DOCSLIB.ORG

Slides to Lecture 4

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Slides to Lecture 4 Lecture 4 ECON4910 Environmental Economics Brief summery of previous lectures: Lecture 1: • Ch. 4 Welfare economics and the environment – Efficiency – Public goods – Externalities Lecture 2: • How to solve external effects by Coasian bargaining – Coase (1960) Econ 4910 – Spring 2016 – Ingrid Hjort Lecture 3 and 4: • Ch. 5 Pollution targets «How do we decide the optimal level of pollution?» • Ch. 6 Pollution instruments «How can we achieve these targets?» – Montgomery (1975): Market in licenses – Bård’s blackboard-model: Tax and double dividend CHAPTER 5 Pollution control: targets What is the efficient level of pollution? The Damage function: DDM () The Benefit function: BBM () n Where M is aggregate emission flow Mm i of all emission sources: i1 • Total damage is thought to rise at an increasing rate, with the size of the emission flow. The more emissions thus more harm on nature. Convex • Total benefits will rise at a decreasing rate as more emissions are used in production, assuming decreasing marginal productivity. Concave What is the efficient level of pollution? Evaluate the trade-off between benefits from producing more private goods to the increased damage on public goods. Stricter pollution targets will generate benefits but will also generate costs. Max social net benefit: maxNB B ( M ) D ( M ) M • Marginal damage of pollution: The harm/reduction of the public environment from one extra unit of pollution. • Marginal benefit of pollution: The benefits from using one extra unit of pollution to produce private consumption goods. Figure 5.2 Total and marginal damage and benefit functions, and the efficient level of flow pollution emissions D(M) B(M) DM() BM() Maximised net benefits Emissions, M DM'( ) * B A BM'( ) ˆ M* M Emissions, M Comment to figure 5.2 The efficient level of pollution The Nash equilibrium: Where marginal damage equal marginal benefits The trade off is optimized at the point where the marginal benefits of pollution equal the marginal damage from pollution. DMBM'( ) '( ) There exist different types of pollution problems I 1. Flow-damage pollution: the damage depend on the rate of the emission flow alone. That is, the instant rate at which they are being discharged into the environmental system. 2. Stock-damage pollution: damages depend only on the stock of pollution in the relevant environmental system at any point in time. Stock pollutants accumulate in the environment over time. Stock pollutants are persistent over time, and may be transported over space, two dimensional. Pollution flows and pollution stocks • The static flow pollution model: (noise, light, smell, smoke) These problems have no time dimension, the pollution stops when the emissions stops. Flow-damage pollution: D = D(M) (5.1a) • The stock pollution problem: Emissions (M) accumulate and create a stock (A) of a harmful substance. Stock-damage pollution: D = D(A) (5.1b) Stock pollutants can create a burden for future generations by passing on damage that persists well after the benefits received from incurring that damage have been forgotten. The distinction between flows and stocks becomes crucial for two reasons First, This distinction enables us to understand the science lying behind the pollution problem and translate this into economic models. Second, The distinction is important for policy purposes. While the damage is associated with the pollution stock, that stock is outside the direct control of policy makers. Environmental protection agencies may, however, be able to control the rate of emission flows. Even where they cannot control such flows directly, the regulator may find it more convenient to target emissions rather than stocks. Given that what we seek to achieve depends on stocks but what is controlled or regulated are typically flows, it is necessary to understand the linkage between the two. There exist different types of pollution problems II 3. Uniformly mixing: the damage depends upon the total amount of the pollutant entering the system, independent of geographical location, e.g., green house gases 4. Non-uniformly mixing: the damage is relatively sensitive to where emissions are injected into the environmental system. The concentration rate of the pollutant vary from place to place Uniformly mixing • By definition, the location of the uniformly mixing (UM) emission source is irrelevant – All that matters, as far as concentration rates at any receptor are concerned, is the total amount of those emissions. • Mixing of a pollutant refers to the extent to which physical processes cause the pollutant to be dispersed or spread out. • A pollutant is uniformly mixing if the pollutant quickly becomes dispersed to the point where its spatial distribution is uniform. – That is, the measured concentration rate of the pollutant does not vary from place to place. – This property is satisfied, for example, by most greenhouse gases. • Policy: Focus on minimizing the total pollution level, finding the cost effective allocation of responsibility. Non-uniformity • Where pollutants are not uniformly mixing, location matters. • Non-unifority is of importance as many types of pollution fall into this category. Examples: – Ozone accumulation in the lower atmosphere – Local air pollution: • particulate pollutants from diesel engines and trace metal emissions • Oxides of Nitrogen and Sulphur in urban airsheds – Some local water and ground pollutants do not uniformly mix • Complicates the policy problem: Total emissions is no longer the sole source of concern, must also consider the emissions site and its impact on concentration levels at other sites. How should emission targets from various sources be