Elsevier

Energy Policy

Volume 55, April 2013, Pages 73-81
Energy Policy

A comparability analysis of global burden sharing GHG reduction scenarios

https://doi.org/10.1016/j.enpol.2012.10.044Get rights and content

Abstract

The distribution of the mitigation burden across countries is a key issue regarding the post-2012 global climate policies. This article explores the economic implications of alternative allocation rules, an assessment made in the run-up to the COP15 in Copenhagen (December 2009). We analyse the comparability of the allocations across countries based on four single indicators: GDP per capita, GHG emissions per GDP, GHG emission trends in the recent past, and population growth. The multi-sectoral computable general equilibrium model of the global economy, GEM-E3, is used for that purpose. Further, the article also compares a perfect carbon market without transaction costs with the case of a gradually developing carbon market, i.e. a carbon market with (gradually diminishing) transaction costs.

Highlights

► Burden sharing of global mitigation efforts should consider equity and efficiency. ► The comparability of allocations across countries is based on four indicators. ► The four indicators are GDP/capita, GHG/GDP, population growth, and GHG trend. ► Any possible agreement on effort comparability needs a combination of indicators. ► We analyse the role played by the degree of flexibility in global carbon trading.

Introduction

The UNFCCC Copenhagen Accord and Cancun Agreements (UNFCCC, 2009, UNFCCC, 2010) on climate policy recognise that deep cuts in global greenhouse gas (GHG) emissions are needed “so as to hold the increase in global temperature below 2 °C above pre-industrial levels”. The required emission reductions in both developed and developing countries to meet the 2 degrees target are very substantial in the 2050 time horizon, which will lead to a major transformation of the energy and economic systems worldwide. World GHG emissions will be cut by 50% globally in 20501. The leaders of the G8 have supported the goal of developed countries to reduce GHG emissions by at least 80% by 2050 (G8, 2009). The EU recently put forward a roadmap detailing a transition scenario in order to reduce its domestic GHG emissions by 80% in 2050 (European Commission, 2011a, European Commission, 2011b).

In the Copenhagen Accord most major world economies announced for the first time a list of reduction commitments, known as ‘pledges’2, with a 2020 time horizon. For instance, the European Union (EU) will unilaterally reduce its GHG emissions by 20% compared to 19903. Moreover, the EU has made a conditional offer to move to a 30% reduction, provided that other developed countries commit themselves to comparable emission reductions and that more advanced developing countries contribute adequately according to their responsibilities and respective capabilities (UNFCCC, 2011).

The main purpose of this article is to present the ex-ante modelling assessment of the Copenhagen negotiations4 to inform the European Commission position in the run-up to UN Climate Change Conference in Copenhagen in 20095. The analysis uses the computable general equilibrium (CGE) GEM-E3 model, which covers the interactions between economy, energy system and environment (Capros et al., 2010).

A key issue before the Copenhagen meeting was the burden sharing of the global mitigation effort between countries. Indeed, the cross-country comparison of the global mitigation effort in the 2020 time horizon is a fundamental difficulty in reaching an international agreement on a comprehensive and ambitious global mitigation policy. While many multi-sectoral CGE papers (e.g. Burtraw et al., 2001, Morgenstern et al., 2002) study the allocation of GHG emissions across industries and sectors, this paper emphasises the different outcomes of the alternative emission allocations across countries in different low-carbon emission scenarios.

These allocations across countries were based on a set of four indicators6 that relate to country characteristics often brought forward in the international negotiations on climate change as reasons why specific countries should reduce less or more when discussing comparability. These indicators are described as simple because they are based on indicators that are readily available and that can be easily linked to the mitigation potential by policy makers.

Firstly, GDP per capita is chosen as an indicator of the ability to pay for mitigation actions. Secondly, the greenhouse gas (GHG) intensity of the economy, defined as GHG emissions per GDP, is an indicator of the potential to reduce emissions. Thirdly, the observed GHG emission trend in the recent past is considered an indicator to reward previous action, and is applied specifically for those developed countries that have GHG reduction targets listed under annex B of the Kyoto Protocol. Fourthly, population growth, as a proxy for future population growth, assigns relatively less demanding emission reduction targets to countries that experience higher population growth than others.

The GEM-E3 model was run to quantify the macroeconomic implications of the targets implied by each of the four allocation indicators separately. A fifth scenario, resulting from a combination of the four indicators, was studied, called ‘Central Scenario’. Furthermore, the second purpose of this article is to document the analysis of the role played by the degree of flexibility in global carbon trading. The article compares the ideal case of a perfect market without transaction costs with the case of a gradually developing carbon market, i.e. a carbon market with (gradually diminishing) transaction costs.

This article has five more sections. Section 2 presents the methodology and, in particular, the features of the GEM-E3 general equilibrium model and the baseline scenario. Section 3 describes different global mitigation scenarios according to the noted allocation indicators for burden sharing. Section 4 analyses the macro-economic impact of the global mitigation scenarios. Section 5 addresses the role of a global carbon market. Finally, Section 6 concludes.

Section snippets

Methodology

This section presents the main features of the GEM-E3 model. In a second subsection, the baseline scenario is analysed. The baseline scenario is essential as it is the reference with which the reduction scenarios are compared.

Global mitigation scenarios

This section details the specification of the five global mitigation scenarios. The group of developed countries have a 27.3% reduction target in 2020 compared to 2005. For the developing countries, it was assumed that they would also introduce internal actions such that, combined with the targets for developed countries, global emission growth by 2020 is limited to an increase of around 20% compared to 1990. The indicators used to make the country allocation are discussed in Section 3.1.

Economic implications of various allocations

This section gives the effects on the economic welfare, GDP, employment and private consumption of the developed countries of the targets listed in Table 2 for the four ‘single-indicator scenarios’, and for the ‘central scenario’. The targets for the developing countries (as in Table 3) are kept identical across all 5 different allocations for the developed countries. All scenarios use free allocation (grandfathered permits), both for the EU and the other countries.

Role of global carbon market

The carbon market may have a crucial role to play in order to implement the climate policies in a cost-efficient way. It is not only a manner to reduce overall costs; it also is a mechanism that links climate policies in the developed and developing world. In our scenarios, the emission trading between developed countries and offsetting mechanisms in developing countries are limited to the sectors which are typically part of the EU ETS, i.e. the energy-intensive sectors. In Section 4, it was

Conclusions

The article presents an ex-ante modelling assessment analysis in the run-up to UN Climate Change Conference in Copenhagen in 2009. Anno 2012, and after the conferences in Cancun and Durban, a global climate policy agreement for 2020 and beyond is still under discussion. A key issue in the on-going international negotiations for the post-2012 period relates to the economic effects of alternative mitigation targets across developed countries (and developing countries). The distribution of

Acknowledgements

The authors would like to thank the two anonymous referees and the editor for their comments.

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    The opinions expressed in this paper belong to the authors only and should not be attributed to the institutions they are affiliated to. The authors would like to thank the editor and the two anonymous referees.

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