Studies in environmental economics numerical analysis of greenhouse gas policies

Abstract: This thesis consists of four essays within the field of environmental economics. Computable General Equilibrium models have been used to assess the economic consequences of greenhouse gas policies. The focus is mainly on the Swedish economy, but the EU economies and the global economies are also analyzed in one essay each. The costs and effects of a unilateral Swedish decision to reduce carbon dioxide emissions are analyzed in essay I. The results of a unilateral reduction are compared to the results of an implementation of an EU multilateral agreement. The results indicate that if Sweden unilaterally decides to increase its CO2 tax, total EU CO2 emissions will increase, i.e. there will be a “carbon leakage effect”. Furthermore, an EU multilateral implementation of a CO2 tax will induce lower welfare (excluding environmental benefits) in Sweden, as compared to the situation where the same tax is unilaterally introduced.In the second essay we analyze the Swedish environmental goals conforming to the Kyoto Protocol, when simultaneously meeting national goals to alleviate acidification and eutrofication effects by reducing SO2 and NOx pollutants. We have found that when secondary benefits of measures aiming at reducing CO2 are taken into account, it may still be in the government’s interest to nationally decrease CO2, instead of engaging in seemingly low-cost trading. The principles for allocation emission permits are many, and in the third essay I focus on principles based on economic welfare theory. My main conclusion from these simulation exercises is that the distribution rule based on the different assumptions on social welfare function and some other more ad hoc distribution rules offers quite large changes in welfare, distributions of emission rights and contrary to earlier literature, I find that the initial distribution not only gives second-order effects but affects equilibrium prices and therefore, income.In the fourth essay I focus on how households’ demand for transport services can be improved in CGE-models. A differentiation between trip purposes and trip length, a complementary relationship between work journeys and labor supply, and a subdivision of households by density of population and income, influences the numerical results in a direction increasing the negative welfare effect of a carbon target, as compared to the non-extended model.