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Reducing carbon dioxide emissions through joint implementation of projects

  • Martin, Will

Efficient reduction of carbon dioxide emissions requires coordination of international efforts. Approaches proposed include carbon taxes, emission quotas, and jointly implemented energy projects. To reduce emissions efficiently, requires equalizing the marginal costs of reduction between countries. The apparently large differentials between the costs of reducing emissions in industrial and developing countries, implies a great potential for lowering the costs of reducing emissions by focusing on projects in developing countries. Most proposals for joint implementation of energy projects emphasize installing more technically efficient capital equipment, to allow reductions in energy use for any given mix of input, and output. But such increases in efficiency are likely to have potentially important second-round impacts: 1) Lowering the relative effective price of specific energy products. 2) Lowering the price of energy relative to other inputs. 3) Lowering the price of energy-intensive products relative to other products. The author explores the consequences of these second-round impacts, and suggests ways to deal with them in practical joint-implementation projects. For example, the direct impact of reducing the effective price of a fuel is to increase consumption of that fuel. Generally, substitution effects also reduce the use of other fuels, and the emissions generated from them. If the fuel whose efficiency is being improved, is already the least emission-intensive, the combined impact of these price changes is less likely to be favorable, and may even increase emissions. In the example the author uses, increase in coal use efficiency was completely ineffective in reducing emissions, because it resulted in emission-intensive coal being substituted for less polluting oil and gas.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2359.

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Date of creation: 30 Jun 2000
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Handle: RePEc:wbk:wbrwps:2359
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  1. McKibbin, W.J. & Wilcoxen, P.J., 1995. "The Theoretical and Empirical Structure of the G-Cubed Model," Papers 118, Brookings Institution - Working Papers.
  2. Pindyck, Robert S, 1979. "Interfuel Substitution and the Industrial Demand for Energy: An International Comparison," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 169-79, May.
  3. McKibbin, W.J. & Wilcoxen, P.J., 1995. "Environmental Policy and International Trade," Papers 117, Brookings Institution - Working Papers.
  4. Fulginiti, Lilyan E & Perrin, Richard K, 1993. "Prices and Productivity in Agriculture," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 471-82, August.
  5. Warwick J. McKibbin & Peter J. Wilcoxen, 1997. "A Better Way to Slow Global Climate Change," Economics and Environment Network Working Papers 9702, Australian National University, Economics and Environment Network.
  6. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, April.
  7. Alan D. Woodland, 1993. "A Micro-Econometric Analysis of the Industrial Demand for Energy in NSW," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 57-90.
  8. Martin, Will & Alston, Julian M, 1997. "Producer Surplus without Apology? Evaluating Investments in R&D," The Economic Record, The Economic Society of Australia, vol. 73(221), pages 146-58, June.
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