IDEAS home Printed from https://ideas.repec.org/a/bla/coecpo/v20y2002i4p339-365.html
   My bibliography  Save this article

Cutting Carbon Emissions At A Profit (Part I): Opportunities For The United States

Author

Listed:
  • Florentin Krause
  • Stephen J. DeCanio
  • J. Andrew Hoerner
  • Paul Baer

Abstract

This article identifies and corrects shortcomings in recent modeling studies on the economics of reducing greenhouse gas emissions in the United States. The major assessments of the Kyoto Protocol—by the U.S. Energy Information Administration, the Clinton White House Council of Economic Advisers, the U.S. Department of Energy Interlaboratory Working Group, and the Stanford Energy Modeling Forum—are found to be seriously incomplete. Each study omits one or several of four major cost‐reducing policy options, resulting in cost estimates that are far too pessimistic. In the present study, these shortcomings are overcome through the integrated evaluation of all major cost‐cutting policy options within a coherent least‐cost framework. Three domestic policies—a national carbon cap and permit trading program, productivity‐enhancing market reforms and technology programs, and recycling of permit auction revenues into economically advantageous tax cuts—are combined with international emissions allowance trading. This analysis shows that an integrated least‐cost strategy for mitigating U.S. greenhouse gas emissions would produce an annual net output gain of roughly 0.4% of GDP in 2010 and about 0.9% of GDP in 2020. On a cumulative net present value basis, the United States would gain $250 billion by 2010 and $600 billion by 2020. International flexibility mechanisms (including emissions trading) are of only secondary significance in realizing these productivity, output, and welfare gains.

Suggested Citation

  • Florentin Krause & Stephen J. DeCanio & J. Andrew Hoerner & Paul Baer, 2002. "Cutting Carbon Emissions At A Profit (Part I): Opportunities For The United States," Contemporary Economic Policy, Western Economic Association International, vol. 20(4), pages 339-365, October.
  • Handle: RePEc:bla:coecpo:v:20:y:2002:i:4:p:339-365
    DOI: 10.1093/cep/20.4.339
    as

