We explore two methods of incorporating bottom-up abatement cost estimates into top-down modeling: an
economy-wide method and a sector-specific method. Carbon emissions generally depend on technology and
scale. Given the technology options, abatement is possible without a substantial reduction in scale. Otherwise
the change must come purely through a reduction in demand. Our analysis shows that the cost of environmental
policy is considerably overestimated by top-down models if a bottom-up abatement cost curve is not included.
Using the data for the Swiss economy, we demonstrate two techniques of representing an abatement function
explicitly in a computable general equilibriummodel: a traditional and a hybrid (discrete technology modeling)
approach. The results suggest that the current climate policy in Switzerland will not be able to move the economy
towards the required 10% CO2
reduction. Both approaches provide virtually the same results when the calibration
process is precisely executed, which contradicts the results of previous studies.