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CO2 Emissions Limits: Economic Adjustments and the Distribution of Burdens

Henry D. Jacoby, Richard S. Eckaus, A. Denny Ellerman, Ronald G. Prinn, David M. Reiner and Zili Yang

Year: 1997
Volume: Volume18
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No3-2
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Abstract:
Policies under consideration within the Climate Convention would impose CO2 controls on only a subset of nations. A model of economic growth and emissions, coupled to an analysis of the climate system, is used to explore the consequences of a sample proposal of this type. The results show how economic burdens are likely to be distributed among nations, how carbon "leakage" may counteract the reductions attained, and how policy costs may be influenced by emissions trading. We explore the sensitivity of results to uncertainty in key underlying assumptions, including the influence on economic impacts and on the policy contribution to long-term climate goals.



The Kyoto Protocol: An Economic Analysis Using GTEM

Vivek Tulpule, Stephen Brown, Jaekyu Lim, Cain Polidano, Horn Pant and Brian S. Fisher

Year: 1999
Volume: Volume 20
Number: Special Issue - The Cost of the Kyoto Protocol: A Multi-Model Evaluation
DOI: 10.5547/ISSN0195-6574-EJ-Vol20-NoSI-11
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Abstract:
In this paper ABARE's Global Trade and Environment Model (GTEM) is used to analyse the potential of international emissions trading as a mechanism for helping to achieve the abatement commitments agreed to in the Kyoto Protocol. The prospect of two emission trading blocs, one consisting of the European Union and eastern Europe and the other consisting of many of the remaining Annex I regions, is also considered. The analysis shows that the carbon penalty varies significantly across regions when no emissions trading is allowed. In aggregate, the cost of abatement to Annex I regions falls with emissions trading.Under the assumption of the two trading blocs, the carbon penalty in the European bloc is higher than with full Annex I trading. The paper also considers the impact on developing countries and the role of carbon leakage in determining the economic impacts on Annex I regions.





Trade Liberalization and Carbon Leakage

Onno Kuik and Reyer Gerlagh

Year: 2003
Volume: Volume24
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol24-No3-4
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Abstract:
This paper examines the effect of trade liberalization on carbon leakage. We present quantitative estimates of carbon leakage under the Kyoto Protocol with and without freer trade by means of import tariff reductions agreed to in the Uruguay Round of multilateral trade negotiations. We find that under a plausible range of assumptions, the implementation of these import tariff reductions increases the overall rate of leakage, suggesting that previous studies may structurally have underestimated the rate of carbon leakage under the Kyoto Protocol. But we also find that the costs of abating the trade-induced leakage are modest relative to the welfare gains of freer trade. Analysis of the trade-induced carbon leakage shows large differences between leakage caused by reductions of import tariffs on energy goods and by reductions of import tariffs on non-energy goods. It also shows large differences in emission responses among developing country regions.



Unilateral Climate Policy: Can OPEC Resolve the Leakage Problem?

Christoph Bohringer, Knut Einar Rosendahl, and Jan Schneider

Year: 2014
Volume: Volume 35
Number: Number 4
DOI: 10.5547/01956574.35.4.4
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Abstract:
In the absence of a global agreement to reduce greenhouse gas emissions, individual countries have introduced national climate policies. Unilateral action involves the risk of relocating emissions to regions without climate regulations, i.e., emission leakage. A major channel for leakage are price changes in the international oil market. Previous studies on leakage have assumed competitive behavior in this market. Here, we consider alternative assumptions about OPEC's behavior in order to assess how these affect leakage and costs of unilateral climate policies. Our results based on simulations with a large-scale computable general equilibrium model of the global economy suggest that assumptions on OPEC's behavior are crucial to the impact assessment of unilateral climate policy measures. We find that leakage through the oil market may become negative when OPEC is perceived as a dominant producer, thereby reducing overall leakage drastically compared to a setting where the oil market is perceived competitive.



U.S. CO2 Mitigation in a Global Context: Welfare, Trade and Land Use

Ronald D. Sands, Katja Schumacher, and Hannah Forster

Year: 2014
Volume: Volume 35
Number: Special Issue
DOI: 10.5547/01956574.35.SI1.10
View Abstract