calculated? CHAPTER 6 Pollution control: instruments The target The target: the emission target should be set such that the aggregate marginal benefit from emissions equals the aggregate marginal damage MB MD The instrument The instrument: should be cost-efficient. – The cost of achieving a given reduction in emissions will be minimized if and only if the marginal costs of emission reduction are equalized for all emitters One important criteria: Cost efficiency • The use of cost-effective instruments is necessary to achieve an economically efficient allocation of resources. • Suppose a list is available of all instruments which are capable of achieving some predetermined pollution abatement target. – If one particular instrument can attain that target at lower real cost than any other can then that instrument is cost-effective. • Using a cost-effective instrument involves: – Allocating the smallest amount of resources to pollution control, conditional on a given target being achieved. – It has the minimum opportunity cost. Least-cost theorem The least cost theorem: A necessary condition to achieve abatement at least cost. The marginal cost of abatement is equalized over all polluting firms (equimarginal principle) – Abatement: Emission reduction • Focus on abatement effort: polluters that can abate at least cost. • This result is known as the least-cost theorem of pollution control. • Illustrated in next figure Example I: different marginal abatement cost Marginal abatement cost (MAC) caBB'( ) caAA'( ) a Pollution abatement Production yi f i() m i Abatement ammiˆ i i ˆ Cost of abatement ci()()() a i f i m i f i m i caii'( ) 0 Abatement: emission reduction compared to baseline Abatement cost: decreased production due to decreased inputs Example II: equal marginal abatement cost The social planner will k minc ( ai ) s . t M M * minimize total abatement cost m i i1 for all firms, given the target k mMj i1 kk ˆ f()()* mi f m i m i M ii11 Show that the least cost theorem holds, i.e., the shadowc price()()() a of femission mˆ f m reduction equals iacross i firms i i i i Least-cost theorem: conclusions • A least-cost control regime implies that the marginal cost of abatement is equalized across firms undertaking pollution control. • A least-cost solution will in general not involve equal abatement effort by all polluters. • Where abatement costs differ, cost efficiency implies that relatively low-cost abaters will undertake most of the total abatement effort, but not usually all of it. Instruments for achieving pollution abatement targets 1) Voluntary approaches 2) Command and control 3) Economic incentive based instruments 1) Voluntary approaches Bargaining solutions • In a classic paper, Ronald Coase (1960) explored the connection between property rights and the likelihood of efficient bargaining solutions to inefficient allocations of resources. – well defined and enforceable allocation of property rights. – No transactions costs. • Bargaining may lead to some abatement as every consumer is willing to pay up something to avoid emissions... ...but not enough to reach the social optimum, since the environment is a public good, causing free-rider problems Liability • The judicial system may help to bring about efficient outcomes – An implicit assumption in the discussion of bargaining, enforcement of the contract • Liability can be used to deal with environmental hazards, by incentivize the efficient level of precautionary behavior • Suppose: a general legal principle is established, making agents liable for the adverse external effects of their actions The challenges with climate change • The absence of supra-national sovereign institutions makes it difficult to legally enforce the Coasian-bargaining solutions (global climate treaties) • Compensation: How can we determine whose emissions are causing what damages • Use of liability
Load more

Recommended publications
  • How to Price Carbon to Reach Net-Zero Emissions in the UK
    How to price carbon to reach net-zero emissions in the UK Joshua Burke, Rebecca Byrnes and Sam Fankhauser Policy report May 2019 The Centre for Climate Change Economics and Policy (CCCEP) was established in 2008 to advance public and private action on climate change through rigorous, innovative research. The Centre is hosted jointly by the University of Leeds and the London School of Economics and Political Science. It is funded by the UK Economic and Social Research Council. More information about the ESRC Centre for Climate Change Economics and Policy can be found at: www.cccep.ac.uk The Grantham Research Institute on Climate Change and the Environment was established in 2008 at the London School of Economics and Political Science. The Institute brings together international expertise on economics, as well as finance, geography, the environment, international development and political economy to establish a world-leading centre for policy-relevant research, teaching and training in climate change and the environment. It is funded by the Grantham Foundation for the Protection of the Environment, which also funds the Grantham Institute – Climate Change and the Environment at Imperial College London. More information about the Grantham Research Institute can be found at: www.lse.ac.uk/GranthamInstitute About the authors Joshua Burke is a Policy Fellow and Rebecca Byrnes a Policy Officer at the Grantham Research Institute on Climate Change and the Environment. Sam Fankhauser is the Institute’s Director and Co- Director of CCCEP. Acknowledgements This work benefitted from financial support from the Grantham Foundation for the Protection of the Environment, and from the UK Economic and Social Research Council through its support of the Centre for Climate Change Economics and Policy.
