Revisiting the case for intensity targets: Better incentives and less uncertainty for developing countries
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Huifang Tian & John Whalley, 2009.
"Level versus Equivalent Intensity Carbon Mitigation Commitments,"
NBER Working Papers
15370, National Bureau of Economic Research, Inc.
- Huifang Tian & John Whalley, 2009. "Level versus Equivalent Intensity Carbon Mitigation Commitments," University of Western Ontario, Economic Policy Research Institute Working Papers 20094, University of Western Ontario, Economic Policy Research Institute.
- Martin L. Weitzman, 1974. "Prices vs. Quantities," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 477-491.
- M. L. Weitzman, 1973. "Prices vs. Quantities," Working papers 106, Massachusetts Institute of Technology (MIT), Department of Economics.
- Newell, Richard G. & Pizer, William A., 2008. "Indexed regulation," Journal of Environmental Economics and Management, Elsevier, vol. 56(3), pages 221-233, November.
- Newell, Richard G. & Pizer, William A., 2006. "Indexed Regulation," Discussion Papers dp-06-32, Resources For the Future.
- Richard G. Newell & William A. Pizer, 2008. "Indexed Regulation," NBER Working Papers 13991, National Bureau of Economic Research, Inc.
- Neil Strachan, 2007. "Setting greenhouse gas emission targets under baseline uncertainty: the Bush Climate Change Initiative," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 12(4), pages 455-470, May.
- Krysiak, Frank C., 2008. "Prices vs. quantities: The effects on technology choice," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1275-1287, June.
- Kolstad, Charles D., 2005. "The simple analytics of greenhouse gas emission intensity reduction targets," Energy Policy, Elsevier, vol. 33(17), pages 2231-2236, November.
- Bosetti, Valentina & Carraro, Carlo & Massetti, Emanuele, 2009. "Banking permits: Economic efficiency and distributional effects," Journal of Policy Modeling, Elsevier, vol. 31(3), pages 382-403, May.
- Bosetti, Valentina & Carraro, Carlo & Massetti, Emanuele, 2008. "Banking Permits: Economic Efficiency and Distributional Effects," CEPR Discussion Papers 6652, C.E.P.R. Discussion Papers.
- 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".
- Valentina Bosetti & Carlo Carraro & Emanuele Massetti, 2008. "Banking Permits: Economic Efficiency and Distributional Effects," CESifo Working Paper Series 2214, CESifo Group Munich.
- Valentina Bosetti & Carlo Carraro & Emanuele Massetti, 2008. "Banking Permits: Economic Efficiency and Distributional Effects," Working Papers 2008.1, Fondazione Eni Enrico Mattei.
- Nordhaus, William D., 1993. "Rolling the 'DICE': an optimal transition path for controlling greenhouse gases," Resource and Energy Economics, Elsevier, vol. 15(1), pages 27-50, March.
- William D. Nordhaus, 1992. "Rolling the 'Dice': An Optimal Transition Path for Controlling Greenhouse Gases," Cowles Foundation Discussion Papers 1019, Cowles Foundation for Research in Economics, Yale University.
- Frank Jotzo & John Pezzey, 2007. "Optimal intensity targets for greenhouse gas emissions trading under uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(2), pages 259-284, October.
- Frank Jotzo & John C. V. Pezzey, 2007. "Optimal Intensity Targets for Greenhouse Gas Emissions Trading Under Uncertainty," Economics and Environment Network Working Papers 0701, Australian National University, Economics and Environment Network.
- Boemare, Catherine & Quirion, Philippe, 2002. "Implementing greenhouse gas trading in Europe: lessons from economic literature and international experiences," Ecological Economics, Elsevier, vol. 43(2-3), pages 213-230, December.
- Catherine Boemare & Philippe Quirion, 2002. "Implementing greenhouse gas trading in Europe: lessons from economic literature and international experiences," Post-Print halshs-00007264, HAL.
- Flachsland, Christian & Marschinski, Robert & Edenhofer, Ottmar, 2009. "Global trading versus linking: Architectures for international emissions trading," Energy Policy, Elsevier, vol. 37(5), pages 1637-1647, May.
- A. Denny Ellerman & Ian Sue Wing, 2003. "Absolute versus intensity-based emission caps," Climate Policy, Taylor & Francis Journals, vol. 3(sup2), pages 7-20, December.
- Carolyn Fischer, 2003. "Combining rate-based and cap-and-trade emissions policies," Climate Policy, Taylor & Francis Journals, vol. 3(sup2), pages 89-103, December.
- Fischer, Carolyn, 2003. "Combining Rate-Based and Cap-and-Trade Emissions Policies," Discussion Papers dp-03-32, Resources For the Future.
- Pizer, William, 2005. "The Case for Intensity Targets," Discussion Papers dp-05-02, Resources For the Future.
- Quirion, Philippe, 2005. "Does uncertainty justify intensity emission caps?," Resource and Energy Economics, Elsevier, vol. 27(4), pages 343-353, November.
- Philippe Quirion, 2005. "Does uncertainty justify intensity emission caps?," Post-Print halshs-00007162, HAL.
- Blyth, William & Bradley, Richard & Bunn, Derek & Clarke, Charlie & Wilson, Tom & Yang, Ming, 2007. "Investment risks under uncertain climate change policy," Energy Policy, Elsevier, vol. 35(11), pages 5766-5773, November.
- Marschinski, Robert & Lecocq, Franck, 2006. "Do intensity targets control uncertainty better than quotas ? Conditions, calibrations, and caveats," Policy Research Working Paper Series 4033, The World Bank. Full references (including those not matched with items on IDEAS)