Where is it cheapest to cut carbon?

Researchers from The Australian National University have shed some light on why some countries are more reluctant to agree to an international carbon price than others. Research by Jack Pezzey from the Fenner School of Environment and Society in the ANU College of Medicine, Biology and Environment, and Professor David Stern and Mr Ross Lambie, both from the Crawford School of Public Policy in the ANU College of Asia and the Pacific, shows why carbon-emissions intensive countries such as Australia and the USA are more likely to prefer certain types of international policies to cut emissions. Their recent findings are published in the current Australian Journal of Agriculture and Resource Economics. "Our research shows that a carbon emissions-intensive country - one with high emissions per dollar of Gross Domestic Product (GDP), which typically has low energy prices and therefore a low dollar cost of cutting an extra tonne of carbon emissions at the margin - would not like a policy like emissions trading which imposes a common, international carbon price in dollars per tonne," said Pezzey. "This is because a country's economy would then respond by cutting emissions up to the point where its 'marginal cost of cutting' equals the common price.