    Download full text from publisher

    File URL: https://doi.org/10.1093/cep/20.4.339
    Download Restriction: no

    File URL: https://libkey.io/10.1093/cep/20.4.339?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Sanstad, Alan H. & DeCanio, Stephen J. & Boyd, Gale A. & Koomey, Jonathan G., 2001. "Estimating bounds on the economy-wide effects of the CEF policy scenarios," Energy Policy, Elsevier, vol. 29(14), pages 1299-1311, November.
    2. Krause, Florentin, 1996. "The costs of mitigating carbon emissions : A review of methods and findings from European studies," Energy Policy, Elsevier, vol. 24(10-11), pages 899-915.
    3. Ian W.H. Parry & Roberton C. Williams III & Lawrence H. Goulder, 2002. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 25, pages 471-503, Edward Elgar Publishing.
    4. M. Jeff Hamond & Stephen J. DeCanio & Peggy Duxbury & Alan H. Sanstad & Christopher H. Stinson, 1997. "Tax Waste, Not Work," Challenge, Taylor & Francis Journals, vol. 40(6), pages 53-62, November.
    5. Richard S.J. Tol, 1999. "Kyoto, Efficiency, and Cost-Effectiveness: Applications of FUND," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 131-156.
    6. Ian W.H. Parry, 2002. "Environmental Taxes and Quotas in the Presence of Distorting Taxes in Factor Markets," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 23, pages 429-446, Edward Elgar Publishing.
    7. DeCanio, Stephen J., 1993. "Barriers within firms to energy-efficient investments," Energy Policy, Elsevier, vol. 21(9), pages 906-914, September.
    8. Christopher N. MacCracken & James A. Edmonds & Son H. Kim & Ronald D. Sands, 1999. "The Economics of the Kyoto Protocol," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 25-71.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bandyopadhyay, Gopal & Bagheri, Fathollah & Mann, Michael, 2007. "Reduction of fossil fuel emissions in the USA: A holistic approach towards policy formulation," Energy Policy, Elsevier, vol. 35(2), pages 950-965, February.
    2. Alexander Golub & Anil Markandya & Dominic Marcellino, 2006. "Does The Kyoto Protocol Cost Too Much And Create Unbreakable Barriers For Economic Growth?," Contemporary Economic Policy, Western Economic Association International, vol. 24(4), pages 520-535, October.
    3. Stephen DeCanio, 2003. "Economic Analysis, Environmental Policy, and Intergenerational Justice in the Reagan Administration The Case of the Montreal Protocol," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 3(4), pages 299-321, December.
    4. Tulkens, Philippe & Tulkens, Henry, 2006. "The White House and the Kyoto Protocol: Double Standards on Uncertainties and Their Consequences," Climate Change Modelling and Policy Working Papers 12063, Fondazione Eni Enrico Mattei (FEEM).
    5. Laitner, J. A. & DeCanio, S. J. & Koomey, J. G. & Sanstad, A. H., 2003. "Room for improvement: increasing the value of energy modeling for policy analysis," Utilities Policy, Elsevier, vol. 11(2), pages 87-94, June.
    6. Florentin Krause & Stephen J. DeCanio & J. Andrew Hoerner & Paul Baer, 2003. "Cutting Carbon Emissions At A Profit (Part Ii): Impacts On U.S. Competitiveness And Jobs," Contemporary Economic Policy, Western Economic Association International, vol. 21(1), pages 90-105, January.
    7. KAVUNCU Y. Okan, 2010. "Reconsidering Intergenerational Cost-Benefit Analysis of Climate Change: An Endogenous Abatement Approach," EcoMod2003 330700079, EcoMod.
    8. Mark K. Jaccard & John Nyboer & Crhis Bataille & Bryn Sadownik, 2003. "Modeling the Cost of Climate Policy: Distinguishing Between Alternative Cost Definitions and Long-Run Cost Dynamics," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 49-73.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Toman, 1998. "Research Frontiers in the Economics of Climate Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 11(3), pages 603-621, April.
    2. Sanstad, Alan H. & DeCanio, Stephen J. & Boyd, Gale A. & Koomey, Jonathan G., 2001. "Estimating bounds on the economy-wide effects of the CEF policy scenarios," Energy Policy, Elsevier, vol. 29(14), pages 1299-1311, November.
    3. Carolyn Fischer & Richard D. Morgenstern, 2006. "Carbon Abatement Costs: Why the Wide Range of Estimates?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 73-86.
    4. Fullerton, Don & Metcalf, Gilbert E., 2002. "Cap and trade policies in the presence of monopoly and distortionary taxation," Resource and Energy Economics, Elsevier, vol. 24(4), pages 327-347, November.
    5. Brita Bye & Karine Nyborg, 1999. "The Welfare Effects of Carbon Policies: Grandfathered Quotas versus Differentiated Taxes," Discussion Papers 261, Statistics Norway, Research Department.
    6. Ian W.H. Parry & Antonio M. Bento, 2002. "Tax Deductions, Environmental Policy, and the "Double Dividend" Hypothesis," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 22, pages 397-426, Edward Elgar Publishing.
    7. Ian W.H. Parry & Wallace E. Oates & Ian W.H. Parry & Wallace E. Oates, 2004. "Policy Analysis in the Presence of Distorting Taxes," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 4, pages 67-77, Edward Elgar Publishing.
    8. Conniffe, Denis & FitzGerald, John & Scott, Susan & Shortall, Fergal, 1997. "The Costs to Ireland of Greenhouse Gas Abatement," Research Series, Economic and Social Research Institute (ESRI), number PRS32.
    9. Ian Parry, 2001. "The Costs of Restrictive Trade Policies in the Presence of Factor Tax Distortions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(2), pages 147-170, March.
    10. Wang, Qiang & Li, Rongrong, 2015. "Cheaper oil: A turning point in Paris climate talk?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 1186-1192.
    11. Parry, Ian W. H. & Williams III, Roberton C., 1999. "A second-best evaluation of eight policy instruments to reduce carbon emissions," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 347-373, August.
    12. Oladosu, Gbadebo & Rose, Adam, 2007. "Income distribution impacts of climate change mitigation policy in the Susquehanna River Basin Economy," Energy Economics, Elsevier, vol. 29(3), pages 520-544, May.
    13. Philippe Quirion, 2004. "Prices versus Quantities in a Second-Best Setting," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 29(3), pages 337-359, November.
    14. Lawrence H. Goulder & Ian W.H. Parry & Roberton C. Williams III & Dallas Burtraw, 2002. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 27, pages 523-554, Edward Elgar Publishing.
    15. Llop Llop, Maria, 2016. "A second-best analysis of alternative instruments for the preservation of natural resources?," Working Papers 2072/261533, Universitat Rovira i Virgili, Department of Economics.
    16. O'Malley, Eoin & Scott, Susan & Sorrell, Steve, 2003. "Barriers to Energy Efficiency: Evidence from Selected Sectors," Research Series, Economic and Social Research Institute (ESRI), number PRS47.
    17. A. Lans Bovenberg & Lawrence H. Goulder, 2001. "Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does It Cost?," NBER Chapters, in: Behavioral and Distributional Effects of Environmental Policy, pages 45-90, National Bureau of Economic Research, Inc.
    18. : Eduardo L. Giménez (a) & Miguel Rodríguez, "undated". "Pigou’S Dividend Versus Ramsey’S Dividend In The Double Dividend Literature," Working Papers 2-06 Classification-JEL :, Instituto de Estudios Fiscales.
    19. Ian Mackenzie & Nick Hanley & Tatiana Kornienko, 2008. "The optimal initial allocation of pollution permits: a relative performance approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(3), pages 265-282, March.
    20. Parry, Ian & Bento, Antonio, 1999. "Tax Deductible Spending, Environmental Policy, and the "Double Dividend" Hypothesis," RFF Working Paper Series dp-99-24, Resources for the Future.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:coecpo:v:20:y:2002:i:4:p:339-365. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/weaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.