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Kyoto and the EU CEP 2020: A Dynamic Study of the impacts on the Agricultural Sector in Spain

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  • Childs, Jack
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    Employing a recursive dynamic computable general equilibrium (CGE) model of the Spanish economy, this study explicitly aims to characterise the potential impact of Kyoto and European Union environmental policy targets on specific agricultural activities up to 2020. The model code is modified to characterise the emissions trading scheme (ETS), emissions quotas and carbon taxes, whilst emissions reductions are applied to all six registered greenhouse gases (GHGs). Compared to a ‘business-as-usual’ baseline scenario, by 2020, GDP and employment fall 2.1% and 2.4%, respectively, whilst the retail price index rises 3.4%. In agriculture, the indices of output (4.3% fall), and supply price (7.7% rise) perform relatively worse, whilst there is a concomitant cumulative fall in aggregate farm incomes of €1,510m by 2020. The more notable impact in agriculture is attributed to its relatively higher emissions intensity. Consequently, we record an agricultural marginal abatement cost estimate of €86/tonne of CO2 equivalent by 2020, which is consistent with other estimates in the literature. In addition, we find that the optimal mix of emissions reductions across specific agricultural sectors is a function of the degree of substitutability of their emitting activities. In light of estimated income losses within the strategically important farm sector, a final simulation contemplates an ‘agricultural cost-neutral’ emissions reduction policy akin to a cross compliance payment between 2013 and 2020. This is found to reduce food price rises, whilst altering the optimum mix of agricultural emissions reductions across specific agricultural activities. Empleando un modelo dinámico recursivo de equilibrio general computable (EGC) de la economía española, este estudio analiza el impacto de las políticas medioambientales de Kioto y de la Unión Europea (el acuerdo ‘20/20/20’), sobre distintas actividades agrarias hasta 2020. La estructura del modelo se modifica para caracterizar el comercio de los derechos, las cuotas sobre las emisiones y las tarifas de CO2. Además, se aplica la reducción en las emisiones de los seis gases de efecto invernadero. En comparación con el escenario de referencia, se pronostican caídas en el PIB y el empleo de un 2.1% y 2.4%, respectivamente, en 2020, mientras que el índice de precios al consumo sube un 3.4%. En agricultura, el índice de producción (cae un 4,3%), el de empleo (cae un 1.7%) y el de precios (aumenta un 7.7%), empeoran y además los ingresos acumulados de los agricultores bajan 1.510 millones de euros en 2020. El impacto más acusado en el sector agrario se atribuye a la mayor intensidad de sus emisiones. En consecuencia, se estima un coste marginal de reducción de 86€ por tonelada de CO2 equivalente para 2020, lo cual es consistente con las estimaciones existentes en la bibliografía. Además se observa que la combinación óptima de reducción de emisiones en los diferentes sectores agrarios depende del grado de sustitución de las actividades emisoras. A la vista de las pérdidas de ingresos observadas en el sector agrario, se contempla un escenario de mitigación de coste-cero para los agricultores, semejante a un pago de condicionalidad, entre 2013 y 2020. Los resultados señalan una mitigación en el incremento de los precios de los alimentos y una redistribución en la combinación óptima de las emisiones en los sectores agrarios.

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    Paper provided by Agricultural Economics Society in its series 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK with number 135074.

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    Date of creation: 2012
    Handle: RePEc:ags:aesc12:135074
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    1. Xavier Labandeira, Pedro Linares and Miguel Rodriguez, 2009. "An Integrated Approach to Simulate the impacts of Carbon Emissions Trading Schemes," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    2. Capros, Pantelis & Mantzos, Leonidas & Parousos, Leonidas & Tasios, Nikolaos & Klaassen, Ger & Van Ierland, Tom, 2011. "Analysis of the EU policy package on climate change and renewables," Energy Policy, Elsevier, vol. 39(3), pages 1476-1485, March.
    3. Edwards, T. Huw & Hutton, John P., 1999. "The Allocation of Carbon Permits within One Country : A General Equilibrium Analysis of the United Kingdom," The Warwick Economics Research Paper Series (TWERPS) 540, University of Warwick, Department of Economics.
    4. Jan van Heerden & Reyer Gerlagh & James Blignaut & Mark Horridge & Sebastiaan Hess & Ramos Mabugu & Margaret Mabugu, 2006. "Searching for Triple Dividends in South Africa: Fighting CO2 Pollution and Poverty while Promoting Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 113-142.
    5. Markus Lips & Peter Rieder, 2005. "Abolition of Raw Milk Quota in the European Union: A CGE Analysis at the Member Country Level," Journal of Agricultural Economics, Wiley Blackwell, vol. 56(1), pages 1-17.
    6. Burniaux, Jean-Marc & Truong Truong, 2002. "GTAP-E: An Energy-Environmental Version of the GTAP Model," GTAP Technical Papers 923, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    7. Labandeira, Xavier & Labeaga, José M. & Rodríguez, Miguel, 2009. "An integrated economic and distributional analysis of energy policies," Energy Policy, Elsevier, vol. 37(12), pages 5776-5786, December.
    8. Hertel, Thomas & Lee, Huey-Lin & Rose, Steven & Sohngen, Brent, 2008. "Modeling Land-use Related Greenhouse Gas Sources and Sinks and their Mitigation Potential," GTAP Working Papers 2605, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    9. Elbehri, Aziz & Ken Pearson, 2000. "Implementing Bilateral Tariff Rate Quotas in GTAP using GEMPACK," GTAP Technical Papers 475, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    10. Xavier Labandeira & Miguel Rodriguez, 2004. "The Effects of a Sudden CO2 reduction in Spain," Others 0412001, EconWPA.
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