Economic Analysis of Greenhouse Gas Emissions: A Structural Decomposition Analysis

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In order to have an effective agreement on greenhouse warming, it will be necessary to have credible and comparable estimates of greenhouse gas emissions and economic impacts of their mitigation for as many nations as possible. An operational methodology is needed that can be standardized across country contexts and that can capitalize on existing economic data bases. One such methodology is structural decomposition analysis (SDA). The purpose of this project is to develop a stronger theoretical base for the SDA methodology using the tools of applied microeconomics, more specifically production theory, applied demand analysis, and growth theory. While SDA estimating equations in the past have been specified in an ad hoc manner, this research will involve developing a formal derivation of these equations. This research is important because it will provide researchers and policy makers with a firmly grounded alternative to the more conventional macroeconometric and computable general equilibrium approaches which, because of data limitations, are difficult to use in making cross country comparisons.