EU enlargement and environmental policy



Endowments:

L

Aggregate labor endowment

K

Aggregate capital endowment

Qf

Endowment of natural resource

—r

B

Balance of payment surplus

co2

Endowment with carbon emission rights

Other parameters:

aiCO2

Carbon coefficient per unit

Table A2 Overview of key elasticities and parameter specifications

Substitution elasticities in non-fossil fuel production

Capital-labor-energy vs. intermediates                                      0

Capital-energy vs. labor                                                  0.6

Capital vs. energy                                                        0.8

Electricity vs. primary energy inputs                                      0.1

Gas-oil vs. coal                                                           0.5

Gas vs. oil                                                                 2

Substituion elasticities in final demand

Energy goods vs. non-energy goods                                   0.5

Non-energy goods vs. non-energy goods                               1

Energy goods vs. energy goods                                         1

Substitution elasticities in government demand

Fossil fuels vs. non-fossil fuels                                                1

Fossil fuels vs. fossil fuels                                                  0.3

Elasticities in international trade (Armington)

Substitution elasticity between imports vs. domestic inputs                4

Other Parameters

Supply elasticity for crued oil                                                  1

Supply elasticity for gas                                                       1

Supply elasticity for coal                                                    0.5

30



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