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The Economics of Climate Change Mitigation

Policies and Options for Global Action beyond 2012

image of The Economics of Climate Change Mitigation

Against the background of a projected doubling of world greenhouse gas emissions by mid-century, this book explores feasible ways to abate them at least cost. Through quantitative analysis, it addresses key climate policy issues including: an ideal set of climate policy tools; the size of the economic and environmental costs of incomplete country or sector coverage of climate change mitigation policies;  how to concretely develop a global carbon market; the case for, and what can we reasonably expect from, R&D and technology support policies; and  the incentives for major emitting countries to join a climate change mitigation agreement.

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Annex 1

Long-Run GDP Growth Framework and Scenarios for the World Economy

This annex applies a simple “conditional growth” framework to long-term GDP projections for the world economy that serves as a baseline for the examination of policy scenarios.1 Baseline economic scenarios have proliferated in recent years in the context of climate change projections, such as those developed by the Intergovernmental Panel on Climate Change (IPCC), which typically assumes a convergence process whereby the income levels of less-developed countries gradually, and at least partially, catch-up to those of more developed economies.2 The vast majority of projections focus on convergence at the macroeconomic level, in terms of GDP per capita or GDP per worker (the “top-down” approach) while a few others assume some gradual catch-up at the sectoral level (the “bottom-up” approach).3 In both cases, climate modellers have typically relied on simple assumptions regarding the form and the speed of convergence, without explicitly specifying the policy assumptions underlying their scenarios. This, and the fact that in the IPCC’s Special Report on Emission Scenarios (SRES) a large number of possible outcomes are presented as being equally likely, may have contributed to strengthening the impression of uncertainty that is inherent to any long-run world economic projections.

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