Assessing the Value of Price Caps and Floors
18 March 2010The International Energy agency looks at the long-term economic and climatic effects of introducing price caps and floors in hypothetical global climate change mitigation policy.
The quantitative analysis goes through emission trends, abatement costs and equilibrium climate sensitivity presented by the IPCC and the IEA, and confirms the need for price caps to decrease uncertainty.
The uncertainty results from unpredictable economic growth and energy prices, and unabated emission trends and uncertain abatement technologies.
Rigid targets may include greater economic risks with little comparative advantage for the climate.
Alternatively, ambitious emission objectives with price caps and price floors may require lower expected costs and even lead to slightly better climatic outcomes.
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Assessing the Value of Price Caps and Floors
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