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Where-to-Abate' And 'Where-to-Invest' Flexibility - An Integrated Assessment Analysis of Climate Change

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  • Georg Müller-Fürstenberg
  • Gunter Stephan

Abstract

Within the framework of a dynamic Computable General Equilibrium (CGE) model this paper analyses the impact of trade restrictions on regional rates of return on capital, marginal costs of abatement and optimal climate policy. It will be shown that regional differences both in marginal costs of abatement and in marginal productivity of capital are driven by market imperfection. With restrictions on international trade, the industrialized countries of the North exhibit higher marginal costs of abatement and a lower marginal productivity of capital than the developing nations of the South. Free trade not only in carbon emission rights but also in capital increases conventional welfare but stimulates carbon dioxide emissions to grow, - an effect that is not completely offset by efficiency gains in abatement. Nevertheless, depending upon the choice of the discount rate some kind of an insensitivity result is observed.

Suggested Citation

  • Georg Müller-Fürstenberg & Gunter Stephan, 2002. "Where-to-Abate' And 'Where-to-Invest' Flexibility - An Integrated Assessment Analysis of Climate Change," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(II), pages 191-213, June.
    • Handle: RePEc:ses:arsjes:2002-ii-5
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    References listed on IDEAS

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    Cited by:

    1. Georg M ller-F rstenberger & Gunter Stephan, 2005. "Intensity Targeting or Emission CAPS: Non-Cooperative Climate Change Policies and Technological Change," Diskussionsschriften dp0502, Universitaet Bern, Departement Volkswirtschaft.

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    More about this item

    Keywords

    Climate policy; carbon emission trade; rate-of-interest differential; marginal cost of abatement; capital mobility; international capital market imperfection;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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