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Kiel Institute for World Economics Kiel Working Papers, Kiel Institute for World Economics

No 1138:
On the Robustness of Marginal Abatement Cost Curves: The Influence of World Energy Prices

Gernot Klepper and Sonja Peterson

Abstract: Since the study of Ellerman and Decaux (1998) marginal abatement cost curves (MACCs) have become one of the favorite instruments to analyze the impacts of the implementation of the Kyoto Protocol and emission trading. This paper shows that the MACC in one country depends - via the link of world energy prices - on the level of abatement in the rest of the world. The strength of the dependence is influenced by factors, such as trade elasticities and trade structures. After discussing the mechanism theoretically, the CGE model DART is used to quantify the eŽects. We show that the MACC of a region does indeed shift with changes in the abatement level in the rest of the world and that especially with low domestic abatement level the MACCs can diŽer considerably.

Keywords: Marginal abatement costs, energy prices, computable general equilibrium model, DART; (follow links to similar papers)

JEL-Codes: C68; D58; F18; Q41; (follow links to similar papers)

27 pages, January 2003

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