Clean-Development Investments : An Incentive-Compatible CGE Modeling Framework

The Clean Development Mechanism established under the Kyoto Protocol allows industrialized Annex I countries to offset part of their domestic emissions by investing in emissions-reduction projects in developing non-Annex I countries. Computable gen...

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Bibliographic Details
Main Authors:	Böhringer, Christoph, Rutherford, Thomas F., Springmann, Marco
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ABATEMENT ABATEMENT COSTS ABATEMENT OPTIONS APPROACH ARBITRAGE AVAILABILITY BALANCE BENCHMARK BENCHMARK DATA BILATERAL TRADE CARBON CARBON ABATEMENT CARBON CONTENT CARBON FINANCE CARBON LEAKAGE CARBON MARKET CARBON PRICE CERTIFIED EMISSION REDUCTIONS CHANGES IN PRICES CHEMICAL PRODUCTS CLIMATE CLIMATE CHANGE CLIMATE CHANGE MITIGATION CLIMATE POLICIES CLIMATE POLICY CO2 COAL CONSUMERS COST FUNCTIONS COST OF PRODUCTION COSTS OF COMPLIANCE COSTS OF EMISSIONS CRUDE OIL DEVELOPMENT POLICY DISTRIBUTIONAL IMPACTS DOMESTIC EMISSIONS ECONOMIC ANALYSIS ECONOMIC EQUILIBRIUM ECONOMIC GROWTH ECONOMIC IMPACT ECONOMIC IMPACTS ECONOMIC PERSPECTIVE ECONOMIC RESEARCH ECONOMICS OF CLIMATE CHANGE ECONOMY-WIDE IMPACTS ELASTICITY OF SUBSTITUTION ELECTRICITY ELECTRICITY PRICES ELECTRICITY SECTOR EMISSION EMISSION ABATEMENT EMISSION CONSTRAINT EMISSION CONSTRAINTS EMISSION LEVEL EMISSION LIMITATION EMISSION PERMITS EMISSION REDUCTION EMISSION REDUCTIONS EMISSION TAX EMISSION TAX RATE EMISSION TAXES EMISSIONS EMISSIONS ALLOWANCES EMISSIONS FROM FOSSIL-FUEL COMBUSTION EMISSIONS PREDICTION EMISSIONS QUOTAS EMISSIONS REDUCTION EMISSIONS REDUCTIONS ENERGY DEMAND ENERGY ECONOMICS ENERGY GOODS ENERGY INFORMATION ADMINISTRATION ENERGY POLICY ENERGY PRODUCTION ENERGY RESEARCH ENERGY SUPPLY ENERGY SYSTEM ENERGY USE ENVIRONMENTAL ECONOMICS EQUILIBRIUM EXPORTS FERROUS METALS FINANCIAL SUPPORT FOSSIL FOSSIL FUELS FRAMEWORK CONVENTION ON CLIMATE CHANGE FUEL FUEL PRICES FUEL SUPPLY FUNCTIONAL FORMS FUTURE RESEARCH GENERAL EQUILIBRIUM ANALYSIS GHG GLOBAL CARBON MARKET GLOBAL EMISSIONS GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS GREENHOUSE GAS EMISSIONS REDUCTIONS INCOME INTERNATIONAL ENERGY OUTLOOK INTERNATIONAL OFFSET INTERNATIONAL TRADE INVESTMENT DECISIONS IRON LEVEL OF EMISSIONS MARGINAL ABATEMENT MARGINAL ABATEMENT COST MONETARY BENEFITS MONETARY FUND NATURAL GAS NATURAL RESOURCES PE PIPELINE POLICY ANALYSIS POLICY SCENARIOS PRICE ELASTICITY PRICE INCREASES PRICE INDEX PRICE LEVELS PRICES OF ENERGY PRIMARY ENERGY PRODUCTION COSTS PRODUCTION OF ENERGY QUANTITATIVE ANALYSIS REBATES REFINED OIL RENEWABLE ENERGY RESOURCE ECONOMICS RETURNS TO SCALE SENSITIVITY SCENARIOS SHADOW PRICE STRUCTURAL CHANGE SUBSTITUTION TRADE DEFICIT TRADING PARTNERS TRANSACTION COSTS UNEP WELFARE LOSSES WORLD CRUDE climate finance
Online Access:	http://documents.worldbank.org/curated/en/2013/12/18634281/clean-development-investments-incentive-compatible-cge-modeling-framework http://hdl.handle.net/10986/16936

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Summary:	The Clean Development Mechanism established under the Kyoto Protocol allows industrialized Annex I countries to offset part of their domestic emissions by investing in emissions-reduction projects in developing non-Annex I countries. Computable general equilibrium analysis of the Clean Development Mechanism's impacts so far mimics the Clean Development Mechanism as a sector emissions trading scheme, thereby overstating its potential to save climate change mitigation costs. This study develops a novel approach that represents the Clean Development Mechanism more realistically by compensating Clean Development Mechanism implementing sectors for additional abatement cost and by endogenizing Clean Development Mechanism credits as a function of investment. Compared with previous representations, the proposed approach is more consistent in its incentive structure and investment characteristics at the sector level. An empirical application of the new methodology demonstrates that the economy-wide cost savings from the Clean Development Mechanism tend to be lower than suggested by conventional modeling approaches while Clean Development Mechanism implementing sectors do not lose in output.

Clean-Development Investments : An Incentive-Compatible CGE Modeling Framework

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