| We follow Schmalensee, Stoker, and Judson (1998) to forecast CO2 emissions based on the environmental Kuznets curve (EKC). Our findings suggest that the EKC will not lead to significant decreases in CO2 emissions even by 2050 for countries with the highest incomes. Therefore, mandatory emissions cuts are required to limit climate change. In the same spirit of Horowitz (2009) and Ng and Zhao (2010), we then use a reduced-form approach to estimate the economic costs of mandatory emission cuts. Based on our parameter estimates, we find that a 25% mandatory deduction in CO2 emissions from 1990 will lead to a 5.63% decrease in the combined GDP of the 19 OECD countries, and a 40% deduction will result in a 12.92% loss in income (holding other relevant variables... |
