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Is CO2 Trading Always Beneficial? A CGE-Model Analysis on Secondary Environmental Benefits

Author

Listed:
  • Nilsson, Charlotta

    (National Institute of Economic Research)

  • Huhtala, Anni

    (National Institute of Economic Research)

Abstract

The paper analyzes the cost-efficiency of trading CO2 emissions by focusing on the overall environmental impacts of active climate policy measures. When reducing CO2 emissions, other emissions, also related to the consumption of fossil fuels, decrease with no additional cost. These secondary benefits must be taken into consideration when analyzing gains from international emissions trading. The Swedish environmental target to comply with the Kyoto Protocol by reducing greenhouse gases, and two national goals to alleviate acidification and eutrofication effects by reducing SO2 and NOx pollutants are simultaneously studied in a CGE-modeling framework. The results indicate that when secondary benefits are taken into account, it may still be in the government’s interest to decrease CO2 nationally, instead of engaging in seemingly low-cost trading.

Suggested Citation

  • Nilsson, Charlotta & Huhtala, Anni, 2000. "Is CO2 Trading Always Beneficial? A CGE-Model Analysis on Secondary Environmental Benefits," Working Papers 75, National Institute of Economic Research.
    • Handle: RePEc:hhs:nierwp:0075
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    References listed on IDEAS

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    1. Ian W.H. Parry & Roberton C. Williams III & Lawrence H. Goulder, 2002. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 25, pages 471-503, Edward Elgar Publishing.
    2. Kverndokk,S. & Rosendahl,E., 2000. "CO2 mitigation costs and ancillary benefits in the Nordic countries, the UK and Ireland : a survey," Memorandum 34/2000, Oslo University, Department of Economics.
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    4. Matsuo, Naoki, 1998. "Key elements related to the emissions trading for the Kyoto protocol," Energy Policy, Elsevier, vol. 26(3), pages 263-273, February.
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    Cited by:

    1. Oktaviani, Rina & Amaliah, Syarifah & Ringler, Claudia & Rosegrant, Mark W. & Sulser, Timothy B., 2011. "The impact of global climate change on the Indonesian economy:," IFPRI discussion papers 1148, International Food Policy Research Institute (IFPRI).
    2. Östblom, Göran & Samakovlis, Eva, 2004. "Costs of Climate Policy when Pollution Affects Health and Labour Productivity. A general Equilibrium Analysis Applied to Sweden," Working Papers 93, National Institute of Economic Research.
    3. Krook Riekkola, Anna & Ahlgren, Erik O. & Söderholm, Patrik, 2011. "Ancillary benefits of climate policy in a small open economy: The case of Sweden," Energy Policy, Elsevier, vol. 39(9), pages 4985-4998, September.
    4. Göran Östblom & Eva Samakovlis, 2007. "Linking health and productivity impacts to climate policy costs: a general equilibrium analysis," Climate Policy, Taylor & Francis Journals, vol. 7(5), pages 379-391, September.
    5. Bert Metz & Marcel Berk & Marcel Kok & Jelle van Minnen & Andre de Moor & Albert Faber, 2001. "How Can the European Union Contribute to a COP-6 Agreement? An Overview for Policy Makers," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 1(2), pages 167-185, April.
    6. Brita Bye & Snorre Kverndokk & Knut Rosendahl, 2002. "Mitigation costs, distributional effects, and ancillary benefits of carbon policies in the Nordic countries, the U.K., and Ireland," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 7(4), pages 339-366, December.
    7. Kverndokk,S. & Rosendahl,E., 2000. "CO2 mitigation costs and ancillary benefits in the Nordic countries, the UK and Ireland : a survey," Memorandum 34/2000, Oslo University, Department of Economics.
    8. Samakovlis, Eva, 2008. "How are Green National Accounts Produced in Practice?," Working Papers 105, National Institute of Economic Research.
    9. Terry Barker & Tom Kram & Sebastian Oberthür & Monique Voogt, 2001. "The Role of EU Internal Policies in Implementing Greenhouse Gas Mitigation Options to Achieve Kyoto Targets," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 1(2), pages 243-265, April.

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