Marginal abatement cost curves in general equilibrium: The influence of world energy prices

Marginal abatement cost curves (MACCs) are a favorite instrument to analyze international emissions trading. This paper focuses on the question of how to defineMACCs in a general equilibrium context where the global abatement level influences energy prices and in turn national MACCs. We discuss the mechanisms theoretically and then use the CGE model DART for quantitative simulations. The result is, that changes in energy prices resulting from different global abatement levels do indeed affect national MACCs. Also, we compare different possibilities of defining MACCs—of which some are robust against changes in energy prices while others vary considerably.

Kiel Institute Expert