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CO2 Emissions and Greenhouse Gas Policy Stringency - An Empirical Assessment

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  • Marcel Probst
  • Caspar Sauter

Abstract

This paper investigates how greenhouse gas (GHG) policy stringency affects anthropogenic CO2 emissions using a new GHG policy stringency indicator and a structural spatial VAR approach. We estimate an average country-specific elasticity of CO2 emissions to GHG policy stringency, and assess the role of channels over which policy stringency affects CO2 emissions. We then ascertain how GHG policy stringency affects sectoral CO2 efficiency and the sectoral composition of economies. Results indicate that a country with no GHG regulations can achieve a 15% reduction of its CO2 emissions by adopting the stringency level of the most regulated country. In addition, increasing GHG policy stringency improves sectoral CO2 efficiency, and decreases production in CO2 intensive sectors thereby altering the sectoral composition. At last, policy induced CO2 reduction costs in terms of GDP are relatively large, but 4 times lower for developing compared to developed countries.

Suggested Citation

  • Marcel Probst & Caspar Sauter, 2015. "CO2 Emissions and Greenhouse Gas Policy Stringency - An Empirical Assessment," IRENE Working Papers 15-03, IRENE Institute of Economic Research.
    • Handle: RePEc:irn:wpaper:15-03
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    3. Mardones, Cristian & Cabello, Martin, 2019. "Effectiveness of local air pollution and GHG taxes: The case of Chilean industrial sources," Energy Economics, Elsevier, vol. 83(C), pages 491-500.
    4. Deininger, Sebastian & Maringer, Dietmar, 2017. "Channels of Sovereign Risk Spillovers and Investment in the Manufacturing Sector," Working papers 2017/07, Faculty of Business and Economics - University of Basel.

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    More about this item

    Keywords

    CO2; composition effect; environmental policy stringency; greenhouse gas emissions; impluse reponse functions; spatial VAR; technique effect;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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