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CO 2 emission mitigation and fossil fuel markets: Dynamic and international aspects of climate policies

Author

Listed:
  • Nico Bauer

    (PIK - Potsdam Institute for Climate Impact Research)

  • Valentina Bosetti

    (Dipartimento di Economia - Università Bocconi)

  • Meriem Hamdi-Cherif

    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Alban Kitous

    (IPTS - JRC Institute for Prospective Technological Studies - JRC - European Commission - Joint Research Centre [Seville])

  • David Mccollum

    (IIASA - International Institute for Applied Systems Analysis [Laxenburg])

  • Aurélie Méjean

    () (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Shilpa Rao

    (IIASA - International Institute for Applied Systems Analysis [Laxenburg])

  • Hal Turton

    (PSI - Paul Scherrer Institute)

  • Leonidas Paroussos

    (National Technical University of Athens)

  • Shuichi Ashina

    (NIES - National Institute for Environmental Studies)

  • Katherine Calvin

    (Joint Global Change Research Institute - PNNL - Pacific Northwest National Laboratory - University of Maryland [College Park])

  • Kenichi Wada

    (NIES - National Institute for Environmental Studies)

  • Detlef Van Vuuren

    (Utrecht University [Utrecht])

Abstract

This paper explores a multi-model scenario ensemble to assess the impacts of idealized and non-idealized climate change stabilization policies on fossil fuel markets. Under idealized conditions climate policies significantly reduce coal use in the short-and long-term. Reductions in oil and gas use are much smaller, particularly until 2030, but revenues decrease much more because oil and gas prices are higher than coal prices. A first deviation from optimal transition pathways is delayed action that relaxes global emission targets until 2030 in accordance with the Copenhagen pledges. Fossil fuel markets revert back to the no-policy case: though coal use increases strongest, revenue gains are higher for oil and gas. To balance the carbon budget over the 21st century, the long-term reallocation of fossil fuels is significantly larger—twice and more— than the short-term distortion. This amplifying effect results from coal lock-in and inter-fuel substitution effects to balance the full-century carbon budget. The second deviation from the optimal transition pathway relaxes the global participation assumption. The result here is less clear-cut across models, as we find carbon leakage effects ranging from positive to negative because trade and substitution patterns of coal, oil, and gas differ across models. In summary, distortions of fossil fuel markets resulting from relaxed short-term global emission targets are more important and less uncertain than the issue of carbon leakage from early mover action.

Suggested Citation

  • Nico Bauer & Valentina Bosetti & Meriem Hamdi-Cherif & Alban Kitous & David Mccollum & Aurélie Méjean & Shilpa Rao & Hal Turton & Leonidas Paroussos & Shuichi Ashina & Katherine Calvin & Kenichi Wada , 2015. "CO 2 emission mitigation and fossil fuel markets: Dynamic and international aspects of climate policies," Post-Print hal-01586814, HAL.
  • Handle: RePEc:hal:journl:hal-01586814
    DOI: 10.1016/j.techfore.2013.09.009
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01586814
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Otto, Sander A.C. & Gernaat, David E.H.J. & Isaac, Morna & Lucas, Paul L. & van Sluisveld, Mariësse A.E. & van den Berg, Maarten & van Vliet, Jasper & van Vuuren, Detlef P., 2015. "Impact of fragmented emission reduction regimes on the energy market and on CO2 emissions related to land use: A case study with China and the European Union as first movers," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 220-229.
    2. Bauer, Nico & Hilaire, Jérôme & Brecha, Robert J. & Edmonds, Jae & Jiang, Kejun & Kriegler, Elmar & Rogner, Hans-Holger & Sferra, Fabio, 2016. "Assessing global fossil fuel availability in a scenario framework," Energy, Elsevier, vol. 111(C), pages 580-592.
    3. repec:gam:jeners:v:10:y:2017:i:8:p:1097-:d:105965 is not listed on IDEAS
    4. Arroyo-Currás, Tabaré & Bauer, Nico & Kriegler, Elmar & Schwanitz, Valeria Jana & Luderer, Gunnar & Aboumahboub, Tino & Giannousakis, Anastasis & Hilaire, Jérôme, 2015. "Carbon leakage in a fragmented climate regime: The dynamic response of global energy markets," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 192-203.
    5. Ridha, Firas N. & Manovic, Vasilije & Macchi, Arturo & Anthony, Edward J., 2015. "CO2 capture at ambient temperature in a fixed bed with CaO-based sorbents," Applied Energy, Elsevier, vol. 140(C), pages 297-303.
    6. repec:spr:climat:v:147:y:2018:i:1:d:10.1007_s10584-017-2132-8 is not listed on IDEAS
    7. Liobikienė, Genovaitė & Butkus, Mindaugas, 2017. "The European Union possibilities to achieve targets of Europe 2020 and Paris agreement climate policy," Renewable Energy, Elsevier, vol. 106(C), pages 298-309.
    8. repec:gam:jeners:v:10:y:2017:i:11:p:1784-:d:117810 is not listed on IDEAS
    9. Marcucci, Adriana & Fragkos, Panagiotis, 2015. "Drivers of regional decarbonization through 2100: A multi-model decomposition analysis," Energy Economics, Elsevier, vol. 51(C), pages 111-124.
    10. Paroussos, Leonidas & Fragkos, Panagiotis & Capros, Pantelis & Fragkiadakis, Kostas, 2015. "Assessment of carbon leakage through the industry channel: The EU perspective," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 204-219.
    11. Griffin, Paul A. & Jaffe, Amy Myers & Lont, David H. & Dominguez-Faus, Rosa, 2015. "Science and the stock market: Investors' recognition of unburnable carbon," Energy Economics, Elsevier, vol. 52(PA), pages 1-12.
    12. Kriegler, Elmar & Riahi, Keywan & Bauer, Nico & Schwanitz, Valeria Jana & Petermann, Nils & Bosetti, Valentina & Marcucci, Adriana & Otto, Sander & Paroussos, Leonidas & Rao, Shilpa & Arroyo Currás, T, 2015. "Making or breaking climate targets: The AMPERE study on staged accession scenarios for climate policy," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 24-44.
    13. Frederick Ploeg, 2018. "The safe carbon budget," Climatic Change, Springer, vol. 147(1), pages 47-59, March.
    14. Roland Hodler, Anna Bruderle, 2017. "The effect of oil spills on infant mortality," OxCarre Working Papers 196, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.

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