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Marginal abatement cost curves in general equilibrium: The influence of world energy prices

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  • Klepper, Gernot
  • Peterson, Sonja

Abstract

Marginal abatement cost curves (MACCs) are a favorite instrument to analyze international emissions trading. This paper focusses on the question of how to define MACCs in a general equilibrium context where the global abatement level influences energy prices and in turn national MACCs. We discuss the mechanisms theoretically and then use the CGE model DART for quantitative simulations. The result is, that changes in energy prices resulting from different global abatement levels do indeed affect national MACCs. Also, we compare different possibilities of defining MACCs - of which some are robust against changes in energy prices while others vary considerably.

Suggested Citation

  • Klepper, Gernot & Peterson, Sonja, 2006. "Marginal abatement cost curves in general equilibrium: The influence of world energy prices," Open Access Publications from Kiel Institute for the World Economy 3775, Kiel Institute for the World Economy (IfW).
    • Handle: RePEc:zbw:ifwkie:3775
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    References listed on IDEAS

    as
    1. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    2. Klepper, Gernot & Peterson, Sonja & Springer, Katrin, 2003. "DART97: a description of the multi-regional, multi-sectoral trade model for the analysis of climate policies," Kiel Working Papers 1149, Kiel Institute for the World Economy (IfW).
    3. McKitrick, Ross, 1999. "A Derivation of the Marginal Abatement Cost Curve," Journal of Environmental Economics and Management, Elsevier, vol. 37(3), pages 306-314, May.
    4. VAN STEENBERGHE, Vincent, 2003. "CO2 abatement costs and permits price : Exploring the impact of banking and the role of future commitments," CORE Discussion Papers 2003098, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Böhringer, Christoph & Löschel, Andreas, 2001. "Market power in international emissions trading : the impact of U.S. withdrawal from the Kyoto Protocol," ZEW Discussion Papers 01-58, ZEW - Leibniz Centre for European Economic Research.
    6. Böhringer, Christoph, 2001. "Climate politics from Kyoto to Bonn: from little to nothing?!?," ZEW Discussion Papers 01-49, ZEW - Leibniz Centre for European Economic Research.
    7. Odile Blanchard & Patrick Criqui & Alban Kitous, 2002. "After The Hague, Bonn and Marrakech : the future international market for emissions permits and the issue of hot air," Post-Print halshs-00196364, HAL.
    8. Andreas Löschel & Zhong Zhang, 2002. "The economic and environmental implications of the US repudiation of the kyoto protocol and the subsequent deals in Bonn and Marrakech," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(4), pages 711-746, December.
    9. Christoph BOhringer & Andreas LOschel, 2003. "Market power and hot air in international emissions trading: the impacts of US withdrawal from the Kyoto Protocol," Applied Economics, Taylor & Francis Journals, vol. 35(6), pages 651-663.
    10. Klepper, Gernot & Peterson, Sonja, 2003. "On the robustness of marginal abatement cost curves: the influence of world energy prices," Kiel Working Papers 1138, Kiel Institute for the World Economy (IfW).
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    More about this item

    Keywords

    Climate change; marginal abatement cost curves; energy prices; computable general equilibrium model;

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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