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Delayed Participation of Developing Countries to Climate Agreements: Should Action in the EU and US be Postponed?

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  • Valentina Bosetti
  • Carlo Carraro
  • Massimo Tavoni

Abstract

This paper analyses the cost implications for climate policy in developed countries if developing countries are unwilling to adopt measures to reduce their own GHG emissions. First, we assume that a 450 CO2 (550 CO2e) ppmv stabilisation target is to be achieved and that Non Annex1 (NA1) countries decide to delay their GHG emission reductions by 30 years. What would be the cost difference between this scenario and a case in which both developed and developing countries start reducing their emissions at the same time? Then, we look at a scenario in which the timing of developing countries’ participation is uncertain and again we compute the costs of climate policy in developed and developing countries. We findthat delayed participation of NA1 countries has a negative impact on climate policy costs. Economic inefficiencies can be as large as 10-25 TlnUSD. However, this additional cost wanes when developing countries are allowed to trade emission reductions from their baseline emission paths during the 30-year delay period. Thus, irrespective of whether NA1 countriesare immediately assigned an emission reduction target or not, they should nonetheless be included in a global carbon market. Technology deployment is also affected by the timing of developing countries’ mitigation measures. Delayed NA1-country participation in a climateagreement would scale down the deployment of coal with CCS throughout the century. Onthe other hand, innovation in the form of energy R&D investments would be positivelyaffected, since it would become crucial in developed countries. Finally, uncertainty about the timing of NA1-country participation does not modify the optimal abatement strategy for developed countries and does not alter policy costs as long as a global carbon market is in place.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2445.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2445

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Related research

Keywords: delayed action; climate policy; stabilisation costs; uncertain participation;

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References

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  1. Bosetti, Valentina & Carraro, Carlo & Massetti, Emanuele & Tavoni, Massimo, 2007. "International Energy R&D Spillovers and the Economics of Greenhouse Gas Atmospheric Stabilization," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6426, C.E.P.R. Discussion Papers.
  2. Carlo Carraro & Valentina Bosetti & Emanuele Massetti, 2008. "Banking Permits: Economic Efficiency and Distributional Effects," Working Papers 2008_01, Department of Economics, University of Venice "Ca' Foscari".
  3. Massimo Tavoni & Valentina Bosetti & Brent Sohngen, 2007. "Forestry and the Carbon Market Response to Stabilize Climate," Working Papers, Fondazione Eni Enrico Mattei 2007.15, Fondazione Eni Enrico Mattei.
  4. Valentina Bosetti & Massimo Tavoni, 2007. "Uncertain R&D, Backstop Technology and GHGs Stabilization," Working Papers, Fondazione Eni Enrico Mattei 2007.6, Fondazione Eni Enrico Mattei.
  5. Warwick J. McKibbin & Martin T. Ross & Robert Shackleton & Peter J. Wilcoxen, 1999. "Emissions Trading, Capital Flows and the Kyoto Protocol," Economics and Environment Network Working Papers, Australian National University, Economics and Environment Network 9901, Australian National University, Economics and Environment Network.
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Cited by:
  1. Bosetti, Valentina & Carraro, Carlo & Tavoni, Massimo, 2009. "Climate Change Mitigation Strategies in Fast-Growing Countries: The Benefits of Early Action," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7394, C.E.P.R. Discussion Papers.
  2. Valentina Bosetti & Carlo Carraro & Alessandra Sgobbi & Massimo Tavoni, 2008. "Modelling Economic Impacts of Alternative International Climate Policy Architectures. A Quantitative and Comparative Assessment of Architectures for Agreement," Working Papers, Fondazione Eni Enrico Mattei 2008.85, Fondazione Eni Enrico Mattei.
  3. Bosetti, Valentina & Carraro, Carlo & Sgobbi, Alessandra & Tavoni, Massimo, 2008. "Delayed Action and Uncertain Targets. How Much Will Climate Policy Cost?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6973, C.E.P.R. Discussion Papers.
  4. Valentina Bosetti & David G. Victor, 2010. "Politics and Economics of Second-Best Regulation of Greenhouse Gases: The Importance of Regulatory Credibility," Working Papers, Fondazione Eni Enrico Mattei 2010.29, Fondazione Eni Enrico Mattei.

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