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The Economics of the Kyoto Protocol

In this paper we use the Second Generation Model to develop an assessment of the energy and economic implications of achieving the goals of the Kyoto Protocol. We find that many of the details of the Protocol that remain to be worked out introduce critical uncertainties affecting the cost of compliance. Our analysis shows that the cost of implementing the Protocol in the United States can vary by more than an order of magnitude. The marginal cost in 2010 could be as low as $26 per tonne of carbon if a global system of emissions mitigation could be quickly and effectively implemented. But it could also exceed $250 per tonne of carbon if the United States must meet its emissions limitations entirely through domestic actions, and if mitigation obligations are not adequately anticipated by decision-makers.

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Energy Specializations: Energy Modeling – Other; Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation

JEL Codes:
C59 - Econometric Modeling: Other
Q54 - Climate; Natural Disasters and Their Management; Global Warming
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Kyoto protocol, Second Generation Model (SGM) Carbon Emission Mitigation, Carbon Tax, Emission Trading

DOI: 10.5547/ISSN0195-6574-EJ-Vol20-NoSI-3

Published in Volume 20, Special Issue - The Cost of the Kyoto Protocol: A Multi-Model Evaluation of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.