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"“Lock-in” Effect of Emission Standard and Its Impact on the Choice of Market Based Instruments" by Haoqi Qian, Libo Wu, Weiqi Tang, Yao Yang and Chang Yu Abstract In this paper we introduce the kink point mechanism into our CGE model to simulate each region’s MAC curve. Then we study choice of carbon abatement policies based on the combination of this mechanism and Weitzman’s rule. Firstly, we find that regional MAC curves shift upward over time which means the increase of abatement cost and the difference among MAC curves also become wider after year 2015. This is because the emission intensity targets go tighter in all regions and the result is consistent to our common sense. Secondly, kink points occur to all regional MAC curves and these kink points have very different characteristics. When facing with emission constraint, each region has to adjust its optimal production behavior by balancing the cost of abatement activity input and the cost of reducing output. For China, although the whole economy is in the stage of high-speed development, the development of technology is still in a low level. This feature determines the high initial abatement activity cost in current China, such as high emission reduction investment cost. These high costs cause the inconsistent behavior in reducing emissions and lead to the occurrence of kink points in MAC curves. Moreover, each regions’ emission intensity targets and cost share of inputs also affects the difference of kink points. Thirdly, the position of kinked points of regional MAC curves shift rightward, resulting the actual reduction rate locate at the left side of kink points. The slope of MAC curve at the left side of kink point is higher than that at the right side, this indicates the loss of economic efficiency of adopting price control policies is smaller than that of adopting quantity policies. This policy suggestion means that if China slows down its pace of emission reduction, then it is better to choose price control policies such as carbon taxes to cope with climate change. Finally, we must pay attention that this paper only discusses the choice of two kinks of ... |
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- Dynamic modeling - Climate change policy |
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Public Access  GTAP Resource 4654 (975.7 KB) Replicated: 0 time(s)Restricted Access No documents have been attached. Special Instructions No instructions have been specified. |
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Last Modified: 9/15/2023 2:05:45 PM
