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The Global Warming Potential Paradox: Implications for the Design of Climate Policy

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  • Stéphane De Cara
  • Elodie Debove
  • Pierre-Alain Jayet

Abstract

We address the issue of the design of climate policy in a dynamic, multi-greenhouse gas context. Despite well-established shortcomings, the Global Warming Potential (GWP) is the most commonly used index to compare greenhouse gases. We first review the shortcomings of the GWP from an economic perspective and examine some of the possible reasons for its success in the climate negotiations so far.We then examine the analytical properties of a second-best GWP-based emission target and compare the resulting second-best abatement paths with the first-best ones. We particularly show that the second-best CO2-equivalent target must exceed the CO2 equivalence of first-best abatements in order to reduce the bias induced by the GWP.

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File URL: https://www6.versailles-grignon.inra.fr/economie_publique/Media/fichiers/Working-Papers/Working-Papers-2006/WP_2006_03
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Bibliographic Info

Paper provided by INRA, Economie Publique in its series Working Papers with number 2006/03.

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Date of creation: 01 Mar 2006
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Handle: RePEc:apu:wpaper:2006/03

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Keywords: Global Warming Potential; climate change; climate policy; Multi-greenhouse gas agreements;

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References

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  1. Michaelis, P., 1999. "Sustainable greenhouse policies: the role of non-CO2 gases," Structural Change and Economic Dynamics, Elsevier, vol. 10(2), pages 239-260, June.
  2. Kandlikar, Milind, 1996. "Indices for comparing greenhouse gas emissions: integrating science and economics," Energy Economics, Elsevier, vol. 18(4), pages 265-281, October.
  3. Stephane De Cara & Martin Houzé & Pierre-Alain Jayet, 2005. "Methane and nitrous oxide emissions from agriculture in the EU : a spatial assessment of sources and abatement costs," Working Papers 156815, Institut National de la Recherche Agronomique, France.
  4. John Reilly & Kenneth Richards, 1993. "Climate change damage and the trace gas index issue," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 3(1), pages 41-61, February.
  5. Kandlikar, Milind, 1995. "The relative role of trace gas emissions in greenhouse abatement policies," Energy Policy, Elsevier, vol. 23(10), pages 879-883, October.
  6. Schneider, Uwe A. & Kumar, Pushpam, 2008. "Greenhouse Gas Mitigation through Agriculture," Choices, Agricultural and Applied Economics Association, vol. 23(1).
  7. H. Aaheim, 1999. "Climate Policy with Multiple Sources and Sinks of Greenhouse Gases," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 14(3), pages 413-430, October.
  8. Fearnside, Philip M., 2002. "Time preference in global warming calculations: a proposal for a unified index," Ecological Economics, Elsevier, vol. 41(1), pages 21-31, April.
  9. Weitzman, Martin L., 1998. "Why the Far-Distant Future Should Be Discounted at Its Lowest Possible Rate," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 201-208, November.
  10. S. De Cara & Gilles Rotillon, 2003. "Multigreenhouse gas international agreements," THEMA Working Papers 2003-13, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  11. Richard Schmalensee, 1993. "Comparing Greenhouse Gases for Policy Purposes," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 245-256.
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