Efficiency and Distribution in Computable Models of Carbon Emission Abatement

Organisation for Economic Co-operation and Development, Economics Department Working Paper No. 192

17 Pages Posted: 25 Feb 1999

See all articles by Joaquim Oliveira Martins

Joaquim Oliveira Martins

OECD; University Paris-Dauphine - PSL

Peter Sturm

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Date Written: March 1998

Abstract

The separability between efficiency and equity is an underlying assumption in most of the computable general equilibrium (CGE) models that have hitherto been used, to assess the economic costs of international agreements to reduce carbon emissions. The analytical correctness of this hypothesis as well as its precise policy implications have generated some debate in the literature. In this context, this paper aims at clarifying the analytical conditions, which determine cost efficiency in usual CGE abatement models. Some illustrative simulation results obtained with the OECD/GREEN model are provided. Then, it is shown under what conditions the equalisation of marginal carbon abatement costs across regions is not a necessary condition for achieving Pareto efficiency and, in what sense the equity and efficiency issues cannot be separated. The consequences of this result for policy is briefly discussed.

JEL Classification: D58, D61, Q30

Suggested Citation

Oliveira Martins, Joaquim and Sturm, Peter, Efficiency and Distribution in Computable Models of Carbon Emission Abatement (March 1998). Organisation for Economic Co-operation and Development, Economics Department Working Paper No. 192, Available at SSRN: https://ssrn.com/abstract=151019 or http://dx.doi.org/10.2139/ssrn.151019

Joaquim Oliveira Martins (Contact Author)

OECD ( email )

2 Rue André Pascal
75775 Paris Cedex 16
France
+33 1 45 24 88 53 (Phone)

HOME PAGE: http://www.oecd.org/cfe

University Paris-Dauphine - PSL ( email )

PARIS
France

Peter Sturm

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

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