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A CGE Analysis on a Rate-based Policy for Climate Change Mitigation

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  • Shinya Kato

    (Graduate School of Economics, Kobe University)

  • Kenji Takeuchi

    (Graduate School of Economics, Kobe University)

Abstract

We conducted a computable general equilibrium analysis of a policy to regulate carbon dioxide emissions per unit of production in Japan. It is often claimed that regulations based on emission rates might lead to an increase in carbon dioxide emissions but do not suppress economic growth. This study shows that in the short run, a rate-based policy reduce firms f emissions at a rate greater than that specified by the regulation. We also compared the rate-based policy with the cap-and-trade policy and found that the former leads to a greater reduction in the real GDP than the latter. Furthermore, the decrease in output is tend to be more evenly distributed under the rate-based policy than under with a cap-and-trade policy. Our results suggest that the rate-based policy is inferior in terms of efficiency but is favorable in terms of ensuring the burden of emission reduction is shared equally.

Suggested Citation

  • Shinya Kato & Kenji Takeuchi, 2014. "A CGE Analysis on a Rate-based Policy for Climate Change Mitigation," Discussion Papers 1414, Graduate School of Economics, Kobe University.
  • Handle: RePEc:koe:wpaper:1414
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    References listed on IDEAS

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    Cited by:

    1. Li, Xiaoyu & Yao, Xilong, 2020. "Can energy supply-side and demand-side policies for energy saving and emission reduction be synergistic?--- A simulated study on China's coal capacity cut and carbon tax," Energy Policy, Elsevier, vol. 138(C).

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    More about this item

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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