The cost of reducing CO2 emissions
Integrating abatement technologies into economic modeling
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Date
2013-03
Publication Type
Journal Article
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yes
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Abstract
We explore two methods of incorporating bottom-up abatement cost estimates into top-down modeling: an economy-wide method and a sector-specific method. Carbon emissions generally depend on technology and scale. Given the technology options, abatement is possible without a substantial reduction in scale. Otherwise the change must come purely through a reduction in demand. Our analysis shows that the cost of environmental policy is considerably overestimated by top-down models if a bottom-up abatement cost curve is not included. Using the data for the Swiss economy, we demonstrate two techniques of representing an abatement function explicitly in a computable general equilibrium model: a traditional and a hybrid (discrete technology modeling) approach. The results suggest that the current climate policy in Switzerland will not be able to move the economy towards the required 10% CO₂ reduction. Both approaches provide virtually the same results when the calibration process is precisely executed, which contradicts the results of previous studies. © 2012 Elsevier B.V.
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published
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Journal / series
Volume
87
Pages / Article No.
62 - 71
Publisher
Elsevier
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Methods
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Subject
Cost curve; Elasticity of substitution; Computable general equilibrium model; Hybrid modeling; Carbon tax
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Notes
Received 24 December 2011, Revised 8 October 2012, Accepted 12 December 2012, Published online 21 January 2013.