Marginal Costs of Carbon Dioxide Abatement: Empirical Evidence from Cross-Country Analysis

This paper examines how the marginal CO2 abatement costs vary throughout stages of economic development, and how these variations may be related to the Environmental Kuznets Curve (EKC) hypothesis. By assuming the existence of a technological link between production of desirable outputs and pollution, shadow prices of carbon emissions are estimated for 76 developing and developed countries. The results show that immediate carbon reductions are more costly in terms of desirable output forgone in the developing economies than in the developed ones. Several interpretations of this finding are finally proposed.