    [Show full text]
  • Economic Analysis of Methane Emission Reduction Opportunities in the U.S. Onshore Oil and Natural Gas Industries
    Economic Analysis of Methane Emission Reduction Opportunities in the U.S. Onshore Oil and Natural Gas Industries March 2014 Prepared for Environmental Defense Fund 257 Park Avenue South New York, NY 10010 Prepared by ICF International 9300 Lee Highway Fairfax, VA 22031 blank page Economic Analysis of Methane Emission Reduction Opportunities in the U.S. Onshore Oil and Natural Gas Industries Contents 1. Executive Summary .................................................................................................................... 1‐1 2. Introduction ............................................................................................................................... 2‐1 2.1. Goals and Approach of the Study .............................................................................................. 2‐1 2.2. Overview of Gas Sector Methane Emissions ............................................................................. 2‐2 2.3. Climate Change‐Forcing Effects of Methane ............................................................................. 2‐5 2.4. Cost‐Effectiveness of Emission Reductions ............................................................................... 2‐6 3. Approach and Methodology ....................................................................................................... 3‐1 3.1. Overview of Methodology ......................................................................................................... 3‐1 3.2. Development of the 2011 Emissions Baseline ..........................................................................
    [Show full text]
  • Appendix: Uk Cost Abatement Curve
    APPENDIX: UK COST ABATEMENT CURVE Summary The Task Force commissioned McKinsey to undertake what is currently the first comprehensive study of its kind for the United Kingdom. The study took as its starting point a previous McKinsey study on global greenhouse gas emissions. It then tailored that work to the UK, using a methodology developed over the past two years with the assistance of leading institutions and experts. A research team from McKinsey constructed a baseline forecast for UK emissions to 2030, drawing on a number of government and public sources. Working with Task Force members and other leading companies, the team then estimated the potential benefits and cost for over 120 different greenhouse gas abatement options that could help the UK meet its targets. These options were then represented in graphical form, illustrating the cumulative potential for emission reduction on the horizontal axis, and the cost per ton of emissions avoided on the vertical axis. This graph represents the first comprehensive UK marginal cost abatement curve. We do not expect this study to be the final word on how to meet the targets, and fully expect that further analysis will be necessary to guide policy choices. However, the level of detail obtained by this study is higher than anything produced before in the UK, and offers some important insights on the task that faces us. While considerable improvements have been achieved, the UK targets will not be met without significant additional effort. All abatement options must be considered if we are to meet the targets. Meeting the 2020 target will be extremely challenging, requiring nothing less than a full implementation of all the options.
