Where is it Cheapest to Cut Carbon Emissions?

The relative cost of carbon emissions reductions across regions depends on whether we measure costby marginal or total cost, private or economy-wide cost, and using market or purchasing power parityexchange rates. If all countries are on the same marginal carbon abatement cost curve then lowermarginal costs of abatement are associated with higher energy intensities and higher total costs ofabatement in achieving proportional cuts in emissions, equal emissions per capita, or common globalcarbon price targets. We test this conjecture using the results of the GTEM computable generalequilibrium model as presented in the climate change economics review conducted by the AustralianTreasury Department. Rankings of countries by costs do differ depending on whether marginal ortotal cost is used. But some regions, including OPEC and the former USSR, have high marginal costsand high emissions intensities and, therefore, high total costs and others like the EU relatively lowmarginal and total costs. Under a global emissions trading regime real economy-wide costs ofabatement are higher in developing economies with currencies valued below purchasing power parityand large differences between private and economy-wide costs such as India contributing to the highGDP losses experienced in those countries.