Estimating the impact of emission reduction target-setting on the macroeconomy

In recent times, greenhouse gas (GHG) reduction targets have been frequently discussed in climate-change policy debates. Computable energy-economic models have played a significant role in the process of formulating policy goals. However, these models are very complicated and contain many ad hoc parameters that may be unclear to policy makers. The purpose of this article is to explore how the elasticity parameters between carbon-based inputs and other inputs play significant roles in estimating the impacts of GHG reduction targets on both the GDP and carbon prices required for achieving the target. Further, it discusses the implications of using ad hoc parameters for climate-change policy making. The analysis is expected to contribute to creating a sound procedure for climate-change policy making.