Title: Economic impacts of climate change policy - A quantitative analysis
Abstract: Global warming has received growing attention during the last decade. The accumulation of anthropogenic greenhouse gas (GHG) emissions in the atmosphere is likely to lead to significant climate changes. In order to avoid potentially larger adverse impacts, GHG emissions - most notably carbon dioxide (CO2) released from fossil fuel use - must be drastically reduced in the future. An economic assessment of climate change has to weigh the benefits from avoided undesirable consequences of global warming against the costs of greenhouse gas emission abatement. Given complete information, cost-benefit analysis could tell policymakers how much greenhouse gas emissions should be abated, when and by whom. However, neither costs nor benefits of GHG abatement are easy to quantify. In particular, there are large uncertainties in benefits of protecting against the negative effects of climate change. The chain of causality - from GHG emissions to ambient concentrations of greenhouse gases in the atmosphere to temperature increase to physical effects such as climatic and sea level changes - is highly complex. Hence, more attention is given to analyzing the costs rather than the benefits of climate change policy. Rational climate policy decision-making requires quantitative assessment, i.e. the use of analytical models that mimic the potential economic impacts of alternative emission reduction policies. A large number of models has been developed to investigate climate change policies that aim at achieving GHG emission trajectories suggested by natural science in a precautionary approach. In assessing alternative GHG abatement strategies the magnitude as well as the distribution of the associated adjustment costs is of major policy relevance. Because of the potentially large costs of ambitious climate change strategies, cost-effective implementation is essential in gaining broader acceptance. Besides efficiency in terms of overall abatement costs, equity in terms of a 'fair' distribution of these costs across countries, sectors or agents for alternative policy strategies is crucial. This thesis contains a selection of essays dealing with the quantitative economic impact analysis of climate change policy. It comprises detailed modeling of the economic adjustment to GHG emission constraints and provides valuable information to make rational policy choices. Different quantitative approaches are employed to warrant the appropriate analysis of selected policy aspects: computable general equilibrium (CGE) modeling, partial equilibrium modeling and econometrics. The thesis is organized in seven chapters. Chapter 2 briefly discusses central issues in the economics of climate change. It motivates CGE modeling as a powerful tool to assess these issues in a consistent economy-wide framework and demonstrates its usefulness along illustrative calculations of the potential economic consequences induced by exogenous emission reduction constraints. The following chapters substantiate specific problems of climate policy. This requires extensions of the core CGE model as well as the additional use of partial equilibrium and econometric approaches. Chapters 3 and 4 investigate how the implications of emission constraints change when switching from the conventional perfect competition paradigm to the more realistic assumption of imperfect competition on good and permit markets. Chapters 5 and 6 present alternative modeling approaches to joint implementation (JI), which involves cross-border investments by industrialized countries to meet part of their domestic emission reduction targets through abatement activities of developing countries. Chapters 7 and 8 address methodological challenges for the model-based assessment of adjustment costs to emission regulation: the choice of costing concepts and the appropriate representation of technological change. Each chapter of the thesis is an independent piece of work and can be read separately. The different chapters contain an introduction that motivates the issues under investigation, relates them to the literature, and highlights the contributions made.
Publication Year: 2003
Publication Date: 2003-01-01
Language: en
Type: dissertation
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