

Suggested Citation

  • Stern, David & Pezzey, John & Lambie, N., 2012. "Where in the world is it cheapest to cut carbon emissions?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 56(3), September.
  • Handle: RePEc:ags:aareaj:211672
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    File URL: http://purl.umn.edu/211672
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    References listed on IDEAS

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    1. Stern, David I. & Jotzo, Frank, 2010. "How ambitious are China and India's emissions intensity targets?," Energy Policy, Elsevier, vol. 38(11), pages 6776-6783, November.
    2. Jotzo, Frank, 2010. "Comparing the Copenhagen emissions targets," Research Reports 107577, Australian National University, Environmental Economics Research Hub.
    3. Bang, Guri, 2010. "Energy security and climate change concerns: Triggers for energy policy change in the United States?," Energy Policy, Elsevier, vol. 38(4), pages 1645-1653, April.
    4. Dasgupta, Susmita & Hettige, Hemamala & Wheeler, David, 2000. "What Improves Environmental Compliance? Evidence from Mexican Industry," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 39-66, January.
    5. Kuik, Onno & Brander, Luke & Tol, Richard S.J., 2009. "Marginal abatement costs of greenhouse gas emissions: A meta-analysis," Energy Policy, Elsevier, vol. 37(4), pages 1395-1403, April.
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    Cited by:

    1. Yingying Lu & David I. Stern, 2016. "Substitutability and the Cost of Climate Mitigation Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(1), pages 81-107, May.
    2. Massimo Tavoni & Detlef van Vuuren, 2015. "Regional Carbon Budgets: Do They Matter for Climate Policy?," Working Papers 2015.71, Fondazione Eni Enrico Mattei.

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