    [Show full text]
  • Externalities and Public Goods Introduction 17
    17 Externalities and Public Goods Introduction 17 Chapter Outline 17.1 Externalities 17.2 Correcting Externalities 17.3 The Coase Theorem: Free Markets Addressing Externalities on Their Own 17.4 Public Goods 17.5 Conclusion Introduction 17 Pollution is a major fact of life around the world. • The United States has areas (notably urban) struggling with air quality; the health costs are estimated at more than $100 billion per year. • Much pollution is due to coal-fired power plants operating both domestically and abroad. Other forms of pollution are also common. • The noise of your neighbor’s party • The person smoking next to you • The mess in someone’s lawn Introduction 17 These outcomes are evidence of a market failure. • Markets are efficient when all transactions that positively benefit society take place. • An efficient market takes all costs and benefits, both private and social, into account. • Similarly, the smoker in the park is concerned only with his enjoyment, not the costs imposed on other people in the park. • An efficient market takes these additional costs into account. Asymmetric information is a source of market failure that we considered in the last chapter. Here, we discuss two further sources. 1. Externalities 2. Public goods Externalities 17.1 Externalities: A cost or benefit that affects a party not directly involved in a transaction. • Negative externality: A cost imposed on a party not directly involved in a transaction ‒ Example: Air pollution from coal-fired power plants • Positive externality: A benefit conferred on a party not directly involved in a transaction ‒ Example: A beekeeper’s bees not only produce honey but can help neighboring farmers by pollinating crops.
    [Show full text]
  • GHG Marginal Abatement Cost and Its Impacts on Emissions Per Import Value from Containerships in United States Abstract
    GHG Marginal Abatement Cost and Its Impacts on Emissions per Import Value from Containerships in United States Abstract: Haifeng Wang Marine Policy Program in University of Delaware, Newark DE 19716 [email protected] Recent effort has made it clear that the marine shipping is an important contributor to world emission inventories. Of all cargo vessels that produce those emissions from international shipping, containerships are among the most energy-intensive. I investigate the total CO2 emissions from containerships that carry exports to United States with a large database of more than 200,000 observations and calculate the CO2 emissions per dollar import in 2002. I identify more than 1000 routes linking one domestic port and one foreign port with more than ten thousand callings from international containerships in 2002. I aggregate commodities at two- digit Harmonized System (HS) and find that the emissions per kilogram import vary by more than 100% by commodity groups. Analyzing the trade volume by countries, I find countries with highest emission/import rate are not the ones that emitted the most. It implies that if a cap- and-trade system were imposed on international containerships, the export countries and exported commodities would be influenced unequally. I then apply fundamental relationships between speed and energy consumptions of containerships, and compute the emissions reduction effect by slowing the fleet. I find that 10% speed reduction from the designed speed can reduce CO2 up to 15%. This translates to CO2 reduction cost between $10 and $50. I also discuss the policy actions on CO2 reduction and its potential influence on bilateral trade with United States.
    [Show full text]
  • Marginal Abatement Cost Curves and the Optimal Timing of Mitigation Measures Adrien Vogt-Schilb, Stéphane Hallegatte
    Marginal abatement cost curves and the optimal timing of mitigation measures Adrien Vogt-Schilb, Stéphane Hallegatte To cite this version: Adrien Vogt-Schilb, Stéphane Hallegatte. Marginal abatement cost curves and the optimal timing of mitigation measures. Energy Policy, Elsevier, 2014, 66, pp.645-653. 10.1016/j.enpol.2013.11.045. hal-00916328 HAL Id: hal-00916328 https://hal-enpc.archives-ouvertes.fr/hal-00916328 Submitted on 10 Dec 2013 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. Marginal abatement cost curves and the optimal timing of mitigation measures Adrien Vogt-Schilb 1,∗, St´ephaneHallegatte 2 1CIRED, Paris, France. 2The World Bank, Sustainable Development Network, Washington D.C., USA Abstract Decision makers facing abatement targets need to decide which abatement mea- sures to implement, and in which order. Measure-explicit marginal abatement cost curves depict the cost and abating potential of available mitigation options. Using a simple intertemporal optimization model, we demonstrate why this in- formation is not sufficient to design emission reduction strategies. Because the measures required to achieve ambitious emission reductions cannot be imple- mented overnight, the optimal strategy to reach a short-term target depends on longer-term targets.
