A Numerical Investigation of the Potential for Negative Emissions Leakage

Joint Program Reprint • Journal Article
A Numerical Investigation of the Potential for Negative Emissions Leakage
Winchester, N. and S. Rausch (2013)
American Economic Review: Papers & Proceedings, 103(3): 320–325

Reprint 2013-17 [Download]

Abstract/Summary:

Emissions restrictions in one region may decrease emissions elsewhere (negative leakage), as increased demand for capital and labor to abate emissions in constrained regions may reduce output in unconstrained regions. We investigate leakage in computable general equilibrium (CGE) models under alternative fossil fuel supply elasticity values and factor mobility assumptions. We find that fossil fuel supply elasticities must be equal or close to infinity to generate net negative leakage. As empirical estimates for fossil fuel supply elasticities are less than 1, we conclude that leakage estimates from CGE models are unlikely to be negative.

© 2013 American Economic Association

Citation:

Winchester, N. and S. Rausch (2013): A Numerical Investigation of the Potential for Negative Emissions Leakage. American Economic Review: Papers & Proceedings, 103(3): 320–325 (http://dx.doi.org/10.1257/aer.103.3.320)
  • Joint Program Reprint
  • Journal Article
A Numerical Investigation of the Potential for Negative Emissions Leakage

Winchester, N. and S. Rausch

Abstract/Summary: 

Emissions restrictions in one region may decrease emissions elsewhere (negative leakage), as increased demand for capital and labor to abate emissions in constrained regions may reduce output in unconstrained regions. We investigate leakage in computable general equilibrium (CGE) models under alternative fossil fuel supply elasticity values and factor mobility assumptions. We find that fossil fuel supply elasticities must be equal or close to infinity to generate net negative leakage. As empirical estimates for fossil fuel supply elasticities are less than 1, we conclude that leakage estimates from CGE models are unlikely to be negative.

© 2013 American Economic Association