Abatement Technologies and their Social Costs in a Hybrid General Equilibrium Framework

Abstract

We present a novel methodology to integrate heterogeneous micro-founded preferences into a dynamic computable general equilibrium model. This integrated model is linked to a bottom-up technology-rich electricity model and a stock-flow vehicle accounting model to quantify the social costs of electric vehicles as an endogenous, demand-driven abatement technology. Emission abatement is achieved through consumer choices that are recognised as a central driver of endogenous technological change. Endogenously determined emissions from vehicle use, electricity generation, and production provide an input to quantify external costs attributable to air quality and carbon emissions. We find that carbon and vehicle registration tax policies induce a significant shift away from conventional vehicles towards electric vehicles in Austria by 2030. The shift to electric vehicles results in small overall economic costs, a substantial decline in fuel demand that exceeds the increase in electricity demand to charge vehicle batteries, and overall positive net environmental benefits.