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The Costs of Kyoto for the US Economy

Terry Barker and Paul Ekins

Year: 2004
Volume: Volume 25
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No3-4
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Abstract:
The high costs for the US economy of mitigating climate change have been cited by the Bush administration as one of the reasons for rejecting US ratification of the Kyoto Protocol. A range of cost estimates are assessed in the IPCC s third report (2001), but they are hedged with so many qualifications that it is not easy to reach useful conclusions. This paper organises some of the quantitative information on costs of greenhouse gas mitigation for the US published before the US rejection of Kyoto. The aim is to put them in a wider context, e.g., allowing for non-climate benefits, and to draw conclusions that are robust in the face of the uncertainties. Important lessons can be drawn for how costs can be reduced in any future international commitment by the US to reduce emissions. Provided policies are expected, gradual and well designed (e.g., through auctioned Annex I tradable permits with revenues used to reduce burdensome tax rates) the net costs for the US of mitigation are likely to be insignificant, that is within the range +/-1% of GDP.



Decarbonizing the Global Economy with Induced Technological Change: Scenarios to 2100 using E3MG

Terry Barker, Haoran Pan, Jonathan Kohler, Rachel Warren, and Sarah Winne

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-12
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Abstract:
This paper reports how endogenous economic growth and technological change have been introduced into a global econometric model. It explains how further technological change might be induced by mitigation policies so as to reduce greenhouse gas emissions and stabilize atmospheric concentrations. These are the first results of a structural econometric approach to modeling the global economy using the model E3MG (energy-environment-economy model of the globe), which in turn constitutes one component in the Community Integrated Assessment System (CIAS) of the UK Tyndall Centre. The model is simplified to provide a post-Keynesian view of the long-run, with an indicator of technological progress affecting each region�s exports and energy use. When technological progress is endogenous in this way, long-run growth in global GDP is partly explained by the model. Average permit prices and tax rates about $430/tC (1995) prices after 2050 are sufficient to stabilize atmospheric concentrations at 450ppm CO2 after 2100. They also lead to higher economic growth.



Combining Energy Technology Dynamics and Macroeconometrics: The E3MG Model

Jonathan Kohler, Terry Barker, Dennis Anderson and Haoran Pan

Year: 2006
Volume: Hybrid Modeling
Number: Special Issue #2
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI2-6
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Abstract:
This paper introduces a novel approach to the hybrid modelling of technological change climate stabilisation cost literature. We describe how a post-Keynesian macroeconomic model of sectoral demand, E3MG, has been combined with investments in 26 energy technologies from a submodel, ETM. E3MG is a 20-region global energy-environment-economy (E3) econometric, dynamic simulation model. It is a component of the UK Tyndall Center�s Community Integrated Assessment System. Technological change is endogenous, through its effects on general energy use and sectoral demand, and on energy technologies through the cost-reducing effects o f learning by doing and economies of scale. This approach directly challenges the notion that historically estimated models cannot be use for long-term analysis. The paper concludes with an account of how technological progress is induced in this hybrid system by high relative prices of carbon designed to achieve climate stabilization at 450ppmv.



The Economics of Low Stabilization: Model Comparison of Mitigation Strategies and Costs

Ottmar Edenhofer , Brigitte Knopf, Terry Barker, Lavinia Baumstark, Elie Bellevrat, Bertrand Chateau, Patrick Criqui, Morna Isaac, Alban Kitous, Socrates Kypreos, Marian Leimbach, Kai Lessmann, Bertrand Magne, Serban Scrieciu, Hal Turton, Detlef P. van Vuuren

Year: 2010
Volume: Volume 31
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-NoSI-2
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Abstract:
This study gives a synthesis of a model comparison assessing the technological feasibility and economic consequences of achieving greenhouse gas concentration targets that are sufficiently low to keep the increase in global mean temperature below 2 degrees Celsius above pre-industrial levels. All five global energy-environment-economy models show that achieving low greenhouse gas concentration targets is technically feasible and economically viable. The ranking of the importance of individual technology options is robust across models. For the lowest stabilization target (400 ppm CO2 eq), the use of bio-energy in combination with CCS plays a crucial role, and biomass potential dominates the cost of reaching this target. Without CCS or the considerable extension of renewables the 400 ppm CO2 eq target is not achievable. Across the models, estimated aggregate costs up to 2100 are below 0.8% global GDP for 550 ppm CO2 eq stabilization and below 2.5% for the 400 ppm CO2 eq pathway.



Modeling Low Climate Stabilization with E3MG: Towards a 'New Economics' Approach to Simulating Energy-Environment-Economy System Dynamics

Terry Barker and S. Serban Scrieciu

Year: 2010
Volume: Volume 31
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-NoSI-6
View Abstract

Abstract:
The literature on climate stabilization modeling largely refers to either energy-system or inter-temporal computable general equilibrium/optimal growth models. We contribute with a different perspective by deploying a large-scale macro-econometric hybrid simulation model of the global energy�environment-economy (E3MG) adopting a �New Economics� approach. We use E3MG to assess the implications of a low-stabilization target of 400ppm CO2 equivalent by 2100, assuming both fiscal instruments and regulation. We assert that if governments adopt more stringent climate targets for rapid and early decarbonization, such actions are likely to induce more investment and increased technological change in favor of low-carbon alternatives. Contrary to the conventional view on the economics of climate change, a transition towards a low-carbon society as modeled with E3MG leads to macroeconomic benefits, especially in conditions of unemployment, with GDP slightly above a reference scenario, depending on use of tax or auction revenues. In addition, more stringent action can lead to higher benefits.





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