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6. Costs of mitigation

The big question for public policy: how expensive will it be to do something about the problem? This complex topic has several subtopics, including:

• No-regrets options — How much can be done for zero net cost? Why hasn’t it been done already?
• Job creation — How do the jobs created by climate policy compare to the jobs lost, in numbers, skill levels, and locations?
• Endogenous technology and path dependence — How do the costs of new low-carbon technologies change as we spend money on them and gain experience? What does this imply for long-term cost predictions?

 

Additional CO2 emissions from land use change -- Forest conservation as a precondition for sustainable production of second generation bioenergy
Popp, A.; Krause, M.; Dietrich, J. P.; Lotze-Campen, H.; Leimbach, M.; Beringer, T. & Bauer, N.
Ecological Economics, 2012, 74, 64 - 70
In the past, deforestation, mainly driven by the conversion of natural forests to agricultural land, contributed up to one-fifth of global human induced carbon dioxide (CO2) emissions. Substitution of bioenergy for fossil energy is an intensely discussed option for mitigating CO2 emissions. This paper, by applying a global land-use model and a global energy-economy-climate model, explores how demand for cellulosic bioenergy crops will add an additional pressure on the land system in the future. In accordance with other studies, we find that CO2 emissions from land use change due to energy crop production will be an important factor in the GHG balance of bioenergy if natural forests will not be protected. But restricting land availability for biomass plantations by conserving natural forests requires additional efforts in the agricultural sector: First, our simulation results indicate that significant additional crop yield increases will be needed due to the combination of forest conservation and the cultivation of dedicated bioenergy crops. Secondly, our simulation results show that forest conservation in combination with increasing demand for dedicated bioenergy crops will lead to higher agricultural production costs of approximately 20%.

Ozone and PM related health co-benefits of climate change policies in Mexico
Crawford-Brown, D.; Barker, T.; Anger, A. & Dessens, O.
Environmental Science & Policy, 2012, 17, 33 - 40
This paper reports the results of extending a previous analysis of reductions in ozone exposures resulting from greenhouse gas reduction policies in Mexico, to the case of estimating reductions in premature death and risks of non-fatal diseases following reductions in both ozone and particulate matter exposures. The results show that a policy of greenhouse gas reduction in the Mexican economy by 77% relative to a baseline growth scenario results in reduced mortality loss of almost 3000 lives per year. The benefit in terms of non-fatal disease is 417,000 cases reduced per year, at a savings of $0.6B per year in cost of illness. These reductions in human health risk, stemming from co-benefits of climate change policies, are significant in light of targets of risk reduction typically used in environmental regulatory decisions, and would be considered important drivers of policy choice if climate policy were harmonised with other areas of risk-based environmental policy.

Land-based mitigation in climate stabilization
Steven K. Rose, Helal Ahammad, Bas Eickhout, Brian Fisher, Atsushi Kurosawa, Shilpa Rao, Keywan Riahi, Detlef P. van Vuuren
Energy Economics, 2012, 34(1):365-380
This paper evaluates the role of land in long-run climate stabilization mitigation scenarios. The details of land modeling for common stabilization policy scenarios are, for the first time, presented, contrasted, and assessed. While we find significant differences in approaches across modeling platforms, all the approaches conclude that land based mitigation – agriculture, forestry, and biomass liquid and solid energy substitutes – could be a steady and significant part of the cost-effective portfolio of mitigation strategies; thereby, reducing stabilization cost and increasing flexibility for achieving more aggressive climate targets. However, large fossil fuel emissions reductions are still required, and there are substantial uncertainties, with little agreement about abatement magnitudes. Across the scenarios, land mitigation options contribute approximately 100 to 340GtC equivalent abatement over the century, 15 to 40% of the total required for stabilization, with bio-energy providing up to 15% of total primary energy. Long-run land climate modeling is rapidly evolving with critical challenges to address. In characterizing current capability, this paper hopes to stimulate future research and the next generation of land modeling and provide a point of comparison for energy and climate policies considering bio-energy, reduced deforestation and degradation, and cost containment.

