Mocking at MACS Johannes Bollen

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Mocking at MACS Johannes Bollen Ton Manders

June, 25 2003

• RIVM National Institute for Public Health and
  the Environment
• The Netherlands

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What is a MAC?
carbon value
p
Abatement costs
q
Emission reduction
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Shortcomings of MACs

• Direct Costs ? GDP, Welfare
• distortionary (energy) taxes
• Terms of Trade changes
• Carbon Leakage / Relocation

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Energy Tax ? Carbon Tax
3,5
3
2,5
Coal
2
tax rate in 1997
Oil
1,5
Gas
1
0,5
0
NLD
GER
USA
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Existing Energy Taxes matter
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MACs are not robust

• Policy regime
• Baseline
• Time
• Energy prices may change

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WorldScan AGE model

• Multi region - multi sector
• Time specific Armington elasticities
• Climate policies

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Regions differ Data for 1997
EU
USA
1.8
2.5
Energy intensity (J/)
88
144
C-intensity (C/TOE)
Energy expenditures
6.1
3.2
Inclusive taxes


2.3
3.0
Exclusive taxes
measured as share of output
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WorldScan derived MACs
Carbon Tax
Percentage Emission reduction
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Model Comparison slope abatement curve (carbon
value / emissions reduction), no trade 2010)
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Abatement costs ? Macro costs
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Policy regimes matter
EU_ALONE
USA_ALONE
USA_ALL
Carbon Tax
EU_ALL
Percentage Emission reduction
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Policy regimes matter
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Time Baseline matter
EU Marginal Abatement Cost Curve
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Sensitivity Substitution Elasticity between
Value Added and Energy
EU Marginal Abatement Cost Curve
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MACs dont tell the truth

• Emission prices / reductions differ slightly
• Costs and GDP losses completely different
• Not robust
• MACs cannot approximate AGE models