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Macroeconomic impacts of climate change mitigation in Latin America: A cross-model comparison

Author

Listed:
  • Kober, Tom
  • Summerton, Philip
  • Pollitt, Hector
  • Chewpreecha, Unnada
  • Ren, Xiaolin
  • Wills, William
  • Octaviano, Claudia
  • McFarland, James
  • Beach, Robert
  • Cai, Yongxia
  • Calderon, Silvia
  • Fisher-Vanden, Karen
  • Rodriguez, Ana Maria Loboguerrero
Abstract
In this paper we analyse macroeconomic consequences of greenhouse gas emission mitigation in Latin America up to 2050 through a multi-model comparison approach undertaken in the context of the CLIMACAP–LAMP research project. We compare two carbon tax scenarios with a business-as-usual scenario of anticipated future energy demand. In the short term, with carbon prices reaching around $15/tCO2 by 2030, most models agree that the reduction in consumer spending, as a proxy for welfare, is limited to about 0.3%. By 2050, at carbon prices of $165/tCO2, there is much more divergence in the estimated impact on consumer spending as well as GDP across models and regions, which reflects uncertainties about technology costs and substitution opportunities between technologies. We observe that the consequences of increasingly higher carbon prices, in terms of reduced consumer spending and GDP, tend to be fairly linear with the carbon price in our CGE models. However, the consequences are divergent and nonlinear in our econometric model, that is linked to an energy system model that simulates step-changes in technology substitution. The results of one model show that climate policy measures can have positive effects on consumer spending and GDP, which results from an investment stimulus and the redistribution of carbon price revenues to consumers.

Suggested Citation

  • Kober, Tom & Summerton, Philip & Pollitt, Hector & Chewpreecha, Unnada & Ren, Xiaolin & Wills, William & Octaviano, Claudia & McFarland, James & Beach, Robert & Cai, Yongxia & Calderon, Silvia & Fishe, 2016. "Macroeconomic impacts of climate change mitigation in Latin America: A cross-model comparison," Energy Economics, Elsevier, vol. 56(C), pages 625-636.
    • Handle: RePEc:eee:eneeco:v:56:y:2016:i:c:p:625-636
    DOI: 10.1016/j.eneco.2016.02.002
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    1. van der Zwaan, Bob & Kober, Tom & Calderon, Silvia & Clarke, Leon & Daenzer, Katie & Kitous, Alban & Labriet, Maryse & Lucena, André F.P. & Octaviano, Claudia & Di Sbroiavacca, Nicolas, 2016. "Energy technology roll-out for climate change mitigation: A multi-model study for Latin America," Energy Economics, Elsevier, vol. 56(C), pages 526-542.
    2. Alex Bowen & Emanuele Campiglio & Massimo Tavoni, 2014. "A Macroeconomic Perspective On Climate Change Mitigation: Meeting The Financing Challenge," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 1-35.
    3. Calderón, Silvia & Alvarez, Andrés Camilo & Loboguerrero, Ana María & Arango, Santiago & Calvin, Katherine & Kober, Tom & Daenzer, Kathryn & Fisher-Vanden, Karen, 2016. "Achieving CO2 reductions in Colombia: Effects of carbon taxes and abatement targets," Energy Economics, Elsevier, vol. 56(C), pages 575-586.
    4. Veysey, Jason & Octaviano, Claudia & Calvin, Katherine & Martinez, Sara Herreras & Kitous, Alban & McFarland, James & van der Zwaan, Bob, 2016. "Pathways to Mexico’s climate change mitigation targets: A multi-model analysis," Energy Economics, Elsevier, vol. 56(C), pages 587-599.
    5. Sergey Paltsev & Pantelis Capros, 2013. "Cost Concepts For Climate Change Mitigation," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 4(supp0), pages 1-26.
    6. Clarke, Leon & McFarland, James & Octaviano, Claudia & van Ruijven, Bas & Beach, Robert & Daenzer, Kathryn & Herreras Martínez, Sara & Lucena, André F.P. & Kitous, Alban & Labriet, Maryse & Loboguerre, 2016. "Long-term abatement potential and current policy trajectories in Latin American countries," Energy Economics, Elsevier, vol. 56(C), pages 513-525.
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    5. Octaviano, Claudia & Paltsev, Sergey & Gurgel, Angelo Costa, 2016. "Climate change policy in Brazil and Mexico: Results from the MIT EPPA model," Energy Economics, Elsevier, vol. 56(C), pages 600-614.
    6. Diniz Oliveira, Thais & Costa Gurgel, Angelo & Tonry, Steve, 2021. "Potential trading partners of a brazilian emissions trading scheme: The effects of linking with a developed region (Europe) and two developing regions (Latin America and China)," Technological Forecasting and Social Change, Elsevier, vol. 171(C).
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    8. Diniz Oliveira, Thais & Gurgel, Angelo & Tonry, Steve, 2018. "The Effects for Brazil of Linking Emissions Trading Schemes in the context of the Heterogeneity of Trading Partners," Conference papers 332951, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    9. N. B. Melnikov & A. P. Gruzdev & M. G. Dalton & M. Weitzel & B. C. O’Neill, 2021. "Parallel Extended Path Method for Solving Perfect Foresight Models," Computational Economics, Springer;Society for Computational Economics, vol. 58(2), pages 517-534, August.
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    11. Melnikov, Nikolai B. & O’Neill, Brian C. & Dalton, Michael G. & van Ruijven, Bas J., 2017. "Downscaling heterogeneous household outcomes in dynamic CGE models for energy-economic analysis," Energy Economics, Elsevier, vol. 65(C), pages 87-97.
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    More about this item

    Keywords

    Climate policy; Energy and economy models; GDP; Employment;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment

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