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Production-based versus consumption-based emission targets: implications for developing and developed economies

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  • Ghosh, Madanmohan
  • Agarwal, Manmohan

Abstract

This paper evaluates how the marginal abatement cost (MAC) and the efficiency cost of policies will change at the regional and global level if reduction targets are based on consumption-based emissions (CBEs) rather than on production-based emissions (PBEs). Using a CGE model, this paper finds that the MAC of CBEs is in general higher than that of PBEs, mainly due to limited substitution possibilities between energy and non-energy goods in final consumption compared to those in the choice of inputs in production activities under PBEs. Interestingly, when policies such as border carbon adjustments (BCAs) are introduced to reduce CBEs, net importers of emissions are better off, while net exporters of emissions are worse off in this approach compared to the PBEs target. If border tariffs are not allowed, the CBEs target turns out to be worse both for net importers and exporters of emissions.

Suggested Citation

  • Ghosh, Madanmohan & Agarwal, Manmohan, 2014. "Production-based versus consumption-based emission targets: implications for developing and developed economies," Environment and Development Economics, Cambridge University Press, vol. 19(5), pages 585-606, October.
    • Handle: RePEc:cup:endeec:v:19:y:2014:i:05:p:585-606_00
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    Cited by:

    1. Madanmohan Ghosh & Deming Luo & Muhammad Shahid Siddiqui & Thomas Rutherford & Yunfa Zhu, 2020. "The Drivers of Greenhouse Gas Emissions Intensity Improvements in Major Economies: Analysis of Trends 1995–2009," Foreign Trade Review, , vol. 55(3), pages 277-297, August.

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