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Is Kyoto fatally flawed? An analysis with MacGEM

Author

Listed:
  • Johan Eyckmans

    () (K.U.Leuven, C.E.S., Energy, Transport and Environment)

  • Denise Van Regemorter

    () (K.U.Leuven, C.E.S., Energy, Transport and Environment)

  • Vincent van Steenberghe

    () (U.C.L, C.O.R.E.)

Abstract

In this paper we present some numerical simulations with the MacGEM model to evaluate the consequences for the Kyoto Protocol on the reduction of greenhouse gases of the recent Bonn agreement and the nonratification by the USA. MacGEM is a global marginal abatement cost model for carbon emissions from fossil fuel use. Marginal abatement cost functions are estimated on data generated with the GEM-E3-World general equilibrium model under the assumption that abatement is produced in a cost efficient way in every individual country/region of the model. Nonparticipation of the USA causes the equilibrium carbon price in Annex B countries to fall by approximately 50% since an important share of permit demand falls out and the global abatement objective is substantially eroded. With respect to the Bonn agreement, we focus on the Commitment Period Reserve (CPR) and carbon sinks. The CPR is a compliance mechanism requiring all Parties to maintain some fixed number of permits on their permit account. It entails a binding permit export ceiling for the former Soviet Union and central European countries. It raises the equilibrium carbon permit price by approximately 30% and generates substantial monopoly rents for permit exporters. Finally, carbon sinks enhancement activities are accounted for by assuming that they represent free abatement options. These activities enable Parties to fulfil their reduction commitment at lower compliance costs and cause the equilibrium permit price to decreases even further. We conclude that the Bonn agreement has indeed eroded completely the Kyoto Protocol's emission targets but that it has the merit to have saved the international climate change negotiation framework.

Suggested Citation

  • Johan Eyckmans & Denise Van Regemorter & Vincent van Steenberghe, 2001. "Is Kyoto fatally flawed? An analysis with MacGEM," Energy, Transport and Environment Working Papers Series ete0118, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
  • Handle: RePEc:ete:etewps:ete0118
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    Cited by:

    1. John Foster & Liam Wagner & Phil Wild & Junhua Zhao & Lucas Skoofa & Craig Froome, 2011. "Market and Economic Modelling of the Intelligent Grid: End of Year Report 2009," Energy Economics and Management Group Working Papers 09, School of Economics, University of Queensland, Australia.
    2. Barbara Buchner & Carlo Carraro & Igor Cersosimo & Carmen Marchiori, 2002. "Back to Kyoto? US Participation and the Linkage between R&D and Climate Cooperation," CESifo Working Paper Series 688, CESifo Group Munich.
    3. VAN STEENBERGHE, Vincent, 2003. "CO2 abatement costs and permits price : Exploring the impact of banking and the role of future commitments," CORE Discussion Papers 2003098, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Löschel, Andreas & Lange, Andreas & Hoffmann, Tim & Böhringer, Christoph & Moslener, Ulf, 2004. "Assessing Emission Allocation in Europe: An Interactive Simulation Approach," ZEW Discussion Papers 04-40, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Axel Michaelowa & Kristian Tangen & Henrik Hasselknippe, 2005. "Issues and Options for the Post-2012 Climate Architecture – An Overview," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 5(1), pages 5-24, March.
    6. Böhringer, Christoph & Dijkstra, Bouwe & Rosendahl, Knut Einar, 2014. "Sectoral and regional expansion of emissions trading," Resource and Energy Economics, Elsevier, vol. 37(C), pages 201-225.
    7. Andreas Löschel & Zhong Zhang, 2002. "The economic and environmental implications of the US repudiation of the kyoto protocol and the subsequent deals in Bonn and Marrakech," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(4), pages 711-746, December.
    8. repec:zbw:hohpro:337-11 is not listed on IDEAS
    9. Florent Pratlong & Denise Van Regemorter & Paul Zagamé, 2004. "«Hot Air» and Market Power in International Emission Trading," Cahiers de la Maison des Sciences Economiques v04074, Université Panthéon-Sorbonne (Paris 1).
    10. Vincent Steenberghe, 2005. "Carbon dioxide abatement costs and permit price: exploring the impact of banking and the role of future commitments," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 7(2), pages 75-107, June.
    11. Richard S.J. Tol, 2002. "Technology Protocols For Climate Change: An Application Of Fund," Working Papers FNU-14, Research unit Sustainability and Global Change, Hamburg University, revised Sep 2002.
    12. Buchner, Barbara & Carraro, Carlo & Cersosimo, Igor, 2002. "On the Consequences of the US Withdrawal from the Kyoto/Bonn Protocol," CEPR Discussion Papers 3239, C.E.P.R. Discussion Papers.
    13. Christoph Böhringer & Henrike Koschel & Ulf Moslener, 2008. "Efficiency losses from overlapping regulation of EU carbon emissions," Journal of Regulatory Economics, Springer, vol. 33(3), pages 299-317, June.
    14. repec:old:wpaper:337-11 is not listed on IDEAS
    15. Godal, Odd & Klaassen, Ger, 2006. "Carbon trading across sources and periods constrained by the Marrakesh Accords," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 308-322, May.

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    Keywords

    environmental economics; climate change; permit trade; Kyoto Protocol; carbon sinks;

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