Modelling abatement technologies: A comparison of approaches

Billede af publikationens forside
25-08-2021
GrønREFORM Dokumentation Kevin Guldager

This economic memo compares GreenREFORM’s approach to integrate end-of-pipe abatement technologies into a computable general equilibrium model with the conventional method in the literature. The memo is based on the Bachelor thesis of the author.

Abstract

Technology catalogues contain technical and economic information about multiple technol-ogies that businesses can bring into use in order to reduce their emissions. By using the in-formation from such catalogues, one can construct a step-curve showing the marginal abatement cost (MAC), i.e. the firms’ cost of reducing emissions by one tonne CO2e, as a function of total abatement. There exists different methods to incorporate the information from technology catalogues in a CGE-model. By imposing different level of taxation in the model, it is possible to construct the “model-based” MAC curve that shows how much the firms will abate at different level of taxation. This MAC curve will differ from the original step-curve consisting of the technologies from the catalogue. However, the size of the devi-ation depends on how the information from the catalogue is implemented in the CGE-model. The traditional way to do this is described in Kiuila and Rutherford (2013). The method suggested in this paper requires calibration of an abatement function outside the CGE-model of interest. Stephensen, P., Beck, U.R. and Berg, R.K suggest an alternative method. This method is presented in the economic memo of 25 August 2020, “End-of-pipe emissions abatement technologies in a CGE-model”. The authors explain how the information from technology cat-alogues can be incorporated by introducing heterogeneity in the firms’ costs of implement-ing the technologies. I find that the method suggested in Stephensen et al. (2020) has a number of advantages.