Link between climate change mitigation and resource efficiency: A UK case study
John Barrett, Kate Scott
Global Environmental Change, 2012, 22(1): 299-307
This paper provides an in-depth analysis of the links between dematerialisation and climate change mitigation. Methods used for material flow analyses (MFA) within the wider context of industrial ecology (which includes a focus on all resource flows in an economy, not purely material tonnage) tend to focus either on detoxification and pollution reduction or dematerialisation and resource productivity. An environmentally extended input–output (EEIO) model incorporates both aspects, which need to be dealt with when looking at how to meet challenging greenhouse gas (GHG) emission targets. The approach understands both production systems and consumption patterns and has the ability through scenarios to analyse the (GHG) effectiveness of a wide range of material efficiency options. This analysis adopts an environmentally extended input–output approach to assess the role of material efficiency measures in reducing UK GHG emissions by 2050. A method for projecting the variables and parameters in the model, including the supply of and demand for materials and products, is presented and applied to investigate thirteen material efficiency strategies in the UK.

A proposal for a new scenario framework to support research and assessment in different climate research communities
van Vuuren, D. P.; Riahi, K.; Moss, R.; Edmonds, J.; Thomson, A.; Nakicenovic, N.; Kram, T.; Berkhout, F.; Swart, R.; Janetos, A.; Rose, S. K. & Arnell, N.
Global Environmental Change, 2012, 22, 21 - 35
In this paper, we propose a scenario framework that could provide a scenario "thread" through the different climate research communities (climate change vulnerability, impact, and adaptation - and mitigation) in order to support assessment of mitigation and adaptation strategies and climate impacts. The scenario framework is organized around a matrix with two main axes: radiative forcing levels and socio-economic conditions. The radiative forcing levels (and the associated climate signal) are described by the new Representative Concentration Pathways. The second axis, socio-economic developments comprises elements that affect the capacity for mitigation and adaptation, as well as the exposure to climate impacts. The proposed scenarios derived from this framework are limited in number, allow for comparison across various mitigation and adaptation levels, address a range of vulnerability characteristics, provide information across climate forcing and vulnerability states and span a full century time scale. Assessments based on the proposed scenario framework would strengthen cooperation between integrated-assessment modelers, climate modelers and vulnerability, impact and adaptation researchers, and most importantly, facilitate the development of more consistent and comparable research within and across these research communities.

Navigating the impact-innovation double hurdle: The case of a climate change research fund
Lettice, F.; Smart, P.; Baruch, Y. & Johnson, M.
Research Policy, 2012, 41, 1048 - 1057
This paper analyses how the funding for research grants was allocated from a specific research fund which aimed to support innovative research projects with the potential to have research impact by reducing carbon emissions. The fund received a total of 106 proposals, of which 27 were successful at obtaining financial support. Our aims were to test which factors influenced the funding decision and to discover whether or not and to what extent the fund met its intended objectives through the allocation of monies. The allocation process and its outcomes were analysed using correlation, logistical and linear regression to test our research hypotheses. Using this research funding process as a single study, we found that trying to clear the impact-innovation double hurdle in a single funding initiative ultimately compromises both goals. This paper therefore contributes to our understanding of innovation management within the context of carbon emission reduction and explains which factors influenced success in securing research monies through the funding process.

