Estimating carbon leakage and the efficiency of border adjustments in general equilibrium — Does sectoral aggregation matter?
In: Energy economics, Band 34, S. S111-S126
ISSN: 1873-6181
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In: Energy economics, Band 34, S. S111-S126
ISSN: 1873-6181
In: CEPR Discussion Paper No. DP13092
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Working paper
In: NBER Working Paper No. w24923
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Working paper
We focus on the optimal timing of climate change mitigation policies, a decision which is complicated by multiple sources of irreversibility or inertia. The pertinence of Real Option Theory in understanding the optimal amount of necessary precautionary behavior is explored, as are the results from modeling exercises. Generally, it appears that irreversibility associated with sunk abatement capital is stronger than that from accumulating greenhouse gas emissions, implying an "option value" to delaying climate change mitigation. The inclusion of tipping points, or non-linearities in environmental damages, could nevertheless lead to the opposite conclusion. These effects are however not easily quantifiable and are not generally included in modeling exercises. The timing decision will therefore have to be made by policy makers after having subjectively evaluated the importance of potential tipping points. It is for this reason that policy-makers need to be able to themselves understand the intuition behind Real Option theory - the interplay between irreversibility and uncertainty. Many climate-economic modeling exercises have implicitly recognized this fact by integrating strict environmental targets which serve as hard constraints and represent precautionary behavior.
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In: Journal of international economics, Band 123, S. 103306
ISSN: 0022-1996
In: Journal of Industrial Ecology, Band 23, Heft 2, S. 402-411
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In: NBER Working Paper No. w23482
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In: CESifo Working Paper Series No. 6514
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Working paper
In: NBER Working Paper No. w18131
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