The costs of climate policies in a second best world with labour market imperfections

Céline Guivarch, Renaud Crassous, Olivier Sassi and Stephane Hallegatte
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Renaud Crassous: CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique
Olivier Sassi: CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique

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Abstract: The critical role of labour market imperfections is explored in climate stabilisation costs formation, using a dynamic recursive energy-economy model that represents a second best world with market imperfections and short-run adjustments constraints along a long-term growth path. The degree of rigidity of the labour markets is a central parameter and a systematic sensitivity analysis of the model results confirms this. When labour markets are represented as highly flexible, the model results are in the usual range of existing literature, i.e. less than 2% GDP losses in 2030 for a stabilisation target at 550ppm CO2 equivalent. However, when labour markets rigidities are accounted for, mitigation costs increase dramatically. Accompanying measures are identified, namely labour subsidies, which guarantees against the risk of large stabilisation costs in the case of high rigidities of the labour markets. This complements the usual view that mitigation is a long-term matter that depends on technology, innovation, investment and behavioural change. The results support the view that mitigation is also a shorter-term issue and a matter of transition on the labour market.

Keywords: labour market rigidities; climate policies costs; second best world; sensitivity analysis; rigidités des marchés du travail; coût des politiques climatiques; monde de second rang; analyse de sensibilité (search for similar items in EconPapers)
Date: 2011-06-15
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00724487v1
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Citations: View citations in EconPapers (32)

Published in Climate Policy, 2011, 11 (1), pp.768-788. ⟨10.3763/cpol.2009.0012⟩

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Related works:
Journal Article: The costs of climate policies in a second-best world with labour market imperfections (2011)
Working Paper: The costs of climate policies in a second best world with labour market imperfections (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00724487

DOI: 10.3763/cpol.2009.0012

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