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

Shinya Kato () and Kenji Takeuchi
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Shinya Kato: Graduate School of Economics, Kobe University

No 1414, Discussion Papers from 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.

Pages: 25pages
Date: 2014-03
New Economics Papers: this item is included in nep-cmp, nep-ene and nep-env
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Journal Article: A CGE analysis of a rate-based policy for climate change mitigation (2017)
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