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

  • Marschinski, Robert
  • Edenhofer, Ottmar

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

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