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Should Marginal Abatement Costs Differ Across Sectors? The Effect of Low-Carbon Capital Accumulation

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dc.contributor.authorMeunier, Guy
dc.contributor.authorVogt-Schilb, Adrien
dc.contributor.authorHallegatte, Stephane
dc.date.accessioned2013-09-04T15:26:32Z
dc.date.available2013-09-04T15:26:32Z
dc.date.issued2013-04
dc.description.abstractThe optimal timing, sectoral distribution, and cost of greenhouse gas emission reductions is different when abatement is obtained though abatement expenditures chosen along an abatement cost curve, or through investment in low-carbon capital. In the latter framework, optimal investment costs differ in each sector: they are equal to the value of avoided carbon emissions, minus the value of the forgone option to invest later. It is therefore misleading to assess the cost-efficiency of investments in low-carbon capital by comparing levelized abatement costs, that is, efforts measured as the ratio of investment costs to discounted abatement. The equimarginal principle applies to an accounting value: the Marginal Implicit Rental Cost of the Capital (MIRCC) used to abate. Two apparently opposite views are reconciled. On the one hand, higher efforts are justified in sectors that will take longer to decarbonize, such as urban planning; on the other hand, the MIRCC should be equal to the carbon price at each point in time and in all sectors. Equalizing the MIRCC in each sector to the social cost of carbon is a necessary condition to reach the optimal pathway, but it is not a sufficient condition. Decentralized optimal investment decisions at the sector level require not only the information contained in the carbon price signal, but also knowledge of the date when the sector reaches its full abatement potential.en
dc.identifierhttp://documents.worldbank.org/curated/en/2013/04/17606425/marginal-abatement-costs-differ-across-sectors-effect-low-carbon-capital-accumulation
dc.identifier.doi10.1596/1813-9450-6415
dc.identifier.urihttps://hdl.handle.net/10986/15559
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 6415
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectABATEMENT COST
dc.subjectABATEMENT COSTS
dc.subjectABATEMENT POTENTIAL
dc.subjectAFFILIATED ORGANIZATIONS
dc.subjectAMOUNT OF ABATEMENT
dc.subjectASYMMETRIC INFORMATION
dc.subjectBASELINE EMISSIONS
dc.subjectCAPITAL COST
dc.subjectCAPITAL STOCKS
dc.subjectCARBON BUDGET
dc.subjectCARBON EMISSIONS
dc.subjectCARBON FOSSIL FUELS
dc.subjectCARBON PRICE
dc.subjectCARBON PRICES
dc.subjectCARBON TAX
dc.subjectCARBON TAXES
dc.subjectCLIMATE
dc.subjectCLIMATE CHANGE
dc.subjectCLIMATE CHANGE MITIGATION
dc.subjectCLIMATE CHANGE MITIGATION POLICIES
dc.subjectCLIMATE POLICY
dc.subjectCO2
dc.subjectCOAL
dc.subjectCOMBUSTION
dc.subjectCOST FUNCTIONS
dc.subjectCOST OF CAPITAL
dc.subjectCUMULATIVE EMISSIONS
dc.subjectDECISION MAKING
dc.subjectDEVELOPMENT POLICY
dc.subjectDISCOUNT FACTOR
dc.subjectDISCOUNT RATE
dc.subjectECOLOGICAL ECONOMICS
dc.subjectELECTRIC CARS
dc.subjectEMISSION TRADING
dc.subjectEMISSION TRADING SYSTEM
dc.subjectEMISSIONS FROM HOUSEHOLDS