    [Show full text]
  • The Just Transition in Energy
    Inequality and Exclusion: The Just Transition in Energy Research Paper The Just Transition in Energy Ian Goldin December 2020 Inequality and Exclusion: The Just Transition in Energy About the Author Ian Goldin is the Professor of Globalisation and Development at Oxford University and Director of the Oxford Martin Programme on Technological and Economic Change. Acknowledgments We are grateful to the Open Society Foundations for supporting this research, and to the governments of Sweden and Canada for supporting the Grand Challenge on Inequality and Exclusion. Ian Goldin thanks Alex Copestake for his excellent research assistance with this paper. About the Grand Challenge Inequality and exclusion are among the most pressing political issues of our age. They are on the rise and the anger felt by citizens towards elites perceived to be out-of-touch constitutes a potent political force. Policy-makers and the public are clamoring for a set of policy options that can arrest and reverse this trend. The Grand Challenge on Inequality and Exclusion seeks to identify practical and politically viable solutions to meet the targets on equitable and inclusive societies in the Sustainable Development Goals. Our goal is for national governments, intergovernmental bodies, multilateral organizations, and civil society groups to increase commitments and adopt solutions for equality and inclusion. The Grand Challenge is an initiative of the Pathfinders, a multi-stakeholder partnership that brings together 36 member states, international organizations, civil society, and the private sector to accelerate delivery of the SDG targets for peace, justice and inclusion. Pathfinders is hosted at New York University's Center for International Cooperation.
    [Show full text]
  • A FRAMEWORK for ANALYSIS Brian R. Copeland M. Scott Taylor Wo
    NBER WORKING PAPER SERIES INTERNATIONAL TRADE AND THE ENVIRONMENT: A FRAMEWORK FOR ANALYSIS Brian R. Copeland M. Scott Taylor Working Paper 8540 http://www.nber.org/papers/w8540 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 October 2001 The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research. © 2001 by Brian R. Copeland and M. Scott Taylor. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. International Trade and the Environment: A Framework for Analysis Brian R. Copeland and M. Scott Taylor NBER Working Paper No. 8540 October 2001 JEL No. F1, H4 ABSTRACT This paper sets out a general equilibrium pollution and trade model to provide a framework for examination of the trade and environment debate. The model contains as special cases a canonical pollution haven model as well as the standard Heckscher-Ohlin-Samuelson factor endowments model. We draw quite heavily from trade theory, but develop a simple pollution demand and supply system featuring marginal abatement cost and marginal damage schedules familiar to environmental economists. We have intentionally kept the model simple to facilitate extensions examining the environmental consequences of growth, the impact of trade liberalization, and strategic interaction between countries. Brian R. Copeland M. Scott Taylor Department of Economics Department of Economics University of British Columbia University of Wisconsin-Madison 997-1873 East Mall 6448 Social Science Bldg. Vancouver, B.C. Madison, WI 53706 Canada and NBER [email protected] International Trade and the Environment: A Framework for Analysis Brian R.
    [Show full text]
  • Carbon Pricing Alex Bowen
    The case for carbon pricing Alex Bowen Policy brief December 2011 The Grantham Research Institute in Climate Change and the Environment was established in 2008 at the London School of Economics and Political Science. The Institute brings together international expertise on economics, as well as finance, geography, the environment, international development and political economy to establish a world- leading centre for policy-relevant research, teaching and training in climate change and the environment. It is funded by the Grantham Foundation for the Protection of the Environment, which also funds the Grantham Institute for Climate Change at Imperial College London. More information about the Grantham Research Institute can be found at www.lse.ac.uk/grantham The Centre for Climate Change Economics and Policy was established in 2008 to advance public and private action on climate change through rigorous, innovative research. The Centre is hosted jointly by the University of Leeds and the London School of Economics and Political Science. It is funded by the UK Economic and Social Research Council and Munich Re. More information about the Centre can be found at: www.cccep.ac.uk Contents Contents Executive summary 2 1. Introduction 3 2. The analytical case for carbon pricing 4 3. The challenge of deciding on the correct price 7 4. How should a carbon price be introduced? 14 5. Carbon pricing and incomes 26 6. Why not rely on other policies? 28 7. Conclusions 31 References 32 The Author Dr Alex Bowen is Principal Research Fellow at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science and The Centre for Climate Change Economics and Policy.
