Where in the world is it cheapest to cut carbon emissions?

Countries with low marginal costs of abating carbon emissions may have high total costs, and vice versa, for a given climate mitigation policy. This may help to explain different countries’ policy stances on climate mitigation. We hypothesize that, under a common percentage cut in emissions intensit...

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Bibliographic Details
Published in:The Australian journal of agricultural and resource economics 2012-07, Vol.56 (3), p.315-331
Main Authors: Stern, David I, Pezzey, John C. V, Lambie, N. Ross
Format: Article
Language:English
Subjects:
Carbon
Carbon abatement costs
Carbon emissions
carbon markets
Carbon offsets
Climate
climate change
Costs
Countries
econometric models
Econometrics
emissions
Emissions control
energy
Energy costs
Environmental policy
European Union
Greenhouse effect
Hypotheses
Hypothesis
International
issues and policy
marginal abatement cost
Marginalism
meta‐analysis
Studies
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Summary:Countries with low marginal costs of abating carbon emissions may have high total costs, and vice versa, for a given climate mitigation policy. This may help to explain different countries’ policy stances on climate mitigation. We hypothesize that, under a common percentage cut in emissions intensity relative to business as usual (BAU), countries with higher BAU emission intensities have lower marginal abatement costs, but total costs relative to output will be similar across countries, and under a common carbon price, relative total costs are higher in emission‐intensive countries. Using the results of the 22nd Energy Modeling Forum (EMF‐22), we estimate marginal abatement cost curves for the US, EU, China and India, which we use to estimate marginal and total costs of abatement under a number of policy options currently under international debate. This analysis provides support for our hypotheses, although its reliability is limited by the shortcomings of the EMF‐22 models and the degree to which our econometric model can adequately account for the substantial differences among them.
ISSN:1364-985X
1467-8489
DOI:10.1111/j.1467-8489.2011.00576.x