What should we expect from innovation? A model-based assessment of the environmental and mitigation cost implications of climate-related R&D
Bosetti, V.; Carraro, C.; Duval, R. & Tavoni, M.
Energy Economics, 2011, 33, 1313 - 1320
Abstract: This paper addresses two basic issues related to technological innovation and climate stabilization objectives: can innovation policies be effective in stabilizing climate? To what extent can innovation policies complement carbon pricing (taxes or permit trading) and improve the economic efficiency of a mitigation policy package? To answer these questions, we use an integrated assessment model with multiple externalities and an endogenous representation of the technical progress in the energy sector. We evaluate a range of innovation policies, both as stand-alone and in combination with other mitigation policies. Our analysis indicates that innovation policies alone are unlikely to stabilize global concentration and temperature. As for the benefits of combining climate and innovation policies, we find efficiency gains of 10% (6 USD Trillions in net present value terms) for a stringent climate policy, and 30% (3 USD Trillions) for a milder one. However, such gains are reduced when more plausible (sub-optimal) global innovation policy arrangements are considered.

The elusive quest for technology-neutral policies
Azar, C. & Sandén, B. A.
Environmental Innovation and Societal Transitions, 2011, 1, 135 - 139
It is often argued that policies to address climate change should be technology neutral. In this paper we address when and to what extent technology neutrality is warranted, and find that it is often an elusive objective that neither can nor should be prioritized as the main guiding principle.

Climate change mitigation options and directed technical change: A decentralized equilibrium analysis
Grimaud, A., Lafforgue, G. & Magné, B.
Resource and Energy Economics, 2011, 33, 938 - 962
The paper considers an endogenous growth model with climate change as well as three R&D sectors dedicated to energy, CCS (Carbon Capture and Storage) and backstop efficiency. First, we characterize the set of decentralized equilibria: a particular equilibrium is associated with any vector of policy instruments including a carbon tax and a subsidy to each R&D sector. Second, we show that it is possible to express any equilibrium as the solution of a maximization program. Third, we solve the first-best optimum problem and thereby deriving the optimal instruments. Finally, we illustrate the theoretical model using calibrated functional specifications. In particular, we investigate the effects of various combinations of policy instruments (including the optimal ones) by determining the deviation of each corresponding equilibrium from the "laisser-faire" benchmark. We find notably that introducing an R&D subsidy hardly affects emissions when a carbon tax is already implemented, thus revealing a complementary effect between these two policy instruments.

Economic analysis of the climate pledges of the Copenhagen Accord for the EU and other major countries
Saveyn, B.; Regemorter, D. V. & Ciscar, J. C.
Energy Economics, 2011, 33, Supplement 1, S34 - S40
This article uses the world GEM-E3 computable general equilibrium model to assess the economic consequences of the climate "Copenhagen Accord". The model allows analyzing the macroeconomic costs in terms of GDP, the change in employment, as well as the impacts on production of specific energy-intensive sectors. Various 2020 climate scenarios are evaluated depending on the GHG mitigation pledges. We find that the cost for the developed countries is around 0.5% of GDP in 2020 for the more ambitious pledges, whereas the GDP effects are more heterogeneous across developing countries and Russia, reflecting the different pledges and the assumptions in the reference scenario across these countries. Further, the article explores whether there is a form of double dividend in the EU when the revenues from auctioning or taxation of GHG emissions are used to reduce the social security contributions of employees. We conclude that GDP and employment perform better compared to the free allocation of permits when more sectors are subject to auctioning or GHG taxes and the additional government revenues are used to reduce the cost of labour.

The role of technological availability for the distributive impacts of climate change mitigation policy
Lüken, M.; Edenhofer, O.; Knopf, B.; Leimbach, M.; Luderer, G. & Bauer, N.
Energy Policy, 2011, 39, 6030 - 6039
The impacts of the availability of low-carbon technologies on the regional distribution of mitigation costs are analyzed in a global multi-regional integrated assessment model. Three effects on regional consumption losses are distinguished: domestic measures, trade of fossil energy carriers and trade of emission permits. Key results are: (i) GDP losses and a redirection of investments in the energy system towards capital-intensive technologies are major contributions to regional consumption losses. (ii) A devaluation of tradable fossil energy endowments contributes largely to the mitigation costs of fossil fuel exporters. (iii) In case of reduced availability of low-carbon technologies, the permit market volume and associated monetary redistributions increase. The results suggest that the availability of a broad portfolio of low-carbon technologies could facilitate negotiations on the permit allocation scheme in a global cap-and-trade system.

