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This article investigates the use of expert-based Marginal Abatement Cost Curves (MACC) to design abatement strategies. It shows that introducing inertia, in the form of the "cost in time" of available options, changes significantly the message from MACCs. With an abatement objective in cumulative emissions (e.g., emitting less than 200 GtCO2 in the 2000-2050 period), it makes sense to implement some of the more expensive options before the potential of the cheapest ones has been exhausted. With abatement targets expressed in terms of emissions at one point in time (e.g., reducing emissions by 20 percent in 2020), it can even be preferable to start with the implementation of the most expensive options if their potential is high and their inertia significant. Also, the best strategy to reach a short-term target is different depending on whether this target is the ultimate objective or there is a longer-term target. The best way to achieve Europe's goal of 20 percent reduction in emissions by 2020 is different if this objective is the ultimate objective or if it is only a milestone in a trajectory toward a 75 percent reduction in 2050. The cheapest options may be sufficient to reach the 2020 target but could create a carbon-intensive lock-in and preclude deeper emission reductions by 2050. These results show that in a world without perfect foresight and perfect credibility of the long-term carbon-price signal, a unique carbon price in all sectors is not the most efficient approach. Sectoral objectives, such as Europe's 20 percent renewable energy target in Europe, fuel-economy standards in the auto industry, or changes in urban planning, building norms and infrastructure design are a critical part of an efficient mitigation policy.

Climate Change Economics --- Climate Change Mitigation and Green House Gases --- Dynamic efficiency --- Energy and Environment --- Environment --- Environment and Energy Efficiency --- How-flexibility --- Inertia --- MACC --- Marginal abatement cost curves --- Merit-order --- Optimal abatement strategy --- Timing --- Transport and Environment --- When-flexibility

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• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This article investigates the use of expert-based Marginal Abatement Cost Curves (MACC) to design abatement strategies. It shows that introducing inertia, in the form of the "cost in time" of available options, changes significantly the message from MACCs. With an abatement objective in cumulative emissions (e.g., emitting less than 200 GtCO2 in the 2000-2050 period), it makes sense to implement some of the more expensive options before the potential of the cheapest ones has been exhausted. With abatement targets expressed in terms of emissions at one point in time (e.g., reducing emissions by 20 percent in 2020), it can even be preferable to start with the implementation of the most expensive options if their potential is high and their inertia significant. Also, the best strategy to reach a short-term target is different depending on whether this target is the ultimate objective or there is a longer-term target. The best way to achieve Europe's goal of 20 percent reduction in emissions by 2020 is different if this objective is the ultimate objective or if it is only a milestone in a trajectory toward a 75 percent reduction in 2050. The cheapest options may be sufficient to reach the 2020 target but could create a carbon-intensive lock-in and preclude deeper emission reductions by 2050. These results show that in a world without perfect foresight and perfect credibility of the long-term carbon-price signal, a unique carbon price in all sectors is not the most efficient approach. Sectoral objectives, such as Europe's 20 percent renewable energy target in Europe, fuel-economy standards in the auto industry, or changes in urban planning, building norms and infrastructure design are a critical part of an efficient mitigation policy.

Climate Change Economics --- Climate Change Mitigation and Green House Gases --- Dynamic efficiency --- Energy and Environment --- Environment --- Environment and Energy Efficiency --- How-flexibility --- Inertia --- MACC --- Marginal abatement cost curves --- Merit-order --- Optimal abatement strategy --- Timing --- Transport and Environment --- When-flexibility

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This paper compares the temporal profile of efforts to curb greenhouse gas emissions induced by two mitigation strategies: a regulation of all emissions with a carbon price and a regulation of emissions embedded in new capital only, using capital-based instruments such as investment regulation, differentiation of capital costs, or a carbon tax with temporary subsidies on brown capital. A Ramsey model is built with two types of capital: brown capital that produces a negative externality and green capital that does not. Abatement is obtained through structural change (green capital accumulation) and possibly through under-utilization of brown capital. Capital-based instruments and the carbon price lead to the same long-term balanced growth path, but they differ during the transition phase. The carbon price maximizes social welfare but may cause temporary under-utilization of brown capital, hurting the owners of brown capital and the workers who depend on it. Capital-based instruments cause larger intertemporal welfare loss, but they maintain the full utilization of brown capital, smooth efforts over time, and cause lower immediate utility loss. Green industrial policies including such capital-based instruments may thus be used to increase the political acceptability of a carbon price. More generally, the carbon price informs on the policy effect on intertemporal welfare but is not a good indicator to estimate the impact of the policy on instantaneous output, consumption, and utility.

Climate Change Economics --- Climate Change Mitigation and Green House Gases --- Climate mitigation --- Economic Theory & Research --- Emerging Markets --- Energy efficiency standards --- Intergenerational equity --- Investment and Investment Climate --- Macroeconomics and Economic Growth

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This paper uses a Ramsey model with two types of capital to analyze the optimal transition to clean capital when polluting investment is irreversible. The cost of climate mitigation decomposes as a technical cost of using clean instead of polluting capital and a transition cost from the irreversibility of pre-existing polluting capital. With a carbon price, the transition cost can be limited by underutilizing polluting capital, at the expense of a loss in the value of polluting assets (stranded assets) and a drop in income. In contrast, policy instruments that focus on redirecting investments-such as feebates or environmental standards-prevent underutilization of existing capital, avoid stranded assets, and reduce short-term losses; but they reduce emissions more slowly and increase the intertemporal cost of the transition. The paper investigates inter- and intra-generational distributional impacts and the political acceptability of climate change mitigation policy instruments.

Climate Change Economics --- Climate Change Mitigation and Green House Gases --- Climate Mitigation Policy --- Economic Theory & Research --- Energy Efficiency Standards --- Environment --- Intergenerational Equity --- Investment & Investment Climate --- Macroeconomics and Economic Growth --- Mothballing --- Political Economy --- Social and Political Acceptability

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This paper presents a model to assess the socioeconomic resilience to natural disasters of an economy, defined as its capacity to mitigate the impact of disaster-related asset losses on welfare. The paper proposes a tool to help decision makers identify the most promising policy options to reduce welfare losses from natural disasters. Applied to riverine and storm surge floods, earthquakes, windstorms, and tsunamis in 117 countries, the model provides estimates of country-level socioeconomic resilience. Because hazards disproportionally affect poor people, each USD 1 of global natural disaster-related asset loss is equivalent to a USD 1.6 reduction in the affected country's national income, on average. The model also assesses policy levers to reduce welfare losses in each country. It shows that considering asset losses is insufficient to assess disaster risk management policies. The same reduction in asset losses results in different welfare gains depending on who (especially poor or nonpoor households) benefits. And some policies, such as adaptive social protection, do not reduce asset losses, but still reduce welfare losses. Post-disaster transfers bring an estimated benefit of at least USD 1.30 per dollar disbursed in the 117 countries studied, and their efficiency is not very sensitive to targeting errors.

Climate Change --- Natural Disasters --- Poverty --- Vulnerability --- Wellbeing