The cost of reducing CO2 emissions: Integrating abatement technologies into economic modeling

Olga Kiuila and Thomas Rutherford ()
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Thomas Rutherford: Centre for Energy Policy and Economics, ETH Zurich

No 2011-26, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: We explore two methods of incorporating bottom-up abatement cost estimates into top-down modeling: economy-wide and sector-specific. Carbon emissions depend basically 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 abatement function explicitly in a computable general equilibrium model: a traditional and a hybrid (discrete technology modeling) approaches. 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 calibration process is precisely executed, which contradicts the results in previous studies..

Keywords: cost curve; elasticity of substitution; computable general equilibrium model; hybrid modeling; carbon tax (search for similar items in EconPapers)
JEL-codes: C68 D24 H21 Q52 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2011
New Economics Papers: this item is included in nep-ene and nep-env
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http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP66.pdf First version, 2011 (application/pdf)

Related works:
Journal Article: The cost of reducing CO2 emissions: Integrating abatement technologies into economic modeling (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2011-26

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