Publication : Environmental And Economic Effects Of The Copenhagen Pledges And More Ambitious Emission Reduction Targets

Source : Science Direct
June 06, 2011

Everett B. Petersona, Joachim Schleicha, and Vicki Duscha

a Department of Agricultural and Applied Economics, Virginia Polytechnic Institute & State University, 202A Hutcheson Hall, Blacksburg, VA 24061, USA
b Fraunhofer Institute for Systems and Innovation Research Breslauer Strasse 48, 76139 Karlsruhe, Germany
c Grenoble Ecole de Management, 12, rue Pierre Sémard, BP 127, 38003 Grenoble Cedex 01, France
Received 21 July 2010;
accepted 30 March 2011.
Available online 20 April 2011.

A multi-region, multi-sector dynamic computable general equilibrium model is applied to explore the economic and welfare effects of the pledges submitted by developed countries (Annex I countries) and major developing (non-Annex I) countries for 2020 under the Copenhagen Accord. In addition to analyzing scenarios reflecting the upper and lower bounds of the Copenhagen Pledges, one additional policy scenario where Annex I countries as a group reduce CO2-emissions by 30% in 2020 compared to 1990 levels, and where major non-Annex I countries reduce CO2 emissions 15% below baseline, is also analyzed. Economic effects are measured as changes in GDP compared to baseline and welfare effects are measured via the equivalent variation. Assuming that countries with emission targets may trade certificates, average reductions in GDP for countries with targets range between 0.1% and 0.7% in 2020 for the policy scenarios. While the GDP losses are larger for major non-Annex I countries with emission targets compared to Annex I countries, this is not the case for the changes in welfare. With the exception of Mexico, the welfare losses for the major non-Annex I regions, as a percentage of projected GDP in 2020, are lower than for the large Annex I countries.

► Copenhagen pledges are not ambitious in terms of global CO2-emission reductions. ► Copenhagen pledges are not costly in terms of global GDP or welfare losses. ► Reductions in GDP and welfare in 2020 are not evenly distributed across regions.► Major non-Annex I countries face relatively larger reductions in GDP compared with Annex I countries.► Copenhagen pledges do not result in large amounts of carbon leakage.

Keywords: Copenhagen Accord; Post-Kyoto; climate policy
Article Outline

2.Emission targets
3.1. Description of DYE-CLIP model
3.2. Simulations
4.Model results
4.1. Certificate prices
4.2. Emissions trading, surplus AAUs and leakage
4.3. Gross domestic product
4.4. Welfare effects

Corresponding author at: Fraunhofer Institute for Systems and Innovation Research Breslauer Strasse 48, 76139 Karlsruhe, Germany. Tel: +49 721 6809203; fax: +49 721 6809272.

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