Climate Change and the Economics of Targeted Mitigation in Sectors with Long-Lived Capital Stock

Mitigation investments in long-lived capital stock (LLKS) differ from other types of mitigation investments in that, once established, LLKS can lock-in a stream of emissions for extended periods of time. Moreover, historical examples from industrial countries suggest that investments in LLKS projects or networks tend to be lumpy, and tend to generate significant indirect and induced emissions besides direct emissions. Looking forward, urbanization and rapid economic growth suggest that similar decisions about LLKS are being or will soon be made in many developing countries. In their current form, carbon markets do not provide correct incentives for mitigation investments in LLKS because the constraint on carbon extends only to 2012, and does not extend to many developing countries. Targeted mitigation programs in regions and sectors in which LLKS is being built at rapid rate are thus necessary to avoid getting locked into highly carbon-intensive LLKS. Even if the carbon markets were extended (geographically, sectorally, and over time), public intervention would still be required, for three main reasons. First, to ensure that indirect and induced emissions associated with LLKS are taken into account in investor s financial cost-benefit analysis. Second, to facilitate project or network financing to bridge the gap between carbon revenues that accrue over time as the project/network unfolds and the capital needed upfront to finance lumpy investments. Third, to internalize other non-carbon externalities (e.g., local pollution) and/or to lift barriers (e.g., lack of capacity to handle new technologies) that penalize the low-carbon alternatives relative to the high-carbon ones.

