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Abstract
The relative cost of carbon emissions reductions across regions depends on whether we measure cost
by marginal or total cost, private or economy-wide cost, and using market or purchasing power parity
exchange rates. If all countries are on the same marginal carbon abatement cost curve then lower
marginal costs of abatement are associated with higher energy intensities and higher total costs of
abatement in achieving proportional cuts in emissions, equal emissions per capita, or common global
carbon price targets. We test this conjecture using the results of the GTEM computable general
equilibrium model as presented in the climate change economics review conducted by the Australian
Treasury Department. Rankings of countries by costs do differ depending on whether marginal or
total cost is used. But some regions, including OPEC and the former USSR, have high marginal costs
and high emissions intensities and, therefore, high total costs and others like the EU relatively low
marginal and total costs. Under a global emissions trading regime real economy-wide costs of
abatement are higher in developing economies with currencies valued below purchasing power parity
and large differences between private and economy-wide costs such as India contributing to the high
GDP losses experienced in those countries.