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Abatement Cost Uncertainty and Policy Instrument Selection under a Stringent Climate Policy. A Dynamic Analysis

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  • Bosetti, Valentina
  • Golub, Alexander
  • Markandya, Anil
  • Massetti, Emanuele
  • Tavoni, Massimo
Abstract
This paper investigates the relative economic and environmental outcomes of price versus quantity mechanisms to control GHG emissions when abatement costs are uncertain. In particular, we evaluate the impacts on policy costs, CO2 emissions and energy R&D for a stringent mitigation target of 550 ppmv CO2 equivalent (i.e. 450 for CO2 only) concentrations. The analysis is performed in an optimal growth framework via Monte Carlo simulations of the integrated assessment model WITCH (World Induced Technical Change Hybrid). Results indicate that the price instrument stochastically dominates the quantity instrument when a stringent stabilization policy is in place.

Suggested Citation

  • Bosetti, Valentina & Golub, Alexander & Markandya, Anil & Massetti, Emanuele & Tavoni, Massimo, "undated". "Abatement Cost Uncertainty and Policy Instrument Selection under a Stringent Climate Policy. A Dynamic Analysis," Climate Change Modelling and Policy Working Papers 6383, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemcc:6383
    DOI: 10.22004/ag.econ.6383
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    References listed on IDEAS

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    1. Valentina Bosetti & Carlo Carraro & Marzio Galeotti & Emanuele Massetti & Massimo Tavoni, 2006. "WITCH. A World Induced Technical Change Hybrid Model," Working Papers 2006_46, Department of Economics, University of Venice "Ca' Foscari".
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    4. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    5. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
    6. Newell, Richard G. & Pizer, William A., 2003. "Regulating stock externalities under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 416-432, March.
    7. Stiglitz Joseph, 2006. "A New Agenda for Global Warming," The Economists' Voice, De Gruyter, vol. 3(7), pages 1-4, July.
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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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