Bibliographic Details

Main Authors:	Shalizi, Zmarak, Lecocq, Franck
Language:	English
Published:	2009-09-01
Subjects:	ABATEMENT, AGGLOMERATION ECONOMIES, AIR, AIR TRAFFIC, ALTERNATIVE ENERGY, ALTERNATIVE TRANSPORT, ALTERNATIVE TRANSPORTATION, ARTERIAL ROADS, ARTERY, ATMOSPHERIC CONCENTRATION, BASELINE EMISSIONS, BIOMASS, BOILERS, BRIDGE, CALCULATION, CAPITAL INVESTMENT, CAPITAL STOCKS, CAPITAL TURNOVER, CARBON, CARBON CAP, CARBON CAPTURE, CARBON CARS, CARBON CONSTRAINTS, CARBON DIOXIDE, CARBON EMISSION, CARBON EMISSIONS, CARBON ENERGY, CARBON EQUIVALENT, CARBON FINANCE, CARBON INTENSITY, CARBON MARKET, CARBON MARKETS, CARBON TAX, CARS, CERTIFIED EMISSION REDUCTIONS, CH4, CLIMATE, CLIMATE CHANGE, CLIMATE CHANGE MITIGATION, CLIMATE CHANGE NEGOTIATIONS, CLIMATE POLICIES, CLIMATE-CHANGE, CO2, COAL, CONCENTRATION TARGET, CONGESTION, CONSUMPTION OF ENERGY, COST OF CARBON, COST-BENEFIT, COST-BENEFIT ANALYSIS, COSTS OF ABATEMENT, CROSSING, DAMAGES, DEMAND FOR ELECTRICITY, DEMAND FOR TRANSPORTATION, DEVELOPMENT ECONOMICS, DOMESTIC CARBON, DRIVING, ECONOMIC GROWTH, ECONOMIC PERSPECTIVE, ECONOMIES OF SCALE, ELECTRICITY, ELECTRICITY GENERATION, ELECTRICITY PRODUCTION, EMISSION, EMISSION ALLOWANCES, EMISSION PATH, EMISSION PATHS, EMISSION REDUCTION, EMISSION REDUCTIONS, EMISSION TARGETS, EMISSIONS, EMISSIONS ALLOWANCES, EMISSIONS FROM ELECTRICITY GENERATION, EMISSIONS FROM FOSSIL-FUEL COMBUSTION, EMISSIONS FROM LAND-USE CHANGE, EMISSIONS GOALS, EMISSIONS GROWTH, EMISSIONS INTENSITY, EMISSIONS PATH, EMISSIONS PATHS, EMISSIONS PER PASSENGER, EMISSIONS REDUCTION, EMISSIONS SAVINGS, EMISSIONS STANDARDS, EMISSIONS TARGETS, ENERGY CONSUMPTION, ENERGY DEMAND, ENERGY EFFICIENCY, ENERGY PRODUCTION, ENERGY SECURITY, ENERGY SOURCES, EXPRESSWAYS, EXTERNALITIES, FINANCIAL ANALYSIS, FINANCIAL BARRIERS, FLOOR AREA, FLOOR SPACE, FOSSIL FUEL, FOSSIL-FUEL EMISSIONS, FREIGHT, FREIGHT TRANSPORT, FUEL, FUEL EFFICIENCY, FUEL OIL, FUEL SUPPLY, FUEL SWITCHING, FUELS, GAS, GASOLINE, GASOLINE USE, GENERATION CAPACITY, GHG, GLOBAL CLIMATE CHANGE, GREENHOUSE, GREENHOUSE GASES, GREENHOUSE GASES EMISSIONS, HARMFUL EMISSIONS, HEATING SYSTEMS, HEAVY TRUCK TRAFFIC, HFC23, HIGH SPEED TRAIN, HIGH SPEEDS, HIGH-SPEED LINES, HIGH-SPEED RAIL, HIGH-SPEED RAIL NETWORK, HIGH-SPEED TRAIN, HIGHWAY, HIGHWAY ADMINISTRATION, HIGHWAY NETWORK, HIGHWAY PROGRAM, HIGHWAY SYSTEMS, HIGHWAYS, HYDROGEN, INFRASTRUCTURE INVESTMENT, INFRASTRUCTURE PROJECTS, INTERSTATE HIGHWAY SYSTEM, INTERSTATE HIGHWAYS, INVESTMENT DECISIONS, IPCC, LAND USE, LOCAL AIR POLLUTION, LONG-TERM EMISSIONS PATHS, LOW CARBON TECHNOLOGIES, LOW-CARBON, METHANE, MILEAGE, MODAL SHARE, MODAL SHARES, MODAL SHIFT, N2O, NATIONAL HIGHWAY SYSTEM, NATIONAL RAILWAY, NATURAL GAS, NITROUS OXIDE, NUCLEAR ENERGY, NUCLEAR POWER, NUCLEAR POWER PLANTS, POLLUTION, POLLUTION EXTERNALITIES, POPULATION GROWTH, POWER GENERATION, POWER PLANTS, POWER SECTOR, PRESENT VALUE, PRICE INCENTIVES, PRICE SIGNAL, PUBLIC TRANSIT, PUBLIC TRANSIT SYSTEMS, RAIL, RAIL INFRASTRUCTURE, RAIL NETWORKS, RAIL RIDERSHIP, RAIL TRACK, RAIL TRANSPORTATION, RAILWAY NETWORK, RAILWAYS, RELATIVE PRICE, RENEWABLE ENERGY, RENEWABLE ENERGY SOURCES, RESIDENTIAL USE, RETROFITTING, RIDER, RIDERSHIP, RING ROAD, ROAD, ROAD INFRASTRUCTURE, ROAD NETWORK, ROAD TRAFFIC, ROADS, RURAL ROADS, SCENARIOS, SUPPLY SIDE, TAX, TOTAL ELECTRICITY GENERATION, TOTAL EMISSIONS, TRADABLE EMISSIONS, TRAINS, TRANSIT, TRANSPORT, TRANSPORT DEMAND, TRANSPORT INFRASTRUCTURE, TRANSPORT INVESTMENT, TRANSPORT SECTOR, TRANSPORTATION, TRANSPORTATION COSTS, TRANSPORTATION DEMAND, TRANSPORTATION INFRASTRUCTURE, TRANSPORTATION NETWORK, TRANSPORTATION NETWORKS, TRANSPORTATION PROBLEMS, TRANSPORTATION PROJECTS, TRANSPORTATION STATISTICS, TRAVEL DEMAND, TRAVEL DISTANCES, TRAVEL TIME, TRIPS, TRUCKS, TRUE, TUNNELS, URBAN HIGHWAY, URBAN TRANSPORTATION, VEHICLE, VEHICLE ENGINES, VEHICLE FLEET, VEHICLE MILES, VEHICLES, WIND, WIND ENERGY,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090923161232 https://hdl.handle.net/10986/4254
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