The Cost of Reducing Greenhouse Gas Emissions
Open accessAbstract
Most countries, including the United States, have an array of greenhouse gas mitigation policies, which provide subsidies or restrictions typically aimed at specific technologies or sectors. Such climate policies range from automobile fuel economy standards, to gasoline taxes, to mandating that a certain amount of electricity in a state comes from renewables, to subsidizing solar and wind electrical generation, to mandates requiring the blending of biofuels into the surface transportation fuel supply, to supply-side restrictions on fossil fuel extraction. This paper reviews the costs of various technologies and actions aimed at reducing greenhouse gas emissions. Our aim is twofold. First, we seek to provide an up-to-date summary of costs of actions that can be taken now using currently available technology. These costs focus on expenditures and emissions reductions over the life of a project compared to some business-as-usual benchmark—for example, replacing coal-fired electricity generation with wind, or weatherizing a home. We refer to these costs as static because they are costs over the life of a specific project undertaken now, and they ignore spillovers. Our second aim is to distinguish between dynamic and static costs and to argue that some actions taken today with seemingly high static costs can have low dynamic costs, and vice versa. We make this argument at a general level and through two case studies, of solar panels and of electric vehicles, technologies whose costs have fallen sharply. Under the right circumstances, dynamic effects will offer a justification for policies that have high costs according to a myopic calculation.
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The social cost of carbon was around 50 € per ton of CO2 in 2017.
“This should be contrasted against the social cost of carbon, which was around 50€ per ton of CO 2 in 2017 (Gillingham and Stock 2018).”
From Circulating structural timber and engineered wood products – challenges and potentials towards reliable evaluation of mechanical properties (2025) · cites this paper as Gillingham and Stock 2018
The static abatement cost could somewhat decrease through learning-by-doing, resulting in the long-term dynamic abatement cost being lower than the static one.
“The static abatement cost could somewhat decrease through learning-by-doing, resulting in the longterm dynamic abatement cost being lower than the static one”
From Circulating structural timber and engineered wood products – challenges and potentials towards reliable evaluation of mechanical properties (2025) · cites this paper as Gillingham and Stock 2018
New factory equipment can be very expensive to purchase and set up, so firms' cost-benefit calculations may dissuade them from retrofitting existing factories to run using low-carbon electricity or to save a few kilowatts.
“New factory equipment can be very expensive to purchase and set up, so firms' cost-benefit calculations may dissuade them from retrofitting existing factories to run using low-carbon electricity or to save a few kilowatts [288,633,778].”
From Tackling climate change with machine learning (2023) · cites this paper as [288]
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“The considerations are often interrelated, for example, environmental benefits are connected to economics through the marginal abatement cost (cf. Gillingham and Stock 2018).”
Influential
- Authors
- Gillingham, K., & Stock, J. H.
- Affiliations
- National Bureau of Economic Research (US)
- ORCID
- Gillingham, Kenneth
- Venue
- Journal of Economic Perspectives
- Publisher
- American Economic Association
- Published
- 2018-11-01
- Volume
- 32
- Issue
- 4
- Pages
- 53-72
- ISSN
- 0895-3309 (ISSN-L)
- OpenAlex
- W2899038746
- Cited by
- 584
- References
- 34
- Citations by year
- 2026: 93 · 2025: 96 · 2024: 92 · 2023: 76 · 2022: 79 · 2021: 74 · 2020: 50 · 2019: 20 · 2013: 1
- FWCI
- 54.56
- Type
- journal article
- Language
- en
- Open access
- diamond
- doi.org
- Locations
- The Journal of Economic Perspectives (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Physical Sciences › Energy › Renewable Energy, Sustainability and the Environment › Energy, Environment, and Transportation Policies
- Physical Sciences › Energy › Renewable Energy, Sustainability and the Environment › Renewable energy and sustainable power systems
- Keywords
- greenhouse gas emissions reduction, climate policy costs, solar panels, electric vehicles, renewable energy subsidies, biofuels, weatherization, fuel economy standards, gasoline tax, renewable portfolio standards
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