Efficiency and Distribution in Computable Models of Carbon Emission Abatement

The separability between efficiency and equity is an underlying assumption in most computable general equilibrium (CGE) models used to assess the costs of carbon abatement. Chichilnisky and Heal (1994) have generated a debate on both the analytical correctness of this hypothesis as well as its precise policy implications. This technical note aims to clarify the determinants of cost efficiency in standard CGE abatement models. Some simulations are provided illustrating the separability property between an efficient outcome and the distribution of income across countries. In the context of an optimal abatement model, it is also shown under which conditions equity and efficiency are not separable anymore ...