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Production-based versus consumption-based emission targets: implications for developing and developed economies

Published online by Cambridge University Press:  16 December 2013

Madanmohan Ghosh  and
Manmohan Agarwal
Madanmohan Ghosh
Affiliation:
Analysis and Modeling Division, Environment Canada, 10 Wellington Street, Gatineau, Quebec, K1A 0H3, Canada. E-mail: madanmohan.ghosh@ec.gc.ca
Manmohan Agarwal
Affiliation:
Centre for International Governance Innovation, Canada. E-mail: magarwal@cigionline.org
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Abstract

This paper evaluates how the marginal abatement cost (MAC) and the efficiency cost of policies will change at the regional and global level if reduction targets are based on consumption-based emissions (CBEs) rather than on production-based emissions (PBEs). Using a CGE model, this paper finds that the MAC of CBEs is in general higher than that of PBEs, mainly due to limited substitution possibilities between energy and non-energy goods in final consumption compared to those in the choice of inputs in production activities under PBEs. Interestingly, when policies such as border carbon adjustments (BCAs) are introduced to reduce CBEs, net importers of emissions are better off, while net exporters of emissions are worse off in this approach compared to the PBEs target. If border tariffs are not allowed, the CBEs target turns out to be worse both for net importers and exporters of emissions.

Type
Research Article
Information
Environment and Development Economics , Volume 19 , Issue 5 , October 2014 , pp. 585 - 606
Copyright
Copyright © Cambridge University Press 2013 

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