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The Costs of Stabilizing Global CO2 Emissions: A Probabilistic Analysis Based on Expert Judgments

In this paper, we examine the economic costs of stabilizing global CO2 emissions at 1990 levels. Previous analyses of the costs of emissions abatement have tended to be deterministic. That is, no attempt was made to assign probabilities to various scenarios. Policy-makers need information both on the range of possible outcomes and on their relative likelihood. We use a probability poll to characterize the uncertainty surrounding critical parameters and to construct probability distributions over the outcomes of interest. The analysis suggests a wide range for abatement costs. In order to stabilize global emissions, the annual price tag lies between a 2 and 6.8 percent of gross world product. This distribution is highly skewed. The expected costs are approximately 1.5 percent.

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Energy Specializations: Energy and the Environment – Climate Change and Greenhouse Gases

JEL Codes:
Q54 - Climate; Natural Disasters and Their Management; Global Warming

Keywords: CO2 emissions, Probabilistic analysis, Abatement costs, climate policy

DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No1-3

Published in Volume15, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.