Abstract:
We describe carbon dioxide mitigation scenarios specified by the Energy Modeling Forum study (EMF-24) "U.S. Technology Transitions under Alternative Climate Policies," using a global computable general equilibrium model that simulates world energy and agricultural systems through 2050. One set of scenarios covers variation across five major technology groups: end-use technology, carbon dioxide capture and storage, nuclear electricity generation, wind and solar power, and bioenergy. Other scenarios cover variation across policies. Policies such as a renewable portfolio standard for electricity generation or a clean electricity standard have the potential for significant emissions reductions, but at a greater cost than a cap-and-trade scenario with the same reduction in emissions. Cap-andtrade scenarios resulted in carbon dioxide leakage rates of 11 to 20 percent depending on the stringency of the targets. Oil-exporting regions without a mitigation policy may still have significant welfare losses when other world regions reduce emissions. Keywords: Carbon dioxide, Climate policy, Carbon leakage, Land use, Bioenergy



Are there Carbon Savings from US Biofuel Policies? The Critical Importance of Accounting for Leakage in Land and Fuel Markets

Antonio M. Bento, Richard Klotz, and Joel R. Landry

Year: 2015
Volume: Volume 36
Number: Number 3
DOI: 10.5547/01956574.36.3.aben
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Abstract:
We develop an analytical and numerical multi-market model that integrates land, fuel, and food markets, and link it with an emissions model to quantify the importance of carbon leakage relative to the intended emissions savings resulting from the Renewable Fuel Standard (RFS) for conventional biofuels. The expansion of biofuels mandated by the RFS can increase or decrease GHG emissions depending on the policy regime being evaluated. For example, replacing the Volumetric Ethanol Excise Tax Credit (VEETC) with the RFS, as occurred at the end of 2011 when the VEETC was allowed to expire, would reduce emissions by 2.0 tgCO2e in 2015 for an expansion of ethanol of 11.4 billion liters. A policy regime consisting of the RFS alone would increase emissions by at least 4.5 tgCO2e for the same expansion of ethanol. Our findings highlight an important tension between land and fuel market leakage. Policy regimes that result in less land market leakage tend to lead to more domestic fuel market leakage per liter of ethanol added.



Carbon Leakage and Competitiveness of Cement and Steel Industries Under the EU ETS: Much Ado About Nothing

Frédéric Branger, Philippe Quirion, Julien Chevallier

Year: 2016
Volume: Volume 37
Number: Number 3
DOI: 10.5547/01956574.37.3.fbra
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Abstract:
In a world of uneven climate policies, concerns about carbon leakage and competitiveness for heavy industries are the main arguments against the implementation of ambitious climate policies. In this paper we investigate a potential competitiveness-driven operational carbon leakage due to the European Union Emissions Trading scheme (EU ETS). We focus on two energy-intensive sectors, cement and steel, and phases I and II of the EU ETS. From a simple analytical model, we derive an equation linking net imports of cement and steel to local and foreign demand along with carbon price. We then econometrically estimate this relation both with ARIMA regression and Prais-Winsten estimation, finding that local and foreign demand are robust drivers of trade flows. We find no significant effect of the carbon price on net imports of steel and cement. We conclude that there is no evidence of carbon leakage in these sectors, at least in the short run.



Climate policies in a fossil fuel producing country – demand versus supply side policies

Taran Fæhn, Cathrine Hagem, Lars Lindholt, Ståle Mæland, and Knut Einar Rosendahl

Year: 2017
Volume: Volume 38
Number: Number 1
DOI: 10.5547/01956574.38.1.tfae
View Abstract

Abstract:
In absence of joint global climate action, several jurisdictions unilaterally restrict their domestic demand for fossil fuels. Another policy option for fossil fuel producing countries, not much analysed, is to reduce own supply of fossil fuels. We explore analytically and numerically how domestic demand and supply side policies affect global emissions, contingent on market behaviour. Next, in the case of Norway, we find the cost-effective combination of the two types of policies. Our numerical results indicate that given a care for global emissions, and a desire for domestic action, about 2/3 of the emission reductions should come through supply side measures.



Refining the evidence: British Columbia’s carbon tax and household gasoline consumption

Chad Lawley and Vincent Thivierge

Year: 2018
Volume: Volume 39
Number: Number 2
DOI: 10.5547/01956574.39.2.claw
View Abstract

Abstract:
The impact of carbon prices on consumer behavior is a central element in current policy debates dealing with mitigation of greenhouse gas emissions. We examine the impact of British Columbia's carbon tax on private automobile gasoline use. We control for several factors that influenced gasoline demand during our study period, including local public transit improvements and increased cross-border shopping. Our results suggest that a 5 cent per litre carbon tax reduced gasoline consumption by 8%. We find that households residing in Vancouver and other cities responded to the carbon tax, whereas households in small towns and rural areas did not respond. We perform several sensitivity analyses. Even our most conservative lower bound estimate suggests that a 5 cent per litre carbon tax reduced gasoline consumption by 5%.




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