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Low-Cost Strategies for Coping with CO2 Emission Limits (A Critique of "CO2 Emission Limits: an Economic Cost Analysis for the USA" by Alan Manne and Richard Richels)

Manne and Richels (Mann and Richels, 1990) have developed a useful modelling framework for evaluating the potential economic impacts of alternative strategies for coping with greenhouse warming. Their estimate is that the discounted present value of economic consumption losses arising from a 20% reduction in CO2 emissions through the next century is in the range of $0.8 to $3.6 trillion. This critique shows that the options for reducing CO2 emissions through energy demand reduction and energy supply shifts are much broader than those considered by Manne and Richels in the initial run of their model. The possibilities are so diverse with both present and future technologies, that the minimum CO2 emissions constraint penalty estimated by Mann and Richels may well prove to be too high - and the possibility of a negative penalty cannot be ruled out. Marine and Richels are correct in arguing that a vigorous R&D program is needed to keep economic consumption losses associated with constraints on CO2 emissions at low levels, and that waiting for clarification of the scientific issues relating to the greenhouse warning before launching such R&D efforts would be unwise, but the priorities for R&D implicit in the initial nun of their model are much too narrowly focused. As this analysis indicates, a much more broadly based energy R&D program is called for.

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Energy Specializations: Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation

JEL Codes:
Q54 - Climate; Natural Disasters and Their Management; Global Warming
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: CO2 emission limits, Greenhouse effect, Techology change. Electricity supply, Renewable energy

DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No4-3

Published in Volume 11, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.