Aggregate Emission Intensity Targets: Applications to the Paris Agreement by Asian Development Bank Institute (ADBI)

Should the world’s largest carbon emitters adopt intensity targets or quantity targets?

We compare aggregate emission intensity, quantity, and price targets adopted at the national level but implemented cost effectively at the firm level. We obtain simple ranking conditions that depend on the slope ratio of marginal emission damage and marginal abatement cost curves, and threshold parameters determined by the variance and covariance of GDP and business-as-usual emission. We apply the ranking conditions to the top 12 carbon dioxide emitters with specific greenhouse gas targets in the Paris Agreement, and obtain a robust result that intensity targets dominate quantity targets for most of these nations.