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Where is it Cheapest to Cut Carbon Emissions?

Author

Listed:
  • David Stern

    () (Arndt-Corden Division of Economics, Crawford School of Public Policy, Australian National University, and Centre for Applied Macroeconomic Analysis, Canberra, Australia)

  • Ross Lambie

    () (Crawford School of Public Policy, Australian National University, Australia. Australian National University)

Abstract

The relative cost of carbon emissions reductions across regions depends on whether we measure cost by marginal or total cost, private or economy-wide cost, and using market or purchasing power parity exchange rates. If all countries are on the same marginal carbon abatement cost curve then lower marginal costs of abatement are associated with higher energy intensities and higher total costs of abatement in achieving proportional cuts in emissions, equal emissions per capita, or common global carbon price targets. We test this conjecture using the results of the GTEM computable general equilibrium model as presented in the climate change economics review conducted by the Australian Treasury Department. Rankings of countries by costs do differ depending on whether marginal or total cost is used. But some regions, including OPEC and the former USSR, have high marginal costs and high emissions intensities and, therefore, high total costs and others like the EU relatively low marginal and total costs. Under a global emissions trading regime real economy-wide costs of abatement are higher in developing economies with currencies valued below purchasing power parity and large differences between private and economy-wide costs such as India contributing to the high GDP losses experienced in those countries.

Suggested Citation

  • David Stern & Ross Lambie, 2010. "Where is it Cheapest to Cut Carbon Emissions?," Environmental Economics Research Hub Research Reports 1063, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:eenhrr:1063
    as

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    File URL: https://crawford.anu.edu.au/research_units/eerh/pdf/EERH_RR63.pdf
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    References listed on IDEAS

    as
    1. Ray, Debraj & Vohra, Rajiv, 1997. "Equilibrium Binding Agreements," Journal of Economic Theory, Elsevier, pages 30-78.
    2. Geoffroy de Clippel & Roberto Serrano, 2008. "Bargaining, Coalitions and Externalities: a Comment on Maskin," Working Papers 2008-16, Brown University, Department of Economics.
    3. Frank Jotzo & Regina Betz, 2009. "Australia's emissions trading scheme: opportunities and obstacles for linking," Climate Policy, Taylor & Francis Journals, vol. 9(4), pages 402-414, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality?
      by David Stern in Stochastic Trend on 2013-11-25 09:11:00
    2. Stern and Enflo, Energy Economics
      by David Stern in Stochastic Trend on 2013-05-05 13:17:00
    3. CSTS-TISS Workshop
      by David Stern in Stochastic Trend on 2011-08-03 17:42:00
    4. Marginal CO2 Abatement Cost Curves from EMF22
      by David Stern in Stochastic Trend on 2010-12-17 13:57:00
    5. EERH Research Reports: June 2010
      by David Stern in Stochastic Trend on 2010-07-03 15:06:00
    6. Where is it Cheapest to Cut Carbon Emissions: Estimating Marginal Costs
      by David Stern in Stochastic Trend on 2010-06-20 09:37:00
    7. Where is it Cheapest to Cut Carbon Emissions?
      by David Stern in Stochastic Trend on 2010-06-17 09:53:00
    8. New EERH Research Reports
      by David Stern in Stochastic Trend on 2010-06-16 04:56:00

    Citations

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    Cited by:

    1. Howes, Stephen & Wyrwoll, Paul, 2012. "Climate Change Mitigation and Green Growth in Developing Asia," ADBI Working Papers 369, Asian Development Bank Institute.
    2. World Bank, 2011. "Climate Change and Fiscal Policy : A Report for APEC," World Bank Other Operational Studies 2734, The World Bank.
    3. Stephen Howes & Paul Wyrwoll, 2012. "Climate Change Mitigation and Green Growth in Developing Asia," Working Papers id:5059, eSocialSciences.

    More about this item

    Keywords

    Climate change; costs; developing countries; computable general equilibrium;

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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