Regional initiatives and the cost of delaying binding climate change agreements
Beccherle, J. & Tirole, J.
Journal of Public Economics, 2011, 95, 1339 - 1348
The Kyoto and Copenhagen Protocols on climate change mitigation postponed the specification of binding commitments to a future negotiation. This paper analyzes the strategic implications of delayed negotiations. While, as is well-understood, the incentive to free ride leads to excessive emissions prior to a binding agreement, the cost of delay is magnified by players' attempt to secure a favorable bargaining position in the future negotiation. A "brinkmanship", an "effort substitution", and a "raising rival's cost" effects all concur to generate high post-agreement emissions. The paper applies this general insight to the issuance of forward or bankable permits.

The Copenhagen Accord: abatement costs and carbon prices resulting from the submissions
Michel G.J. den Elzen, Andries F. Hof, Angelica Mendoza Beltran, Giacomo Grassi, Mark Roelfsema, Bas van Ruijven, Jasper van Vliet and Detlef P. van Vuuren
Environmental Science & Policy, 2011, 14(1): 28-39.
As part of the Copenhagen Accord, individual countries have submitted greenhouse gas reduction proposals for the year 2020. This paper analyses the implications for emission reductions, the carbon price, and abatement costs of these submissions. The submissions of the Annex I (industrialised) countries are estimated to lead to a total reduction target of 12–18% below 1990 levels. The submissions of the seven major emerging economies are estimated to lead to an 11–14% reduction below baseline emissions, depending on international (financial) support. Global abatement costs in 2020 are estimated at about USD 60–100 billion, assuming that at least two-thirds of Annex I emission reduction targets need to be achieved domestically. The largest share of these costs are incurred by Annex I countries, although the costs as share of GDP are similar for Annex I as a group and the seven emerging economies as a group, even when assuming substantial international transfers from Annex I countries to the emerging economies to finance their abatement costs. If the restriction of achieving two-thirds of the emission reduction target domestically is abandoned, it would more than double the international carbon price and at the same time reduce global abatement costs by almost 25%.

Protein efficiency per unit energy and per unit greenhouse gas emissions: Potential contribution of diet choices to climate change mitigation
González, A. D.; Frostell, B. & Carlsson-Kanyama, A.
Food Policy, 2011, 36, 562 - 570
The production, transport and processing of food products have significant environmental impacts, some of them related to climate change. This study examined the energy use and greenhouse gas emissions associated with the production and transport to a port in Sweden (wholesale point) of 84 common food items of animal and vegetable origin. Energy use and greenhouse gas (GHG) emissions for food items produced in different countries and using various means of production were compared. The results confirmed that animal-based foods are associated with higher energy use and GHG emissions than plant-based foods, with the exception of vegetables produced in heated greenhouses. Analyses of the nutritional value of the foods to assess the amount of protein delivered to the wholesale point per unit energy used or GHG emitted (protein delivery efficiency) showed that the efficiency was much higher for plant-based foods than for animal-based. Remarkably, the efficiency of delivering plant-based protein increased as the amount of protein in the food increased, while the efficiency of delivering animal-based protein decreased. These results have implications for policies encouraging diets with lower environmental impacts for a growing world population.

