Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model
Name
10666_2011_Article_9298.pdf
Size
522.44 KB
Format
Adobe PDF
Checksum (MD5)
977e533c8a1b9d84d9fa8592261f1da7
Author(s)
Morris, Jennifer Faye
Paltsev, Sergey
Reilly, John M
Date Issued
November 2011
Journal
Environmental Modeling & Assessment
Publisher
Springer Netherlands
Citation
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.
Version
Author's final manuscript
Abstract
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.
MIT Department
Massachusetts Institute of Technology. Joint Program on the Science & Policy of Global Change
Terms of Use
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.
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1007/s10666-011-9298-7
