1. MNV international 1 http://www.rivm.nl/ieweb Mocking at MACS Johannes Bollen & Ton Manders RIVM: National Institute for Public Health and the Environment The Netherlands June, 25 2003

2. MNV international 2 http://www.rivm.nl/ieweb What is a MAC? Emission reduction carbon value q p Abatement costs

3. MNV international 3 http://www.rivm.nl/ieweb Shortcomings of MAC’s -Direct Costs  GDP, Welfare - distortionary (energy) taxes - Terms of Trade changes -Carbon Leakage / Relocation

4. MNV international 4 http://www.rivm.nl/ieweb Energy Tax  Carbon Tax 0 0,5 1 1,5 2 2,5 3 3,5 NLDGERUSA tax rate in 1997 Coal Oil Gas

5. MNV international 5 http://www.rivm.nl/ieweb Existing Energy Taxes matter emission reduction tax emission reduction tax carbon tax energy tax carbon tax

6. MNV international 6 http://www.rivm.nl/ieweb MAC’s are not robust -Policy regime -Baseline -Time -Energy prices may change

7. MNV international 7 http://www.rivm.nl/ieweb WorldScan AGE model -Multi region - multi sector -Time specific Armington elasticities -Climate policies

8. MNV international 8 http://www.rivm.nl/ieweb Regions differ Data for 1997 2.3 3.0 Exclusive taxes 6.1 3.2 Inclusive taxes Energy expenditures 88144C-intensity (C/TOE) 1.8 2.5Energy intensity (J/$) EUUSA * * measured as share of output *

9. MNV international 9 http://www.rivm.nl/ieweb WorldScan derived MAC’s 0 50 100 150 200 250 300 010203040506070 EUUSAFSUCHI Percentage Emission reduction Carbon Tax

10. MNV international 10 http://www.rivm.nl/ieweb Model Comparison slope abatement curve (carbon value / emissions reduction), no trade 2010) WorldScanMIT-EPPA Germany 4.9 6.6 France10.5 8.5 United Kingdom 5.0 7.0 Spain 4.9 6.8 Italy 9.811.3 Netherlands 7.4 8.9 USA 4.2 6.9

11. MNV international 11 http://www.rivm.nl/ieweb Abatement costs  Macro costs Abatement costsGDP-loss (% GDP) Unilateral action EU 0.3 1.5 USA0.6 1.3

12. MNV international 12 http://www.rivm.nl/ieweb Policy regimes matter Percentage Emission reduction Carbon Tax EU_ALL USA_ALL EU_ALONE USA_ALONE

13. MNV international 13 http://www.rivm.nl/ieweb Abatement costsGDP-loss (% GDP) Unilateral action EU 0.3 1.5 USA0.6 1.3 Multilateral action EU 0.3 -0.1 USA 0.5 Policy regimes matter

14. MNV international 14 http://www.rivm.nl/ieweb Time & Baseline matter EU Marginal Abatement Cost Curve

15. MNV international 15 http://www.rivm.nl/ieweb Sensitivity Substitution Elasticity between Value Added and Energy EU Marginal Abatement Cost Curve

16. MNV international 16 http://www.rivm.nl/ieweb MAC’s don’t tell the truth -Emission prices / reductions differ slightly -Costs and GDP losses completely different -Not robust -MACs cannot approximate AGE models