- Joint Program Report
Models with time horizons of 100 years are customarily used to predict anthropogenic greenhouse gas emissions and to inform the different climate-change policy dialogues. Historical evidence indicates that over this time span the current consumption patterns in developing countries are likely to change substantially and to converge to the present patterns in developed countries. The implications of such changes on emissions profiles and on the costs of policies to curtail them in developing countries are crucial aspects of a comprehensive climate-change policy agenda. This study deals with modeling this type of non-homotheticity in consumption functions within the EPPA framework based on econometric estimation and the above assumption of convergence in consumption patterns.
We find that the composition of consumption and the consequent implications for the sources of emissions would be different in the model with static consumption-function coefficients from that in the model with dynamic coefficients, even though the regional emissions profiles are virtually the same in the two cases. The differences have significant implications for the costs of emissions restrictions in developing countries. Our results suggest that the costs of emissions restrictions in developing countries would be higher if the changes in consumption patterns are taken account of than if they are ignored in the simulation model.