Worse off from reduced cost? The role of policy design under uncertain technological advancement

Arbeitspapier

A simple model is used to illustrate the effects of a reduction in (marginal) abatement cost in a two country setting. It can be shown that a the country experiencing a cost reduction can actually be worse off. This holds true for a variety of quantity and price based emission policies. The most important channel is that a country with lower abatement costs engages in additional abatement effort for which it is not compensated. Under a quantity based policy with a given allocation, a seller of permits can also be negatively affected from a lower carbon price. We also argue that abatement cost shocks to renewable energy and carbon capture and storage (CCS) are different in terms of their effects on international energy markets. A shock to renewable energy reduces fossil fuel rents benefiting energy importers, while the opposite holds for a shock to CCS. The channels obtained in the theoretical model can be confirmed in a more complex global computable general equilibrium model. Some regions are indeed worse off from shock that lowers their abatement costs.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Kiel Working Paper ; No. 1926

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Computable General Equilibrium Models ; Climate; Natural Disasters and Their Management; Global Warming ; Environmental Economics: Government Policy
• Thema: climate policy ; prices vs. quantities ; renewable energy ; CCS ; technological uncertainty ; CGE model

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Weitzel, Matthias
• Ereignis: Veröffentlichung
• (wer): Kiel Institute for the World Economy (IfW)
• (wo): Kiel
• (wann): 2014

Weitere Informationen

• Handle: http://hdl.handle.net/10419/97315
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