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American Economic Review: Vol. 103 No. 3 (May 2013)

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A Numerical Investigation of the Potential for Negative Emissions Leakage

Article Citation

Winchester, Niven, and Sebastian Rausch. 2013. "A Numerical Investigation of the Potential for Negative Emissions Leakage." American Economic Review, 103(3): 320-25.

DOI: 10.1257/aer.103.3.320

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.

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Author Disclosure Statement(s) (329.81 KB) | Online Appendix (598.40 KB) | Download Data Set (48.51 KB)

Authors

Winchester, Niven (MIT)
Rausch, Sebastian (ETH Zurich)

JEL Classifications

Q54: Climate; Natural Disasters; Global Warming
Q58: Environmental Economics: Government Policy


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