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Optimal Allocation of Abatement Effort Under Political Constraints: The Economic Cost of Delaying Sectoral and Economy-Wide Climate Policies.

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Title: Optimal Allocation of Abatement Effort Under Political Constraints: The Economic Cost of Delaying Sectoral and Economy-Wide Climate Policies.
Authors: Bauer, Adam Michael1,2,3 (AUTHOR) ambauer@uchicago.edu, Hallegatte, Stéphane2 (AUTHOR), McIsaac, Florent2 (AUTHOR)
Source: Environmental & Resource Economics. Dec2025, Vol. 88 Issue 12, p3431-3471. 41p.
Subject Terms: *Climate change, *Government policy on climate change, *Cost, *Energy industries, *Fugitive emissions, *Policy analysis
Abstract: Despite commitments to address climate change, governments face political challenges to implementing first-best policies. These challenges cause policymakers to delay climate action, especially in politically sensitive sectors of the economy. Taking political headwinds as an exogenous constraint, this paper analyzes the cost of delaying climate policies both at a sectoral level and economy-wide. The paper demonstrates that delaying climate action is more expensive than distorting the allocation of effort across sectors. More precisely, it is more expensive to delay economy-wide climate policies than to delay action only in a subset of sensitive sectors, which is, in turn, more expensive than immediately implementing a less ambitious policy (e.g., a lower-than-optimal carbon price) in sensitive sectors. The paper then uses numerical simulations to show that sectoral emissions rates, rather than abatement costs, drive the cost of delaying climate action in a given sector. This is because delaying action in sectors with high emissions rates causes a large distortion in the allocation of effort across the rest of the economy, which increases costs. Failing to capture low cost abatement opportunities does increase policy costs (because it requires doing more in expensive sectors) but this effect is smaller than delaying high emissions sectors. Finally, the paper shows that, in practice, climate action is most expensive to delay in the energy sector, because it possesses both a high emissions rate and a low marginal investment cost. The paper can provide guidance for policymakers navigating the political-economic landscape while still aiming to achieve climate goals. [ABSTRACT FROM AUTHOR]
Database: Energy & Power Source
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  Availability: 0
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DbLabel: Energy & Power Source
An: 190381226
AccessLevel: 6
PubType: Academic Journal
PubTypeId: academicJournal
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  Label: Title
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  Data: Optimal Allocation of Abatement Effort Under Political Constraints: The Economic Cost of Delaying Sectoral and Economy-Wide Climate Policies.
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  Data: <searchLink fieldCode="AR" term="%22Bauer%2C+Adam+Michael%22">Bauer, Adam Michael</searchLink><relatesTo>1,2,3</relatesTo> (AUTHOR)<i> ambauer@uchicago.edu</i><br /><searchLink fieldCode="AR" term="%22Hallegatte%2C+Stéphane%22">Hallegatte, Stéphane</searchLink><relatesTo>2</relatesTo> (AUTHOR)<br /><searchLink fieldCode="AR" term="%22McIsaac%2C+Florent%22">McIsaac, Florent</searchLink><relatesTo>2</relatesTo> (AUTHOR)
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  Data: <searchLink fieldCode="JN" term="%22Environmental+%26+Resource+Economics%22">Environmental & Resource Economics</searchLink>. Dec2025, Vol. 88 Issue 12, p3431-3471. 41p.
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  Data: *<searchLink fieldCode="DE" term="%22Climate+change%22">Climate change</searchLink><br />*<searchLink fieldCode="DE" term="%22Government+policy+on+climate+change%22">Government policy on climate change</searchLink><br />*<searchLink fieldCode="DE" term="%22Cost%22">Cost</searchLink><br />*<searchLink fieldCode="DE" term="%22Energy+industries%22">Energy industries</searchLink><br />*<searchLink fieldCode="DE" term="%22Fugitive+emissions%22">Fugitive emissions</searchLink><br />*<searchLink fieldCode="DE" term="%22Policy+analysis%22">Policy analysis</searchLink>
– Name: Abstract
  Label: Abstract
  Group: Ab
  Data: Despite commitments to address climate change, governments face political challenges to implementing first-best policies. These challenges cause policymakers to delay climate action, especially in politically sensitive sectors of the economy. Taking political headwinds as an exogenous constraint, this paper analyzes the cost of delaying climate policies both at a sectoral level and economy-wide. The paper demonstrates that delaying climate action is more expensive than distorting the allocation of effort across sectors. More precisely, it is more expensive to delay economy-wide climate policies than to delay action only in a subset of sensitive sectors, which is, in turn, more expensive than immediately implementing a less ambitious policy (e.g., a lower-than-optimal carbon price) in sensitive sectors. The paper then uses numerical simulations to show that sectoral emissions rates, rather than abatement costs, drive the cost of delaying climate action in a given sector. This is because delaying action in sectors with high emissions rates causes a large distortion in the allocation of effort across the rest of the economy, which increases costs. Failing to capture low cost abatement opportunities does increase policy costs (because it requires doing more in expensive sectors) but this effect is smaller than delaying high emissions sectors. Finally, the paper shows that, in practice, climate action is most expensive to delay in the energy sector, because it possesses both a high emissions rate and a low marginal investment cost. The paper can provide guidance for policymakers navigating the political-economic landscape while still aiming to achieve climate goals. [ABSTRACT FROM AUTHOR]
PLink https://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=enr&AN=190381226
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      – Type: doi
        Value: 10.1007/s10640-025-01029-2
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      – Code: eng
        Text: English
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      Pagination:
        PageCount: 41
        StartPage: 3431
    Subjects:
      – SubjectFull: Climate change
        Type: general
      – SubjectFull: Government policy on climate change
        Type: general
      – SubjectFull: Cost
        Type: general
      – SubjectFull: Energy industries
        Type: general
      – SubjectFull: Fugitive emissions
        Type: general
      – SubjectFull: Policy analysis
        Type: general
    Titles:
      – TitleFull: Optimal Allocation of Abatement Effort Under Political Constraints: The Economic Cost of Delaying Sectoral and Economy-Wide Climate Policies.
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            NameFull: Bauer, Adam Michael
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            NameFull: Hallegatte, Stéphane
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            NameFull: McIsaac, Florent
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            – D: 01
              M: 12
              Text: Dec2025
              Type: published
              Y: 2025
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              Value: 88
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              Value: 12
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            – TitleFull: Environmental & Resource Economics
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