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Environmental climate instruments in Romania: A comparative approach using dynamic CGE modelling

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  • Loisel, Rodica

Abstract

This study simulates a CO2 permit market in Romania using a dynamic general equilibrium model. The carbon constraint is set at 20.7% below the reference emissions level for sectors eligible according to the European Union Emission Trading Scheme (EU-ETS). Free permit distribution enhances growth despite a severe emissions cap, because environmental regulation stimulates structural changes [Porter, M., 1991. American's green strategy. Scientific American 264, 168]. That is, grandfathering allows sectors additional resources to invest in developing technologies, but it also raises the CO2 abatement costs because of energy rebound effects from enhanced growth. Results under endogenous growth [Romer, P.M., 1990. Endogenous technological change. Journal of Political Economy 98 (5), 71-102] are very similar to those obtained under an exogenous growth scenario [Ramsey, Y.F., 1928. A mathematical theory of saving. Economic Journal 38, 543-559], as the substitution effects are responsible for the majority of variations; in addition, Romanian research activities are too modest to significantly impact this system. The abatement cost per unit of GDP is higher under endogenous growth, as spillover effects reduce incentives to invest. Technological diffusion continues to have a positive impact on economic growth, which counterbalances the free-riding attitude adopted by some energy-intensive sectors, such as glass and cement.

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  • Loisel, Rodica, 2009. "Environmental climate instruments in Romania: A comparative approach using dynamic CGE modelling," Energy Policy, Elsevier, vol. 37(6), pages 2190-2204, June.
  • Handle: RePEc:eee:enepol:v:37:y:2009:i:6:p:2190-2204
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    Cited by:

    1. Liu, Yu & Tan, Xiu-Jie & Yu, Yang & Qi, Shao-Zhou, 2017. "Assessment of impacts of Hubei Pilot emission trading schemes in China – A CGE-analysis using TermCO2 model," Applied Energy, Elsevier, pages 762-769.
    2. Kiuila, O. & Rutherford, T.F., 2013. "The cost of reducing CO2 emissions: Integrating abatement technologies into economic modeling," Ecological Economics, Elsevier, vol. 87(C), pages 62-71.
    3. Lin Yang & Yunfei Yao & Jiutian Zhang & Xian Zhang & Karl J. McAlinden, 2016. "A CGE analysis of carbon market impact on CO2 emission reduction in China: a technology-led approach," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 81(2), pages 1107-1128, March.
    4. Jaskólski, Marcin, 2016. "Modelling long-term technological transition of Polish power system using MARKAL: Emission trade impact," Energy Policy, Elsevier, vol. 97(C), pages 365-377.

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