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Multi-Gas Emission Reduction for Climate Change Policy: An Application of Fund

The costs of greenhouse gas emission reduction with abatement of carbon dioxide, methane, and nitrous oxide are investigated using the FUND model. The central policy scenario keeps anthropogenic radiative forcing below 4.5 Wm2. If COemission reduction were the only possibility to meet this target, 2 the net present value of consumption losses would be $45 trillion; with abatement of the other gases added, costs fall to $33 trillion. The bulk of these costs savings can be ascribed to reductions of nitrous oxide. Because nitrous oxide emission reduction is so much more important than methane emission reduction, the choice of equivalence metric between the greenhouse gases does not matter much. Sensitivity analyses show that the shape of the cost curves for CH4 and N2O emission reductions matter, and that the inclusion of sulphate aerosols makes policy targets substantially harder to achieve. The costs of emission reduction vary greatly with the choice of stabilisation target. A target of 4.5 Wm-2 is not justified by our current knowledge of the damage costs of climate change.

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Energy Specializations: Energy Modeling – Other; Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Air Emissions (other than greenhouse gases); Energy and the Environment – Policy and Regulation

JEL Codes:
C59 - Econometric Modeling: Other
Q54 - Climate; Natural Disasters and Their Management; Global Warming
Q52 - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Multi-gas emission reduction, Climate change policy, FUND model

DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI3-11

Published in Multi-Greenhouse Gas Mitigation and Climate Policy, Special Issue #3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.