Computable General Equilibrium Models and Electricity CO₂ Emissions

Abstract

In recent years, there has been growing concern that the likelihood of significant global warming by the middle of the next century is linked to increasing human activities. This increase in human activity is expected to affect the global climate change through growing atmospheric concentration of greenhouse gases (GHGs).² The Intergovernmental Panel on Climate Change (IPCC) estimates that, at the current rate of increase of GHGs, the mean global temperature will rise at a rate of about 0.3°C per decade. Such a rise in temperature, i.e., global warming, could have serious impacts on economic activity and society at different localities. As a result, an increasing number of policy makers have begun to consider various methods of slowing global warming by curbing the emissions of GHGs. Most consideration has been given to human-made emissions of CO₂ which results mainly (about 75%) from the burning of fossil fuels. The phasing out of the CFCs under the Montreal Protocol and current uncertainty about the source and the controllability of methane have diverted most policy considerations to the need to curb human-made CO₂ emissions. Therefore, controlling (reducing) CO₂ emissions has become the subject of many UN-organized conferences and conventions. The least-cost implementation policy has become a central research objective.

Comments and suggestions made by Michael Crew and Linda Brennan on an earlier version of this paper are gratefully acknowledged. The paper benefited from the presentation at the Research Seminar on October 24, 1997.