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The control of CO 2 emissions and its economic impact: An AGE model for a german state


  • Klaus Conrad
  • Michael Schröder


Since it is believed that CO 2 is responsible for 55% of the greenhouse effect, a CO 2 levy is now under consideration in several countries. For an assessment of the macroeconomic implications of an integrated energy and environmental policy we employ an applied general equilibrium model (AGE) since all sectors of an economy and all private households contribute to CO 2 emission. Our model is a temporary equilibrium model with capacity extension under adjustment costs and with abatement activities for SO 2 and NO x emissions. The model of consumer behavior will result in a system of consumer demand functions for non-durables as well as for durable goods. The simulations show the cost of inefficiency in resource allocation if CO 2 taxes differ between industries and households. We finally present the marginal cost curve of CO 2 emission reduction. Copyright Kluwer Academic Publishers 1991

Suggested Citation

  • Klaus Conrad & Michael Schröder, 1991. "The control of CO 2 emissions and its economic impact: An AGE model for a german state," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 1(3), pages 289-312, September.
  • Handle: RePEc:kap:enreec:v:1:y:1991:i:3:p:289-312
    DOI: 10.1007/BF00367922

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    References listed on IDEAS

    1. McFadden, Daniel, 1978. "Cost, Revenue, and Profit Functions," Histoy of Economic Thought Chapters,in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 1 McMaster University Archive for the History of Economic Thought.
    2. Lau, Lawrence J., 1976. "A characterization of the normalized restricted profit function," Journal of Economic Theory, Elsevier, vol. 12(1), pages 131-163, February.
    3. Alan S. Manne & Richard G. Richels, 1990. "CO2 Emission Limits: An Economic Cost Analysis for the USA," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 51-74.
    4. Kokoski, Mary F & Smith, V Kerry, 1987. "A General Equilibrium Analysis of Partial-Equilibrium Welfare Measures: The Case of Climate Change," American Economic Review, American Economic Association, vol. 77(3), pages 331-341, June.
    5. John Whalley & Randall Wigle, 1991. "Cutting CO2 Emissions: The Effects of Alternative Policy Approaches," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 109-124.
    6. Conrad, Klaus, 1983. "Cost prices and partially fixed factor proportions in energy substitution," European Economic Review, Elsevier, vol. 21(3), pages 299-312, May.
    7. Treadway, Arthur B., 1974. "The globally optimal flexible accelerator," Journal of Economic Theory, Elsevier, vol. 7(1), pages 17-39, January.
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    Cited by:

    1. Bergh, J.C.J.M. & Nijkamp, P., 1992. "Dynamic macro modelling for sustainable development : economic-environmental integration and the materials balance model," Serie Research Memoranda 0081, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    2. Learmonth, D. & McGregor, P.G. & Swales, J.K. & Turner, K.R. & Yin, Y.P., 2007. "The importance of the regional/local dimension of sustainable development: An illustrative Computable General Equilibrium analysis of the Jersey economy," Economic Modelling, Elsevier, vol. 24(1), pages 15-41, January.
    3. Spash, Clive L. & Hanley, Nick, 1994. "Cost-benefit analysis and the greenhouse effect," MPRA Paper 38666, University Library of Munich, Germany.


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