Mitigation costs in second-best economies: time profile of emission reductions and sequencing of accompanying measures

Abstract : This article revisits the role of the time profile of carbon emission reductions in the design of climate policies. Using the CGE energy-economy model Imaclim-R, we demonstrate that the emission profile does not significantly change the time profile and the magnitude of mitigation costs. Recycling carbon tax revenues towards lower labor taxes and an early action on long-lived infrastructures offer very important reductions of mitigation costs. These complementary measures are as an important determinant of mitigation costs as the time profile of emissions and the sequencing of these options is closely related to the intertemporal tradeoff on emission reduction.