dc.subjectENERGY ECONOMICS
dc.subjectENERGY EFFICIENCY
dc.subjectENERGY EFFICIENCY STANDARDS
dc.subjectENVIRONMENTAL ECONOMICS
dc.subjectENVIRONMENTAL POLICIES
dc.subjectENVIRONMENTAL POLICY
dc.subjectEXPENDITURES
dc.subjectEXTERNALITIES
dc.subjectFINANCIAL SUPPORT
dc.subjectFOSSIL FUEL
dc.subjectFOSSIL FUELS
dc.subjectGHG
dc.subjectGLOBAL WARMING
dc.subjectGREEN INNOVATION
dc.subjectGREENHOUSE
dc.subjectGREENHOUSE GAS
dc.subjectGREENHOUSE GAS EMISSION
dc.subjectGREENHOUSE GAS EMISSION REDUCTIONS
dc.subjectIMPORTS
dc.subjectINCREASING RETURNS
dc.subjectINVESTMENT BEHAVIOR
dc.subjectINVESTMENT DECISIONS
dc.subjectINVESTMENT STRATEGY
dc.subjectIPCC
dc.subjectLABOR SUPPLY
dc.subjectLOW-CARBON
dc.subjectMARGINAL ABATEMENT
dc.subjectMARGINAL ABATEMENT COST
dc.subjectMARGINAL BENEFITS
dc.subjectMARGINAL COST
dc.subjectMARGINAL COSTS
dc.subjectMARGINAL PRICE
dc.subjectMARGINAL PRODUCTIVITY
dc.subjectMARKET FAILURE
dc.subjectMARKET FAILURES
dc.subjectMONETARY FUND
dc.subjectMULTIPLIERS
dc.subjectOIL
dc.subjectOPPORTUNITY COSTS
dc.subjectOPTIMIZATION
dc.subjectPARETO OPTIMUM
dc.subjectPOLICY IMPLICATIONS
dc.subjectPOLITICAL ECONOMY
dc.subjectPORTFOLIO
dc.subjectPOWER PLANTS
dc.subjectPOWER SECTOR
dc.subjectPRESENT COST
dc.subjectPRESENT VALUE
dc.subjectPRICE SIGNAL
dc.subjectPRODUCTION FUNCTION
dc.subjectPUBLIC ECONOMICS
dc.subjectQUANTITY OF ABATEMENT
dc.subjectRENEWABLE RESOURCES
dc.subjectRESERVOIRS
dc.subjectRESOURCE ECONOMICS
dc.subjectRETROFITTING
dc.subjectSOCIAL COST OF CARBON
dc.subjectTAXATION
dc.titleShould Marginal Abatement Costs Differ Across Sectors? The Effect of Low-Carbon Capital Accumulationen
dspace.entity.typePublication
okr.crosscuttingsolutionareaClimate Change
okr.crossref.titleShould Marginal Abatement Costs Differ across Sectors? The Effect of Low-Carbon Capital Accumulation
okr.date.disclosure2013-04-01
okr.date.doiregistration2025-04-10T12:09:26.944480Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2013/04/17606425/marginal-abatement-costs-differ-across-sectors-effect-low-carbon-capital-accumulation
okr.globalpracticeMacroeconomics and Fiscal Management
okr.globalpracticeEnvironment and Natural Resources
okr.globalpracticeEnergy and Extractives
okr.guid479221468146054176
okr.identifier.doi10.1596/1813-9450-6415
okr.identifier.externaldocumentum000158349_20130419141450
okr.identifier.internaldocumentum17606425
okr.identifier.reportWPS6415
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2013/04/19/000158349_20130419141450/Rendered/PDF/wps6415.pdfen
okr.topicMacroeconomics and Economic Growth::Investment and Investment Climate
okr.topicEnvironment::Climate Change Mitigation and Green House Gases
okr.topicMacroeconomics and Economic Growth::Climate Change Economics
okr.topicEconomic Theory and Research
okr.topicEnvironment::Environment and Energy Efficiency
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
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relation.isAuthorOfPublication2fea2b63-4a74-5fbd-b964-71ef895df009
relation.isAuthorOfPublication.latestForDiscovery464cf77e-5e05-5115-97fe-d40b61d3996e
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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