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Clean-Development Investments: An Incentive-Compatible CGE Modelling Framework

Author

Listed:
  • Christoph Böhringer

    (University of Oldenburg - Economic Policy & ZenTra)

  • Thomas F. Rutherford

    (University of Wisconsin-Madison - Agricultural & Applied Economics)

  • Marco Springmann

    (University of Oldenburg - Economic Policy)

Abstract

The Clean Development Mechanism (CDM) established under the Kyoto Protocol allows industrialized Annex I countries to offset part of their domestic emissions by investing in emissions-reduction projects in developing non-Annex I countries. We present a novel CDM modelling framework which can be used in computable general equilibrium (CGE) models to quantify the sector-specific and macroeconomic impacts of CDM investments. Compared to conventional approaches that mimic the CDM as sectoral emissions trading, our framework adopts a microeconomically consistent representation of the CDM incentive structure and its investment characteristics. In our empirical application we show that incentive compatibility implies that the sectors implementing CDM projects do not suffer, and that overall cost savings from the CDM tend to be lower than suggested by conventional modelling approaches.

Suggested Citation

  • Christoph Böhringer & Thomas F. Rutherford & Marco Springmann, 2013. "Clean-Development Investments: An Incentive-Compatible CGE Modelling Framework," ZenTra Working Papers in Transnational Studies 23 / 2013, ZenTra - Center for Transnational Studies, revised Dec 2013.
    • Handle: RePEc:zen:wpaper:23
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    Citations

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    Cited by:

    1. Montaud, Jean-Marc & Pécastaing, Nicolas, 2015. "Clean Development Mechanism (CDM) as a funding opportunity for development: A macroeconomic CGE analysis of the Peruvian experience," Economics Discussion Papers 2015-6, Kiel Institute for the World Economy (IfW Kiel).
    2. Dunbar, Kwamie & Owusu-Amoako, Johnson & Treku, Daniel N., 2024. "Unveiling the Nexus: Carbon finance and climate technology advancements," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    3. Kim, Jiyoung & Nakano, Satoshi & Nishimura, Kazuhiko, 2017. "Multifactor CES general equilibrium: Models and applications," Economic Modelling, Elsevier, vol. 63(C), pages 115-127.
    4. Linnenluecke, Martina K. & Smith, Tom & McKnight, Brent, 2016. "Environmental finance: A research agenda for interdisciplinary finance research," Economic Modelling, Elsevier, vol. 59(C), pages 124-130.
    5. Pécastaing, Nicolas & Dávalos, Jorge & Inga, Andy, 2018. "The effect of Peru's CDM investments on households’ welfare: An econometric approach," Energy Policy, Elsevier, vol. 123(C), pages 198-207.
    6. Yadira Mori-Clement & Stefan Nabernegg & Birgit Bednar-Friedl, 2018. "Can preferential trade agreements enhance renewable electricity generation in emerging economies? A model-based policy analysis for Brazil and the European Union," Graz Economics Papers 2018-19, University of Graz, Department of Economics.
    7. Springmann, Marco, 2013. "Addressing emission transfers: carbon tariffs vs. clean-development financing," Conference papers 332294, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    8. Satoshi Nakano & Kazuhiko Nishimura, 2017. "Structural propagation in a production network with restoring substitution elasticities," Papers 1701.02216, arXiv.org, revised Apr 2018.
    9. Bakry, Walid & Mallik, Girijasankar & Nghiem, Xuan-Hoa & Sinha, Avik & Vo, Xuan Vinh, 2023. "Is green finance really “green”? Examining the long-run relationship between green finance, renewable energy and environmental performance in developing countries," Renewable Energy, Elsevier, vol. 208(C), pages 341-355.
    10. Christoph Böhringer & Jan Schneider & Marco Springmann, 2021. "Economic and environmental impacts of raising revenues for climate finance from public sources," Climate Policy, Taylor & Francis Journals, vol. 21(4), pages 546-562, April.
    11. Wang, Zhen & Chu, Erming, 2024. "The path toward urban carbon neutrality: How does the low-carbon city pilot policy stimulate low-carbon technology?," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 954-975.
    12. Kim, Jiyoung & Nakano, Satoshi & Nishimura, Kazuhiko, 2017. "Multifactor CES elasticity and productivity growth : a cross-sectional approach," IDE Discussion Papers 632, Institute of Developing Economies, Japan External Trade Organization(JETRO).

    More about this item

    Keywords

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    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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