Absolute vs. intensity-based emission caps
Name
MITJPSPGC_Rpt100.pdf
Size
269.8 KB
Format
Adobe PDF
Checksum (MD5)
82a7a48bbe510279a9f089174b51ba56
Author(s)
Ellerman, A. Denny.
Sue Wing, Ian.
Date Issued
July 2003
Series/Report no.
Report no. 100
Abstract
Cap-and-trade systems limit emissions to some pre-specified absolute quantity. Intensity-based limits, that restrict emissions to some pre-specified rate relative to input or output, are much more widely used in environmental regulation and have gained attention recently within the context of greenhouse gas (GHG) emissions trading. In this paper we provide a non-technical introduction to the differences between these two forms of emission limits. Our aim is not to advocate either form, but to elucidate the properties of each in a world where future emissions and GDP are not known with certainty. We argue that the two forms have identical effects in a world where future emissions and economic output (i.e., GDP) are known with certainty, and show that outcomes for marginal costs, abatement, emissions and welfare diverge only because of the variance of actual future GDP relative to its forecast expectation.
Description
Abstract in HTML and technical report in PDF available on the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change website (http://mit.edu/globalchange/www/).
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