Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model
Marginal abatement cost (MAC) curves, relationships between tonnes of emissions abated and the CO[subscript 2] (or greenhouse gas (GHG)) price, have been widely used as pedagogic devices to illustrate simple economic concepts such as the benefits of emissions trading. They have also been used to pro...
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| Format: | Article |
| Language: | English |
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Springer Netherlands
2017
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| Online Access: | http://hdl.handle.net/1721.1/106558 https://orcid.org/0000-0003-3287-0732 https://orcid.org/0000-0001-5595-0968 |
| _version_ | 1826214158988738560 |
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| author | Morris, Jennifer Faye Paltsev, Sergey Reilly, John M |
| author2 | Massachusetts Institute of Technology. Joint Program on the Science & Policy of Global Change |
| author_facet | Massachusetts Institute of Technology. Joint Program on the Science & Policy of Global Change Morris, Jennifer Faye Paltsev, Sergey Reilly, John M |
| author_sort | Morris, Jennifer Faye |
| collection | MIT |
| description | Marginal abatement cost (MAC) curves, relationships between tonnes of emissions abated and the CO[subscript 2] (or greenhouse gas (GHG)) price, have been widely used as pedagogic devices to illustrate simple economic concepts such as the benefits of emissions trading. They have also been used to produce reduced-form models to examine situations where solving the more complex model underlying the MAC is difficult. Some important issues arise in such applications: (1) Are MAC relationships independent of what happens in other regions?, (2) are MACs stable through time regardless of what policies have been implemented in the past?, and (3) can one approximate welfare costs from MACs? This paper explores the basic characteristics of MAC and marginal welfare cost (MWC) curves, deriving them using the MIT Emissions Prediction and Policy Analysis model. We find that, depending on the method used to construct them, MACs are affected by policies abroad. They are also dependent on policies in place in the past and depend on whether they are CO[subscript 2]-only or include all GHGs. Further, we find that MACs are, in general, not closely related to MWCs and therefore should not be used to derive estimates of welfare change. We also show that, as commonly constructed, MACs may be unreliable in replicating results of the parent model when used to simulate GHG policies. This is especially true if the policy simulations differ from the conditions under which the MACs were simulated. |
| first_indexed | 2024-09-23T16:00:46Z |
| format | Article |
| id | mit-1721.1/106558 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T16:00:46Z |
| publishDate | 2017 |
| publisher | Springer Netherlands |
| record_format | dspace |
| spelling | mit-1721.1/1065582022-09-29T17:40:31Z Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model Morris, Jennifer Faye Paltsev, Sergey Reilly, John M Massachusetts Institute of Technology. Joint Program on the Science & Policy of Global Change Morris, Jennifer Faye Paltsev, Sergey Reilly, John M Marginal abatement cost (MAC) curves, relationships between tonnes of emissions abated and the CO[subscript 2] (or greenhouse gas (GHG)) price, have been widely used as pedagogic devices to illustrate simple economic concepts such as the benefits of emissions trading. They have also been used to produce reduced-form models to examine situations where solving the more complex model underlying the MAC is difficult. Some important issues arise in such applications: (1) Are MAC relationships independent of what happens in other regions?, (2) are MACs stable through time regardless of what policies have been implemented in the past?, and (3) can one approximate welfare costs from MACs? This paper explores the basic characteristics of MAC and marginal welfare cost (MWC) curves, deriving them using the MIT Emissions Prediction and Policy Analysis model. We find that, depending on the method used to construct them, MACs are affected by policies abroad. They are also dependent on policies in place in the past and depend on whether they are CO[subscript 2]-only or include all GHGs. Further, we find that MACs are, in general, not closely related to MWCs and therefore should not be used to derive estimates of welfare change. We also show that, as commonly constructed, MACs may be unreliable in replicating results of the parent model when used to simulate GHG policies. This is especially true if the policy simulations differ from the conditions under which the MACs were simulated. 2017-01-20T17:24:40Z 2017-01-20T17:24:40Z 2011-11 2010-06 2016-08-18T15:40:39Z Article http://purl.org/eprint/type/JournalArticle 1420-2026 1573-2967 http://hdl.handle.net/1721.1/106558 Morris, Jennifer, Sergey Paltsev, and John Reilly. “Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model.” Environmental Modeling & Assessment 17.4 (2012): 325–336. https://orcid.org/0000-0003-3287-0732 https://orcid.org/0000-0001-5595-0968 en http://dx.doi.org/10.1007/s10666-011-9298-7 Environmental Modeling & Assessment Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. Springer Science+Business Media B.V. application/pdf Springer Netherlands Springer Netherlands |
| spellingShingle | Morris, Jennifer Faye Paltsev, Sergey Reilly, John M Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model |
| title | Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model |
| title_full | Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model |
| title_fullStr | Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model |
| title_full_unstemmed | Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model |
| title_short | Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model |
| title_sort | marginal abatement costs and marginal welfare costs for greenhouse gas emissions reductions results from the eppa model |
| url | http://hdl.handle.net/1721.1/106558 https://orcid.org/0000-0003-3287-0732 https://orcid.org/0000-0001-5595-0968 |
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