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Opportunity costs of CO2

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  • Kümmel, Reiner

Abstract

The minimum external costs of CO2 emissions are estimated for an economy which stagnates between the years 1981 and 2030 and then has to halve its energy input because the climate-compatible global CO2 emission budget has been exhausted after 50 years of constant emissions at present rates. All data and the production function are taken from the Federal Republic of Germany in the year 1981. It is (optimistically) assumed that the only loss to society is the loss of production which amounts to 36% of the 1981 output. Discounting it at rates of r = 7% and r = 4% results in annual CO2 opportunity costs of C = 1.2% and C = 5.7% of the 1981 GNP, respectively. These are equivalent, respectively, to 26% and 108% of the total expenditures for energy and may be seen as the minimium range of an energy tax which should support energy conservation and the development of non-fossil energy sources.

Suggested Citation

  • Kümmel, Reiner, 1992. "Opportunity costs of CO2," Energy, Elsevier, vol. 17(10), pages 901-906.
    • Handle: RePEc:eee:energy:v:17:y:1992:i:10:p:901-906
    DOI: 10.1016/0360-5442(92)90038-2
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