The use of scenarios as the basis for combined assessment of climate change mitigation and adaptation
Detlef P. van Vuuren, Morna Isaac, Zbigniew W. Kundzewicz, Nigel Arnell, Terry Barker, Patrick Criqui, Frans Berkhout, Henk Hilderink, Jochen Hinkel, Andries Hof, Alban Kitous, Tom Kram, Reinhard Mechler and Serban Scrieciu
Global Environmental Change, 2011, 21(2): 575-591.
Scenarios are used to explore the consequences of different adaptation and mitigation strategies under uncertainty. In this paper, two scenarios are used to explore developments with (1) no mitigation leading to an increase of global mean temperature of 4 °C by 2100 and (2) an ambitious mitigation strategy leading to 2 °C increase by 2100. For the second scenario, uncertainties in the climate system imply that a global mean temperature increase of 3 °C or more cannot be ruled out. Our analysis shows that, in many cases, adaptation and mitigation are not trade-offs but supplements. For example, the number of people exposed to increased water resource stress due to climate change can be substantially reduced in the mitigation scenario, but adaptation will still be required for the remaining large numbers of people exposed to increased stress. Another example is sea level rise, for which, from a global and purely monetary perspective, adaptation (up to 2100) seems more effective than mitigation. From the perspective of poorer and small island countries, however, stringent mitigation is necessary to keep risks at manageable levels. For agriculture, only a scenario based on a combination of adaptation and mitigation is able to avoid serious climate change impacts.

What should we expect from innovation? A model-based assessment of the environmental and mitigation cost implications of climate-related R&D
Bosetti, Valentina, Carraro, C., Duval, R. & Tavoni, M.
Energy Economics, 2011, 33, 1313 - 1320
This paper addresses two basic issues related to technological innovation and climate stabilization objectives: can innovation policies be effective in stabilizing climate? To what extent can innovation policies complement carbon pricing (taxes or permit trading) and improve the economic efficiency of a mitigation policy package? To answer these questions, we use an integrated assessment model with multiple externalities and an endogenous representation of the technical progress in the energy sector. We evaluate a range of innovation policies, both as stand-alone and in combination with other mitigation policies. Our analysis indicates that innovation policies alone are unlikely to stabilize global concentration and temperature. As for the benefits of combining climate and innovation policies, we find efficiency gains of 10% (6 USD Trillions in net present value terms) for a stringent climate policy, and 30% (3 USD Trillions) for a milder one. However, such gains are reduced when more plausible (sub-optimal) global innovation policy arrangements are considered.

Safe climate policy is affordable—12 reasons
Jeroen C.J.M. van den Bergh
Climatic Change, 2010, 101(3-4): 339-385.
There is a widespread sense that a sufficiently stringent climate mitigation policy, that is, a considerable reduction of greenhouse gas emissions to avoid extreme climate change, will come with very high economic costs for society. This is supported by many cost–benefit analyses (CBA) and policy cost assessments of climate policy. All of these, nevertheless, are based on debatable assumptions. This paper will argue instead that safe climate policy is not excessively expensive and is indeed cheaper than suggested by most current studies. To this end, climate CBA and policy cost assessments are critically evaluated, and as a replacement twelve complementary perspectives on the cost of climate policy are offered.

Comparison of top-down and bottom-up estimates of sectoral and regional greenhouse gas emission reduction potentials
Detlef P. van Vuuren, Monique Hoogwijk, Terry Barker, Keywan Riahi, Stefan Boeters, Jean Chateau, Serban Scrieciu, Jasper van Vliet, Toshihiko Masui, Kornelis Blok, Eliane Blomen and Tom Kram
Energy Policy, 2009, 37(12): 5125-5139.
The Fourth Assessment Report of IPCC reports that greenhouse gas emissions can be reduced by about 30–50% in 2030 at costs below 100 US$/tCO2 based on an assessment of both bottom-up and top-down studies. Here, we have looked in more detail into the outcomes of specific models and also analyzed the economic potentials at the sectoral and regional level. At the aggregated level, the findings of the IPCC report are confirmed. However, substantial differences are found at the sectoral level. At the same time, there seems to be no systematic difference in the reduction potential reported by top-down and bottom-up approaches. The largest reduction potential as a response to carbon prices exists in the energy supply sector. Reduction potential in the building sector may carry relatively low costs. Although uncertainties are considerable, the modeling results and the bottom-up analyses all suggest that at the global level around 50% of greenhouse gas emissions may be reduced at carbon price (costs) below 100$/tCO2-eq—but with a wide range of 30–60%. At a carbon price (costs) less than 20$/tCO2-eq, still 10–35% of emissions may be abated. The variation of results is higher at low carbon-price levels than at high levels.

