Carbon Abatement Costs and Climate Change Finance

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Peterson Institute, 2011 - Business & Economics - 256 pages
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This study provides alternative estimates of the costs of greenhouse gas abatement through 2050 that would be necessary to limit CO2 atmospheric concentrations to approximately 450 parts per million and limiting warming to 2 C. Specific estimates are provided for 25 major economies (with the European Union as a single economy). Business as usual baselines are first developed, based on US Department of Energy projections through 2030 and on maintenance of country-specific trends in GDP growth, energy efficiency growth, and carbon-efficiency of energy growth thereafter. The central policy simulation then involves a "Copenhagen Convergence" path, in which major economies meet their Copenhagen (December 2009) pledges for 2020, and thereafter emissions per capita decline along a path that by 2050 results in equal per capita emissions in all countries.

Three abatement cost functions are used for calculating the resulting abatement costs: a model based on McKinsey & Co. estimates for 2030; the Nordhaus RICE model cost functions; and a set of summary cost regressions calculated from the Stanford Energy Modeling Forum (EMF-22) survey of abatement models. It is found that abatement costs should be moderate, reaching about one-fourth to two-thirds of one percent of GDP by 2030 and 1 to 2 percent of GDP by 2050. Costs can be reduced by international trading, but by less than generally perceived. A more ambitious early start on abatement than pledged at Copenhagen could reduce full-period costs. The study calculates corresponding magnitudes of investment for abatement as well as adaptation costs for developing countries, and identifies a benchmark of about $80 billion annually (excluding China) by 2020, lending support to the $100 billion target pledged for industrial country financial support by that year.
 

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Contents

Ch 1 Overview
1
Ch 2 Baseline Emissions under Business as Usual
7
Ch 3 Abatement Initiatives in the Copenhagen Accord and Cancún Agreements
19
Ch 4 Abatement Cost Functions
25
Ch 5 Abatement Costs through 2050
33
Ch 6 Trade and Timing
57
Ch 7 Estimating Investment Requirements and Adaptation Costs
71
Ch 8 Synthesis
81
Appendices
89
References
131
Index
135
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About the author (2011)

William R. Cline has been a senior fellow at the Peterson Institute for International Economics since 1981. During 1996-2001 while on leave from the Institute, Dr. Cline was deputy managing director and chief economist of the Institute of International Finance (IIF) in Washington, DC. From 2002 through 2011 he held a joint appointment with the Peterson Institute and the Center for Global Development, where he is currently senior fellow emeritus. Before joining the Peterson Institute, he was senior fellow, the Brookings Institution (1973-81); deputy director of development and trade research, office of the assistant secretary for international affairs, US Treasury Department (1971-73); Ford Foundation visiting professor in Brazil (1970-71); and lecturer and assistant professor of economics at Princeton University (1967-70).

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