Session Environment and Employment
Session ChairRadoslaw Stefanski, University of Oxford, OxCarre

Presenter(s) Céline Guivarch, CIRED
Discussant(s) Radoslaw Stefanski, University of Oxford, OxCarre
Co-Author(s) Stéphane Hallegatte, CIRED, Renaud Crassous, CIRED and Olivier Sassi, CIRED
WCERE Categorys Climate change and CGE models and environment
Keywords climate policies costs, labour market rigidities, second best world and sensitivity analysis

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This article explores the critical role of labour market imperfections in climate stabilisation costs formation. To do so, we use a dynamic recursive energy-economy model that represents a second best world with market imperfections and short-run adjustments constraints along a long-term growth path. We show that the degree of rigidity of the labour markets is a central parameter and we conduct a systematic sensitivity analysis of the model results to this parameter. When labour markets are represented as highly flexible, the model results are in the usual range of existing literature, i.e. less than 2% GDP losses in 2030 for a stabilisation target at 550ppm CO2 equivalent. But when labour markets rigidities are accounted for, mitigation costs increase dramatically. In a second time, the article identifies accompanying measures, namely labour subsidies, which guarantees against the risk of large stabilisation costs in the case of high rigidities of the labour markets. That vision complements the usual view that mitigation is a long-term matter that depends on technology, innovation, investment and behavioural change. Here we add the warning that mitigation is also a shorter-term issue and a matter of transition on the labour market.

When & Where
Thu 1 Jul 10
16:15 - 18:00
Room R-R120
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    Guivarch et al_2010_Costs climate policies second best world labour market imperfections.pdf

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