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A numerical model for cost effective mitigation of CO2 in the EU with stochastic carbon sink

  • Gren, Ing-Marie
  • Munnich, Miriam
  • Carlsson, Mattias
  • Elofsson, Katarina

This paper presents a model for the analysis of the potential of carbon sinks in the EU Emissions Trading Scheme (ETS) under conditions of stochastic carbon sequestration by forest land. A partial equilibrium model is developed which takes into account both the ETS and national commitments. Chance constraint programming is used to analyze the role of stochastic carbon sinks for national and EU-wide costs as well as carbon allowance price. The results show that the inclusion of the carbon sink option can reduce costs by as much as 2/3, but the cost saving is dampened when higher reliability of targets achievement is required. When carbon sinks are included, some countries with large carbon sequestration in relation to carbon emissions can achieve their national commitments without any costly reductions in energy use. However, cost estimates are sensitive to changes in assumed parameter values, in particular to changes in given business-as-usual levels of the use of fossil fuel.

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File URL: http://pub.epsilon.slu.se/9327/
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Paper provided by Swedish University of Agricultural Sciences, Department of Economics in its series Department of Economics publications with number 9327.

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Date of creation: 2009
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Handle: RePEc:sua:ekonwp:9327
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  1. Dahl, Carol & Sterner, Thomas, 1991. "Analysing gasoline demand elasticities: a survey," Energy Economics, Elsevier, vol. 13(3), pages 203-210, July.
  2. Bramoulle, Yann & Olson, Lars J., 2005. "Allocation of pollution abatement under learning by doing," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1935-1960, September.
  3. Fankhauser, Samuel & Smith, Joel B. & Tol, Richard S. J., 1999. "Weathering climate change: some simple rules to guide adaptation decisions," Ecological Economics, Elsevier, vol. 30(1), pages 67-78, July.
  4. Robert N. Stavins, 1999. "The Costs of Carbon Sequestration: A Revealed-Preference Approach," American Economic Review, American Economic Association, vol. 89(4), pages 994-1009, September.
  5. Wohlgemuth, Norbert, 1997. "World transport energy demand modelling : Methodology and elasticities," Energy Policy, Elsevier, vol. 25(14-15), pages 1109-1119, December.
  6. Olsthoorn, Xander, 2001. "Carbon dioxide emissions from international aviation: 1950–2050," Journal of Air Transport Management, Elsevier, vol. 7(2), pages 87-93.
  7. Holtsmark, Bjart & Maestad, Ottar, 2002. "Emission trading under the Kyoto Protocol--effects on fossil fuel markets under alternative regimes," Energy Policy, Elsevier, vol. 30(3), pages 207-218, February.
  8. , 2008. "Modelling aviation fuel demand: the case of the United States and China," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 32(4), pages 323-342, December.
  9. Elofsson, Katarina, 2003. "Cost-effective reductions of stochastic agricultural loads to the Baltic Sea," Ecological Economics, Elsevier, vol. 47(1), pages 13-31, November.
  10. Sally Kane & Jason Shogren, 2000. "Linking Adaptation and Mitigation in Climate Change Policy," Climatic Change, Springer, vol. 45(1), pages 75-102, April.
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