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American Economic Review Vol. 103 No. 3 2013

A Numerical Investigation of the Potential for Negative Emissions Leakage

Niven Winchester1; Sebastian Rausch2

1 Joint Program on the Science and Policy of Global Change, Massachusetts Institute of Technology, 77 Massachusetts Avenue, Cambridge, MA 02139. · 2 Department of Management, Technology and Economics, ETH Zurich, Zurichbergstrasse 18, 8032 Zurich, Switzerland.

Abstract

Emissions restrictions in one region may decrease emissions elsewhere (negative leakage), as increased demand for capital and labor to abate emissions in constrained regions may reduce output in unconstrained regions. We investigate leakage in computable general equilibrium (CGE) models under alternative fossil fuel supply elasticity values and factor mobility assumptions. We find that fossil fuel supply elasticities must be equal or close to infinity to generate net negative leakage. As empirical estimates for fossil fuel supply elasticities are less than 1, we conclude that leakage estimates from CGE models are unlikely to be negative.

DOI
10.1257/aer.103.3.320
Volume
103
Issue
3
Pages
320-325
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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