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Revisiting the case for intensity targets: Better incentives and less uncertainty for developing countries

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  • Marschinski, Robert
  • Edenhofer, Ottmar

Abstract

In the debate on post-Kyoto global climate policy, intensity targets, which set a maximum amount of emissions per GDP, figure as prominent alternative to Kyoto-style absolute emission targets, especially for developing countries. This paper re-examines the case for intensity targets by critically assessing several of its properties, namely (i) reduction of cost-uncertainty, (ii) reduction of 'hot air', (iii) compatibility with international emissions trading, (iv) incentive to decouple carbon emissions and economic output (decarbonization), and, (v) use as a substitute for banking/borrowing. Relying on simple analytical models, it is shown that the effect on cost-uncertainty is ambiguous and depends on parameter values, and that the same holds for the risk of 'hot air'; that the intensity target distorts international emissions trading; that despite potential asymmetries in the choice of abatement technology between absolute and intensity target, the incentive for a lasting transformation of the energy system is not necessarily stronger under the latter; and, finally, that only a well-working intensity target could substitute banking/borrowing to some extent--but also vice versa. Overall, the results suggest that due to the increased complexity and the potentially only modest benefits of an intensity target, absolute targets remain a robust choice for a cautious policy maker.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 38 (2010)
Issue (Month): 9 (September)
Pages: 5048-5058

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Handle: RePEc:eee:enepol:v:38:y:2010:i:9:p:5048-5058

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Web page: http://www.elsevier.com/locate/enpol

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Keywords: Intensity target Post-Kyoto Climate policy;

References

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Cited by:
  1. Lu, Yingying & Stegman, Alison & Cai, Yiyong, 2013. "Emissions intensity targeting: From China's 12th Five Year Plan to its Copenhagen commitment," Energy Policy, Elsevier, vol. 61(C), pages 1164-1177.
  2. Hossa Almutairi & Samir Elhedhli, 2014. "Carbon tax based on the emission factor: a bilevel programming approach," Journal of Global Optimization, Springer, vol. 58(4), pages 795-815, April.
  3. Yiyong Cai & Yingying Lu & David Newth & Alison Stegman, 2013. "Modelling Complex Emissions Intensity Targets with a Simple Simulation Algorithm," CAMA Working Papers 2013-33, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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