    [Show full text]
  • Investment and Emission Control Under Technology and Pollution Externalities (Original Title: Technology Diffusion, Abatement Cost, and Transboundary Pollution)
    Investment and emission control under technology and pollution externalities (Original title: Technology diffusion, abatement cost, and transboundary pollution) July 2009 Geoffrey Heala, Nori Taruib abstract This paper studies incentives to develop advanced pollution abatement technology when technology may spillover across agents and pollution abatement is a public good. We are motivated by a variety of pollution control issues where solutions require the develop- ment and implementation of new pollution abatement technologies. We show that at the Nash equilibrium of a simultaneous-move game with R&D investment and emission abate- ment, whether the free rider effect prevails and under-investment and excess emissions occur depends on the degree of technology spillovers and the effect of R&D on the marginal abate- ment costs. There are cases in which, contrary to conventional wisdom, Nash equilibrium investments in emissions reductions exceed the first-best case. Classification: Q50, H87, D70 Keywords: International environmental agreement; pollution abatement costs; endogenous technological change. aGraduate School of Business, Columbia University, 616 Uris Hall, New York, NY 10027, USA. Email: [email protected]. bCorresponding author, Department of Economics, University of Hawaii at Manoa, 2424 Maile Way, Honolulu, HI 96822, USA. Email: [email protected], phone: +1-808-956-8427, fax: +1-808-956-4703. Investment and emission control under technology and pollution externalities (Original title: Technology diffusion, abatement cost, and transboundary pollution) abstract This paper studies incentives to develop advanced pollution abatement technology when technology may spillover across agents and pollution abatement is a public good. We are motivated by a variety of pollution control issues where solutions require the develop- ment and implementation of new pollution abatement technologies.
    [Show full text]
  • Marginal Abatement Cost, Thereby Achieving Cost-Effectiveness in Aggregate
    The Future of US Carbon-Pricing Policy Robert N. Stavins, John F. Kennedy School of Government, Harvard University Executive Summary There is widespread agreement among economists—and a diverse set of other policy analysts—that at least in the long run, an economy-wide carbon-pricing system will be an essential element of any national policy that can achieve mean- ingful reductions of CO2 emissions cost-effectively in the United States. There is less agreement, however, among economists and others in the policy community regarding the choice of specific carbon-pricing policy instrument, with some sup- porting carbon taxes and others favoring cap-and-trade mechanisms. This prompts two important questions: How do the two major approaches to carbon pricing compare on relevant dimensions, including but not limited to efficiency, cost-effectiveness, and distributional equity? And which of the two approaches is more likely to be adopted in the future in the United States? This paper ad- dresses these questions by drawing on both normative and positive theories of policy instrument choice as they apply to US climate change policy and draws extensively on relevant empirical evidence. The paper concludes with a look at the path ahead, including an assessment of how the two carbon-pricing instru- ments can be made more politically acceptable. JEL Codes: Q540, Q580, Q400, Q480 Keywords: climate change, market-based instruments, carbon pricing, carbon taxes, emissions trading, cap-and-trade, performance standards, technology standards In this paper,
    [Show full text]
  • Emissions Trading Explained
    Cap and Trade Carbon Emissions Trading Explained Carbon Cap Management LLP Capping and Reducing Emissions CARBON CAP Capping and Reducing Emissions CARBON CAP Capping and Reducing Emissions Cap and Trade Carbon Emissions Trading Explained Increasing Awareness Climate change is one of mankind’s greatest challenges and Normally, carbon emissions are expressed in tonnes of carbon dioxide- Carbon Cap is a company dedicated to raising awareness about equivalent (tCO2e) released into the atmosphere and the amount of climate change and providing solutions directly associated carbon released for a given activity is referred to as its carbon footprint. with the capping and reduction of carbon emissions. Related to Some examples of the average carbon footprint emitted from typical this is our goal to provide high quality educational materials to activities are: individuals and companies on climate change and emissions reduction strategies. This document outlines the benefits of • A passenger’s flight from London to New York: 2 tCO2e carbon emissions trading systems as one of the most important • The average annual emissions for an adult in Europe: 10-20 tCO2e solutions to support the reduction of the emissions in line with global mitigation targets such as those agreed under the Paris For companies, the cost of reducing one additional tonne of Agreement. carbon emissions is known as the marginal abatement cost (MAC) and this can differ across sectors and firms, depending on production processes and technologies available. Marginal Putting a Price on Carbon abatement cost curves (MACCs) aggregate a firm’s MACs and Carbon emissions are an example of what economists term a market provide an indication of what volume of emissions reductions failure as they give rise to the unpriced negative externality of climate can be expected at different carbon price levels.
    [Show full text]