Achieving the G8 50% target: Modelling induced and accelerated technological change using the macro-econometric model E3MG
Terry Barker, S. Serban Scrieciu and Tim Foxon
Climate Policy, 2008, Special Issue 8: S30-S45.
This article assesses the feasibility of a 50% reduction in CO2 emissions by 2050 using a large-scale Post Keynesian simulation model of the global energy–environment–economy system. The main policy to achieve the target is a carbon price rising to $100/tCO2 by 2050, attained through auctioned CO2 permits for the energy sector, and carbon taxes for the rest of the economy. This policy induces technological change. However, this price is insufficient, and global CO2 would be only about 15% below 2000 levels by 2050. In order to achieve the target, additional policies have been modelled in a portfolio, with the auction and tax revenues partly recycled to support investment in low-GHG technologies in energy, manufacturing and transportation, and ‘no-regrets’ options for buildings. This direct support supplements the effects of the increases in carbon prices, so that the accelerated adoption of new technologies leads to lower unit costs. In addition the $100/tCO2 price is reached earlier, by 2030, strengthening the price signal. In a low-carbon society, as modelled, GDP is slightly above the baseline as a consequence of more rapid development induced by more investment and increased technological change.

Climate modelling with endogenous technical change: Stochastic learning and optimal greenhouse gas abatement in the PAGE2002 model
Stephan Alberth and Chris Hope
Energy Policy, 2007, 335(3): 1795-1807.
This paper looks at the impact of ETC on the costs and benefits of different abatement strategies using a modified version of the PAGE2002 model. For most standard abatement paths there would be an initial "learning investment" required that would substantially reduce the unit costs of CO2 abatement as compared to a business as usual scenario. Furthermore, optimising an abatement program where ETC has been included leads to an increase in cost uncertainty during the period of widespread CO2 abatements due to our lack of knowledge of the learning investments involved. Finally, the inclusion of ETC leads to a slightly deferred optimised abatement path followed by a rapid abatement program. Together, the results draw attention to the possibilities of 'uncovering uncertainty' through proactive abatements. 'Learning about learning' could become an important consideration for any plan to optimise future abatements.

Measuring the value of induced technological change
Reyer Gerlagh
Energy Policy, 2007, 35 (11): 5287–5297.
In this paper, we analyze the value of induced technological change (ITC) for cutting the costs of reaching climate stabilization targets using techniques from the tax burden literature. ITC increases the elasticity of emissions with respect to carbon prices, and thereby decreases the burden of an enforced emission reduction. Under ITC, emission abatement may generate a positive learning dividend when the social value of the induced change in learning exceeds its costs. A numerical analysis with two models (one focusing on energy savings, the other focusing on energy transition) suggests that both the decreased carbon tax burden and the learning dividend gain can be substantial, compared to the costs of abatement without ITC.

Impact assessment of emissions stabilization scenarios with and without induced technological change
Claudia Kemfert and Truong Truong
Energy Policy, 2007, 35(11): 5337–5345.
This paper investigates the quantitative economic impacts of emissions stabilization scenarios with and without induced technological change (ITC). Model results show that ITC due to increased investment in R&D reduces compliance costs. Although R&D expenditures compete with other investment expenditures, increased R&D also improves energy efficiency, which substantially lowers abatement costs. Without ITC, emissions targets are primarily reached by declines in production, resulting in overall welfare losses. With ITC, emissions mitigation results in fewer production and GDP cutbacks.

