Fossil Fuel Supply, Leakage and the Effectiveness of Border Measures in Climate Policy
Understanding fossil fuel supply behaviour is crucial for interpreting carbon leakage and assessing the potential effectiveness of border measures in climate policy. In most computable general equilibrium models, this fossil fuel supply is derived from a constant elasticity of substitution production function, in which a natural resource is treated as a fixed factor. We show that this leads to endogenously decreasing supply elasticities and sharply increasing marginal leakage rates for large coalitions that have ambitious emissions targets, particularly when fuel exporters participate in the coalition. We propose an alternative production function that has a constant elasticity of fuel supply, which results in more stable leakage rates and a different share of trade-related leakage. The role of this model variation for the assessment of border measures in climate policy turns out to be limited. In those cases where the model versions differ most (i.e. large coalition, ambitious targets), border measures have a small effect anyway.
|Date of creation:||Jul 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Postbus 80510, 2508 GM Den Haag|
Phone: (070) 338 33 80
Fax: (070) 338 33 50
Web page: http://www.cpb.nl/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jean-Marc Burniaux & Joaquim Oliveira Martins, 2000. "Carbon Emission Leakages: A General Equilibrium View," OECD Economics Department Working Papers 242, OECD Publishing.
- Graham, Paul & Thorpe, Sally & Hogan, Lindsay, 1999. "Non-competitive market behaviour in the international coking coal market," Energy Economics, Elsevier, vol. 21(3), pages 195-212, June.
- Krichene, Noureddine, 2002. "World crude oil and natural gas: a demand and supply model," Energy Economics, Elsevier, vol. 24(6), pages 557-576, November.
- Ringlund, Guro Bornes & Rosendahl, Knut Einar & Skjerpen, Terje, 2008.
"Does oilrig activity react to oil price changes An empirical investigation,"
Elsevier, vol. 30(2), pages 371-396, March.
- Guro Børnes Ringlund & Knut Einar Rosendahl & Terje Skjerpen, 2004. "Does oilrig activity react to oil price changes? An empirical investigation," Discussion Papers 372, Statistics Norway, Research Department.
- Dahl, Carol & Duggan, Thomas E., 1996. "U.S. energy product supply elasticities: A survey and application to the U.S. oil market," Resource and Energy Economics, Elsevier, vol. 18(3), pages 243-263, October.
- Arjan Lejour & Paul Veenendaal & Gerard Verweij & Nico van Leeuwen, 2006. "Worldscan; a model for international economic policy analysis," CPB Document 111, CPB Netherlands Bureau for Economic Policy Analysis.
- Boeters, Stefan & Koornneef, Joris, 2011.
"Supply of renewable energy sources and the cost of EU climate policy,"
Elsevier, vol. 33(5), pages 1024-1034, September.
- Stefan Boeters & J. Koornneef, 2010. "Supply of renewable energy sources and the cost of EU climate policy," CPB Discussion Paper 142, CPB Netherlands Bureau for Economic Policy Analysis.
- Dong, Yan & Whalley, John, 2012. "Joint non-OPEC carbon taxes and the transfer of OPEC monopoly rents," Journal of Policy Modeling, Elsevier, vol. 34(1), pages 49-63.
When requesting a correction, please mention this item's handle: RePEc:cpb:discus:215. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.