The costs of climate policies in a second best world with labour market

Climate Policy (Impact Factor: 1.11). 06/2011; 11(1). DOI: 10.3763/cpol.2009.0012


This article explores the critical role of labour market imperfections in climate stabilisation costs formation. To do so, we use a dynamic recursive energy-economy model that represents a second best world with market imperfections and short-run adjustments constraints along a long-term growth path. We show that the degree of rigidity of the labour markets is a central parameter and we conduct a systematic sensitivity analysis of the model results to this parameter. When labour markets are represented as highly flexible, the model results are in the usual range of existing literature, i.e. less than 2% GDP losses in 2030 for a stabilisation target at 550ppm CO 2 equivalent. But when labour markets rigidities are accounted for, mitigation costs increase dramatically. In a second time, the article identifies accompanying measures, namely labour subsidies, which guarantees against the risk of large stabilisation costs in the case of high rigidities of the labour markets. That vision complements the usual view that mitigation is a long-term matter that depends on technology, innovation, investment and behavioural change. Here we add the warning that mitigation is also a shorter-term issue and a matter of transition on the labour market.

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Available from: Céline Guivarch,
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    • "Nonetheless , the negative effects of those policies can be offset with an appropriate revenue-recycling scheme that reduces wage taxes. Finally, Guivarch et al. (2011) emphasize the crucial role of labour market imperfections in cost analyses of climate policies. "
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    • "This model has been used in several peer-reviewed articles in recent years: cf. Crassous et al. (2006), Guivarch et al. (2009, 2010), Hamdi-Cherif et al. (2010), Mathy and Guivarch (2010), Rozenberg et al. (2010) and Sassi et al. (2010). In this aim, we compare a scenario with CCS to another without CCS. "
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    ABSTRACT: Traducción de: Chest roentgenology
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