The level and distribution of costs and benefits over generations of an emission stabilization program

In the Energy Economics issue of May 2005, Kavuncu and Knabb (KK) develop an IAM-OLG model to analyze the costs and benefits per generation of a Kyoto type emission stabilization program. They find that the first generations are confronted with huge costs, from 8% in 2000 to 40% in 2100. Only after 2315, generations start to benefit. I believe that this result is fully driven by the assumed very high abatement costs. I add an OLG structure to the existing DICE99 model, and reproduce their results based on the same abatement costs function. Under the standard abatement costs function that comes with DICE99, however, an emission stabilization program results in early generations having costs always below 0.5%, while generations start to benefit from 2080 onwards. © 2006 Elsevier B.V. All rights reserved.