Anthropogenic greenhouse gases (GHGs), such as CO₂, CFCs, CH₄ and so forth, are caused by human economic activities. Burning of energy resources accounts for much of GHGs emitted to the air, and therefore we can abate the greenhouse gases by marke...
Anthropogenic greenhouse gases (GHGs), such as CO₂, CFCs, CH₄ and so forth, are caused by human economic activities. Burning of energy resources accounts for much of GHGs emitted to the air, and therefore we can abate the greenhouse gases by market-based environmental policies (carbon tax, tradeable permits, etc.) targeted to reduce the use of energy resources.
To estimate the average abatement cost, we calculate GDP loss per CO₂ ton in 1995 based on the computable general equilibrium model using carbon tax.
Our recursive dynamic CGE model contains 33 production sectors (27 industry sectors, 4 energy sectors and 2 primary factors) and 3 consumption sectors (household, government and foreign sector). The simulation of the recursive dynamic CGE model gives rise to the following conclusion.
The carbon tax exerts negative effects on 13 energy intensive industries, while it exerts positive effects on 9 energy non-intensive industries. Based on the three alternative carbon tax rate scenarios of 5%, 10% and 15% considered in the model, government should charge carbon tax as large as 70-75 hundred won ($91-97 in 1995 constant dollars) per CO₂ ton for GHGs mitigation policy, resulting in GDP loss about 49-378 hundred won ($64-490 in 1995 constant dollars) per CO₂ ton.