nep-res New Economics Papers
on Resource Economics
Issue of 2010‒06‒26
three papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Where is it Cheapest to Cut Carbon Emissions? By David Stern; Ross Lambie
  2. How Can Policy Encourage Economically Sensible Climate Adaptation? By V. Kerry Smith
  3. Distributional Impacts in a Comprehensive Climate Policy Package By Gilbert E. Metcalf; Aparna Mathur; Kevin A. Hassett

  1. By: David Stern (Arndt-Corden Division of Economics, Crawford School of Economics and Government, Australian National University, and Centre for Applied Macroeconomic Analysis, Canberra, Australia); Ross Lambie (Crawford School of Economics and Government, Australian National University, Australia. Australian National University)
    Abstract: The relative cost of carbon emissions reductions across regions depends on whether we measure cost by marginal or total cost, private or economy-wide cost, and using market or purchasing power parity exchange rates. If all countries are on the same marginal carbon abatement cost curve then lower marginal costs of abatement are associated with higher energy intensities and higher total costs of abatement in achieving proportional cuts in emissions, equal emissions per capita, or common global carbon price targets. We test this conjecture using the results of the GTEM computable general equilibrium model as presented in the climate change economics review conducted by the Australian Treasury Department. Rankings of countries by costs do differ depending on whether marginal or total cost is used. But some regions, including OPEC and the former USSR, have high marginal costs and high emissions intensities and, therefore, high total costs and others like the EU relatively low marginal and total costs. Under a global emissions trading regime real economy-wide costs of abatement are higher in developing economies with currencies valued below purchasing power parity and large differences between private and economy-wide costs such as India contributing to the high GDP losses experienced in those countries.
    Keywords: Climate change, costs, developing countries, computable general equilibrium
    JEL: Q52 Q54
    Date: 2010–06
    URL: http://d.repec.org/n?u=RePEc:een:eenhrr:1063&r=res
  2. By: V. Kerry Smith
    Abstract: This paper considers the role of incentive based climate adaptation policies. It uses the early literature on pricing and capacity choices under demand uncertainty to describe how revised price structures for the substitutes for climate services can be treated as anticipatory adaptation. In many situations the policies determining the prices of these services make them difficult to adjust. Thus, excess demand will not be managed through price adjustment. This situation is important because it implies that the rationing rules determining who is served influence both capacity planning and pricing decisions. The lesson drawn from these models is that reform of pricing policy for climate substitutes offers a ready basis for incentive based adaptation policy. The last part of the paper offers some empirical evidence on how the price elasticity of the residential demand for water changes with variations in seasonal precipitation. The findings suggest marked differences between normal and dry conditions for the Phoenix metropolitan area. These results reinforce the need to co-ordinate changes in pricing policy with any capacity planning developed for water supplies as part of anticipatory climate adaptation. Similar relationships may well apply for other substitutes for climatic services.
    JEL: Q4 Q54
    Date: 2010–06
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:16100&r=res
  3. By: Gilbert E. Metcalf; Aparna Mathur; Kevin A. Hassett
    Abstract: This paper provides a simple analytic approach for measuring the burden of carbon pricing that does not require sophisticated and numerically intensive economic models but which is not limited to restrictive assumptions of forward shifting of carbon prices. We also show how to adjust for the capital income bias contained in the Consumer Expenditure Survey, a bias towards regressivity in carbon pricing due to underreporting of capital income in higher income deciles in the Survey. Many distributional analyses of carbon pricing focus on the uses-side incidence of carbon pricing. This is the differential burden resulting from heterogeneity in consumption across households. Once one allows for sources-side incidence (i.e. differential impacts of changes in real factor prices), carbon policies look more progressive. Perhaps more important than the findings from any one scenario, our results on the progressivity of the leading cap and trade proposals are robust to the assumptions made on the relative importance of uses and sources side heterogeneity.
    JEL: H22 H23 Q48 Q54 Q58
    Date: 2010–06
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:16101&r=res

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