How Inertia and Limited Potentials Affect the Timing of Sectoral Abatements in Optimal Climate Policy

22 Pages Posted: 20 Apr 2016

See all articles by Adrien Vogt-Schilb

Adrien Vogt-Schilb

CIRED, Centre international de recherche sur l’environnement et le développement

Guy Meunier

INRA - UR1303 ALISS

S. Hallegatte

World Bank

Date Written: August 1, 2012

Abstract

This paper investigates the optimal timing of greenhouse gas abatement efforts in a multi-sectoral model with economic inertia, each sector having a limited abatement potential. It defines economic inertia as the conjunction of technical inertia -- a social planner chooses investment on persistent abating activities, as opposed to choosing abatement at each time period independently -- and increasing marginal investment costs in abating activities. It shows that in the presence of economic inertia, optimal abatement efforts (in dollars per ton) are bell-shaped and trigger a transition toward a low-carbon economy. The authors prove that optimal marginal abatement costs should differ across sectors: they depend on the global carbon price, but also on sector-specific shadow costs of the sectoral abatement potential. The paper discusses the impact of the convexity of abatement investment costs: more rigid sectors are represented with more convex cost functions and should invest more in early abatement. The conclusion is that overlapping mitigation policies should not be discarded based on the argument that they set different marginal costs (` "different carbon prices" ') in different sectors.

Keywords: Climate Change Economics, Climate Change Mitigation and Green House Gases, Transport Economics Policy & Planning, Environment and Energy Efficiency, Energy and Environment

Suggested Citation

Vogt-Schilb, Adrien and Meunier, Guy and Hallegatte, Stephane, How Inertia and Limited Potentials Affect the Timing of Sectoral Abatements in Optimal Climate Policy (August 1, 2012). World Bank Policy Research Working Paper No. 6154. Available at SSRN: https://ssrn.com/abstract=2122246

Adrien Vogt-Schilb

CIRED, Centre international de recherche sur l’environnement et le développement ( email )

France

Guy Meunier (Contact Author)

INRA - UR1303 ALISS ( email )

65 Boulevard Brandenburg
Ivry-sur-Seine Cedex, 94205
France

Stephane Hallegatte

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
39
Abstract Views
360
PlumX Metrics