Technology policy and world greenhouse gas emissions in the AMIGA modeling system
D.A. Hanson and J.A. Laitner
Energy Journal, 2006, Special Issue Multi-Greenhouse Gas Mitigation and Climate Policy: 355-372.
This article examines the interaction between technology policy and its impact on the full basket of worldwide greenhouse emissions over the 21st century. The heart of the analysis is the Argonne National Laboratory's AMIGA Modeling System, a technology rich, general equilibrium model that (depending on data availability) characterizes as many as 200 sectors of the regional economies. We suggest in this paper that technologies and technology policies exist which could reduce carbon emissions enough to achieve stabilization targets at relatively modest costs given the size of the world economy. This can be accomplished largely through harnessing market forces and creating incentives with the use of efficient prices on greenhouse gas emissions, combined with complementary programs and policies to reduce market failures and to promote new technology improvements and investments.

The costs of Kyoto for the U.S. economy
Terry Barker and Paul Ekins
The Energy Journal, 2004, 25(3): 53.
The high costs for the US economy of mitigating climate change have been cited by the Bush administration as one of the reasons for rejecting US ratification of the Kyoto Protocol. A range of cost estimates are assessed in the IPCC s third report (2001), but they are hedged with so many qualifications that it is not easy to reach useful conclusions. This paper organises some of the quantitative information on costs of greenhouse gas mitigation for the US published before the US rejection of Kyoto. The aim is to put them in a wider context, e.g., allowing for non-climate benefits, and to draw conclusions that are robust in the face of the uncertainties. Important lessons can be drawn for how costs can be reduced in any future international commitment by the US to reduce emissions. Provided policies are expected, gradual and well designed (e.g., through auctioned Annex I tradable permits with revenues used to reduce burdensome tax rates) the net costs for the US of mitigation are likely to be insignificant, that is within the range +/-1% of GDP.

Global economic implications of alternative climate policy strategies
Claudia Kemfert
Environmental Science & Policy, 2002, 5: 367–384.
This paper investigates the economic implications of climate change policies, particularly the impacts of clean development mechanisms (CDM), joint implementation (JI) and emissions trading, with a world integrated assessment model. Of special interest in this context are welfare spill-over and competitiveness effects, multi-gas policies, and the impacts of sink inclusion. We furthermore examine the global economic impacts of the USA’s non-cooperative, free rider position resulting from its recent, isolated climate policy. Both CDM and JI improve economic development in host countries and increase the market share of new applied technologies. Decomposition of welfare effects demonstrates that the competitiveness effect (including spill-over effects from trade) has the greatest importance. Climatic effects will have a significant impact within the next 50 years, will cause considerable welfare losses to world regions and will intensify if leading polluters like the USA do not reduce their emissions.

Cutting carbon emissions at a profit | Part I and Part II
Florentin Krause, Stephen J. DeCanio, J. Andrew Hoerner and Paul Baer
Part I: Contemporary Economic Policy, 2002, 20(4): 339-365.
Part II: Contemporary Economic Policy, 2003, 21(1): 90-105.
This article identifies and corrects shortcomings in the available modeling studies on the costs of the Kyoto Protocol for the U.S. Each of the best-known studies omits one or several of four major cost-reducing policy options, resulting in cost estimates that are far too pessimistic. Integrated evaluation of all major cost-cutting policy options — a national carbon cap and trading program, productivity-enhancing market reforms and technology programs, recycling of permit auction revenues into tax cuts, and integration with international emissions trading — shows that the least-cost strategy for mitigation would produce annual net output gains reaching 0.9% of GDP by 2020. Part I presents national estimates; Part II examines impacts on competitiveness and employment in specific economic sectors.

Market failures and barriers as a basis for clean energy policies
Marilyn A. Brown
Energy Policy, 2001, 29(14): 1197-207.
This paper provides compelling evidence that large-scale market failures and barriers prevent consumers in the United States from obtaining energy services at least cost. Assessments of numerous energy policies and programs suggest that public interventions can overcome many of these market obstacles. By articulating these barriers and reviewing the literature on ways of addressing them, this paper provides a strong justification for the policy portfolios that define the "Scenarios for a Clean Energy Future," a study conducted by five National Laboratories.