Carbon Abatement Costs: Why the Wide Range of Estimates?

Estimates of marginal abatement costs for reducing carbon emissions derived from major economic-energy models vary widely. Controlling for policy regimes we use meta-analysis to examine the importance of structural modeling choices in explaining differences in estimates. The analysis indicates that particular assumptions about perfectly foresighted consumers and Armington trade elasticities generate lower estimates of marginal abatement costs. Other choices are associated with higher cost estimates, including perfectly mobile capital, inclusion of a backstop technology, and greater disaggregation among regions and sectors. Some features, such as greater technological detail, seem less significant. Understanding the importance of key modeling assumptions, as well as the way the models are used to estimate abatement costs, can help guide the development of consistent modeling practices for policy evaluation.

[1]  M. Grubb.  The Economics of the Kyoto Protocol , 2003 .

[2]  Mark Lasky,et al.  The Economic Costs of Reducing Emissions of Greenhouse Gases: A Survey of Economic Models , 2003 .

[3]  J. Hardin.  The Robust Variance Estimator for Two-stage Models , 2002 .

[4]  A. Manne,et al.  U.S. Rejection of the Kyoto Protocol: The Impact on Compliance Costs and Co2 Emissions , 2001 .

[5]  Alan S. Manne,et al.  The Kyoto Protocol: A Cost-Effective Strategy for Meeting Environmental Objectives? , 1999 .

[6]  I. Wing,et al.  Adjustment Time, Capital Malleability and Policy Cost , 1999 .

[7]  Thomas F. Rutherford,et al.  Effects of Restrictions on International Permit Trading: The MS-MRT Model , 1999 .

[8]  J. Bollen,et al.  Clubs, Ceilings and CDM: Macroeconomics of Compliance with the Kyoto Protocol , 1999 .

[9]  R. Tol.  Kyoto, Efficiency, and Cost-Effectiveness: Applications of FUND , 1999 .

[10]  Stephen P. A. Brown,et al.  The Kyoto Protocol: An Economic Analysis Using GTEM , 1999 .

[11]  William D. Nordhaus,et al.  Requiem for Kyoto: An Economic Analysis of the Kyoto Protocol , 1999 .

[12]  Adrian Cooper,et al.  The Economic Implications of Reducing Carbon Emissions , 1999 .

[13]  J. Edmonds,et al.  The Economics of the Kyoto Protocol , 1999 .

[14]  Warwick J. McKibbin,et al.  Emissions trading, capital flows and the Kyoto protocol , 1999 .

[15]  Mikiko Kainuma,et al.  Analysis of Post-Kyoto Scenarios: The Asian-Pacific Integrated Model , 1999 .

[16]  Koji Tokimatsu,et al.  Analysis of Carbon Emission Stabilization Targets and Adaptation by Integrated Assessment Model , 1999 .

[17]  Michael Toman,et al.  Understanding the Design and Performance of Emissions Trading Systems for Greenhouse Gas Emissions: Proceedings of an Experts' Workshop to Identify Research Needs and Priorities , 1999 .

[18]  W. Kip Viscusi,et al.  Energy Taxation as a Policy Instrument to Reduce CO2 Emissions: A Net Benefit Analysis , 1995 .

[19]  Alan S. Manne,et al.  MARKAL-MACRO: An overview , 1992 .

[20]  T. Teisberg,et al.  CETA: A Model for Carbon Emissions Trajectory Assessment , 1992 .

[21]  G. Nicoletti,et al.  The Costs of Policies to Reduce Global Emissions of CO2: Initial Simulation Results with GREEN , 1991 .

[22]  Richard G. Richels,et al.  The Costs of Reducing U.S. CO2 Emissions - Further Sensitivity Analyses , 1990 .

[23]  John M. Reilly,et al.  Global Energy and CO2 to the Year 2050 , 1983 .

[24]  G. Glass.  Primary, Secondary, and Meta-Analysis of Research , 2008 .

[25]  C. Kemfert,et al.  A quantitative Comparison of Economic Cost Assessments implementing the Kyoto Protocol , 2004 .

[26]  G. Klepper,et al.  On the robustness of marginal abatement cost curves: the influence of world energy prices , 2003 .

[27]  R. Repetto,et al.  The costs of climate protection : a guide for the perplexed , 1997 .

[28]  Alan S. Manne,et al.  MERGE. A model for evaluating regional and global effects of GHG reduction policies , 1995 .

[29]  W. Rogers.  Regression standard errors in clustered samples , 1994 .

[30]  Dale W. Jorgenson,et al.  Carbon Taxes and Economic Welfare , 1992 .

[31]  Thomas Rutherford,et al.  The Welfare Effects of Fossil Carbon Restrictions , 1992 .

[32]  D. Hartmann.  Modeling Climate Change , 1990 .

[33]  Marianne Cooper,et al.  Introduction and overview , 1988, J. Am. Soc. Inf. Sci..

[34]  J. Edmonds,et al.  Global Energy: Assessing the Future , 1985 .

[35]  P. J. Huber.  The behavior of maximum likelihood estimates under nonstandard conditions , 1967 .