Costs of Climate Mitigation Policies
The wide range of cost estimates for stabilizing climate is puzzling to policy makers as well as researchers. Assumptions about technology costs have been studied extensively as one reason for these differences. Here, we focus on how policy timing and the modeling of economy-wide interactions affect...
| Main Authors: | , , , |
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| Format: | Technical Report |
| Language: | en_US |
| Published: |
MIT Joint Program on the Science and Policy of Global Change
2016
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| Online Access: | http://hdl.handle.net/1721.1/102617 |
| _version_ | 1811072449793490944 |
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| author | Chen, Y.-H.H. Babiker, M. Paltsev, S. Reilly, J. |
| author_facet | Chen, Y.-H.H. Babiker, M. Paltsev, S. Reilly, J. |
| author_sort | Chen, Y.-H.H. |
| collection | MIT |
| description | The wide range of cost estimates for stabilizing climate is puzzling to policy makers as well as researchers. Assumptions about technology costs have been studied extensively as one reason for these differences. Here, we focus on how policy timing and the modeling of economy-wide interactions affect costs. We examine these issues by restructuring a general equilibrium model of the global economy, removing elements of the model one by one. We find that delaying the start of a global policy by 20 years triples the needed starting carbon price and increases the macroeconomic cost by nearly 30%. We further find that including realistic details of the economy (e.g. sectoral and electricity technology detail; tax and trade distortions; capital vintaging) more than double net present discounted costs over the century. Inter-model comparisons of stabilization costs find a similar range, but it is not possible to isolate the structural causes behind cost differences. Broader comparisons of stabilization costs face the additional issue that studies of different vintages assume different policy starting dates, often dates that are no longer realistic given the pace of climate change negotiations. This study can aid in interpretation of estimates and give policymakers and researchers an idea of how to adjust costs upwards as the start of policy is delayed. It also illustrates that models that greatly simplify the realities of modern economies likely underestimate costs. |
| first_indexed | 2024-09-23T09:06:08Z |
| format | Technical Report |
| id | mit-1721.1/102617 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T09:06:08Z |
| publishDate | 2016 |
| publisher | MIT Joint Program on the Science and Policy of Global Change |
| record_format | dspace |
| spelling | mit-1721.1/1026172019-04-10T15:19:15Z Costs of Climate Mitigation Policies Chen, Y.-H.H. Babiker, M. Paltsev, S. Reilly, J. The wide range of cost estimates for stabilizing climate is puzzling to policy makers as well as researchers. Assumptions about technology costs have been studied extensively as one reason for these differences. Here, we focus on how policy timing and the modeling of economy-wide interactions affect costs. We examine these issues by restructuring a general equilibrium model of the global economy, removing elements of the model one by one. We find that delaying the start of a global policy by 20 years triples the needed starting carbon price and increases the macroeconomic cost by nearly 30%. We further find that including realistic details of the economy (e.g. sectoral and electricity technology detail; tax and trade distortions; capital vintaging) more than double net present discounted costs over the century. Inter-model comparisons of stabilization costs find a similar range, but it is not possible to isolate the structural causes behind cost differences. Broader comparisons of stabilization costs face the additional issue that studies of different vintages assume different policy starting dates, often dates that are no longer realistic given the pace of climate change negotiations. This study can aid in interpretation of estimates and give policymakers and researchers an idea of how to adjust costs upwards as the start of policy is delayed. It also illustrates that models that greatly simplify the realities of modern economies likely underestimate costs. We gratefully acknowledge the financial support for this work provided by the MIT Joint Program on the Science and Policy of Global Change through a consortium of industrial and foundation sponsors and Federal awards, including the U.S. Department of Energy, Office of Science under DE-FG02-94ER61937 and the U.S. Environmental Protection Agency under XA-83600001-1. For a complete list of sponsors and the U.S. government funding sources, please visit http://globalchange.mit.edu/sponsors/all. 2016-05-23T15:23:22Z 2016-05-23T15:23:22Z 2016-03 Technical Report Working Paper http://hdl.handle.net/1721.1/102617 Report 292 en_US MIT Joint Program Report Series;292 application/pdf MIT Joint Program on the Science and Policy of Global Change |
| spellingShingle | Chen, Y.-H.H. Babiker, M. Paltsev, S. Reilly, J. Costs of Climate Mitigation Policies |
| title | Costs of Climate Mitigation Policies |
| title_full | Costs of Climate Mitigation Policies |
| title_fullStr | Costs of Climate Mitigation Policies |
| title_full_unstemmed | Costs of Climate Mitigation Policies |
| title_short | Costs of Climate Mitigation Policies |
| title_sort | costs of climate mitigation policies |
| url | http://hdl.handle.net/1721.1/102617 |
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