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Key Messages1. Quantifying the benefits of GHG abatement is extremely difficult, given the uncertainty on theconsequences of climate change, in particular where low‐probability catastrophic outcomes areconcerned.2. This makes setting the test for selecting options, in terms of a rate of return or a shadow price forcarbon, problematic. There may be no better guide than contribution to a political economy‐widemitigation target (e.g. a trajectory leading to 450 ppm CO2 in the atmosphere by 2100) butranking mitigation measures according to cost‐effectiveness remains essential if resources arenot to be wasted.3. Although the largest overall cuts in GHG emissions are to be expected in the energy, residentialand commercial buildings sectors, many mitigation measures in the transport sector are relativelylow cost. Some of these save money in the long run, through fuel savings. Nevertheless thecapital costs of many transport sector technological innovations are likely to be high and this is abarrier to commercialisation given the evidence that upfront costs have a disproportional impacton decisions regarding energy‐efficiency.4. Fuel efficiency standards accompanied by appropriate fuel taxes are a key instrument foraddressing this barrier. Long‐term targets can create the certainty that vehicle manufacturersneed to make investments in new technologies, compensating for consumer risk aversion topaying for improved fuel economy as well as producer uncertainty on drivers’ willingness to payfor energy efficiency. The resulting changes in vehicle production and purchases have thepotential to deliver the largest share of CO2 mitigation in the transport sector.
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