• Energy Research

In this paper we use the CGE model DART to assess the economic impacts and optimality of different aspects of the EU climate package. A special focus is placed on the 10% biofuel target in the EU. In particular we analyze the development in the biofuel sectors, the effects on agricultural production and prices, and finally overall welfare implications. One of the main findings is that the EU emission targets alone lead to only minor increases in biofuel production. Additional subsidies are necessary to reach the 10% biofuel target. This in turn increases European agricultural prices by up to 7%. Compared to a cost-effective scenario in which the EU 20% emission reduction target is reached, additional welfare losses occur due to separated carbon markets and the renewable quotas. The biofuel target has relatively small negative or even positive welfare effects in some scenarios.

Abstract We carry out a detailed sensitivity analysis of border carbon adjustment (rates) by applying a global computable general equilibrium (CGE) GTAP7-based model. We find different incentives for the regions in the climate coalition to raise carbon-based border tax rates (BTAX) above the standard rate that mimics an equalisation of carbon prices across regions. Herein, the strategic use of BTAX (the manipulation of the terms of trade) is stronger for all coalition regions than the environmental use (the reduction of carbon emissions abroad). Higher BTAX can reduce carbon leakage but with a declining marginal effect. Furthermore, we find different incentives for regions outside the coalition to oppose high BTAX rates: Russia and the other energy exporters would oppose it, while the low-income countries would not because of benefits from the trade diversion effect. Thus, BTAX encourages the former to join the coalition, while compensating transfers are necessary to encourage the other (developing) countries including China and India.

Marginal abatement cost curves (MACCs) are one of the favorite instruments to analyze the impacts of the implementation of the Kyoto Protocol and emissions trading. As shown in this paper one important factor that influences MACCs are energy prices. This leads to the question of how to define MACCs in a general equilibrium context where the overall abatement level world wide influences energy prices and thus national MACCs. We first discuss the mechanisms theoretically and then use the CGE model DART to quantify the effects. The result is, that changes in energy prices resulting from different world wide abatement levels do indeed affect the national MACCs. Also, we compare different possibilities of defining MACCs - of which some turn out to be robust against changes in energy prices while others vary considerably.

This paper presents a modeling comparison on how stabilization of global climate change at about 2 °C above the pre-industrial level could affect economic and energy systems development in China and India. Seven General Equilibrium (CGE) and energy system models on either the global or national scale are soft-linked and harmonized with respect to population and economic assumptions. We simulate a climate regime, based on long-term convergence of per capita carbon dioxide (CO2) emissions, starting from the emission pledges presented in the Copenhagen Accord to the United Nations Framework Convention on Climate Change and allowing full emissions trading between countries. Under the climate regime, Indian emission allowances are allowed to grow more than the Chinese allowances, due to the per capita convergence rule and the higher population growth in India. Economic and energy implications not only differ among the two countries, but also across model types. Decreased energy intensity is the most important abatement approach in the CGE models, while decreased carbon intensity is most important in the energy system models. The reduction in carbon intensity is mostly achieved through deployment of carbon capture and storage, renewable energy sources and nuclear energy. The economic impacts are generally higher in China than in India, due to higher 2010-2050 cumulative abatement in China and the fact that India can offset more of its abatement cost though international emission trading.

Abstract Linking the EU and Chinese Emission Trading Systems (ETS) increases the cost-efficiency of reaching greenhouse gas mitigation targets, but both partners will benefit – if at all – to different degrees. Using the global computable-general equilibrium (CGE) model DART Kiel, we evaluate the effects of linking ETS in combination with 1) restricted allowances trading, 2) adjusted allowance endowments to compensate China, and 3) altered Armington elasticities when Nationally Determined Contribution (NDC) targets are met. We find that generally, both partners benefit from linking their respective trading systems. Yet, while the EU prefers full linking, China favors restricted allowance trading. Adjusted allowance endowments which shift reduction obligations to the EU cannot sufficiently compensate China so as to make full linking as attractive as restricted trading. Gains associated with linking increase with higher Armington elasticities for China, but decrease for the EU. Overall, the EU and China favor different options for linking ETS. Moreover, heterogeneous impacts across EU countries could cause dissent among EU regions, potentially increasing the difficulty of finding a linking solution favorable for all trading partners.

Abstract In this paper, we analyze how much the shipping sector could contribute to global CO2 emission reductions from an efficiency point of view. To do this, a marginal abatement cost curve (MACC) for the shipping sector is generated that can be combined with a MACC for conventional CO2 abatement in the production and consumption sectors around the world. These two MACCs are used to assess the following as regards the various global reduction targets: (a) what the maximum global cost savings would be that could be achieved by abating emissions in the shipping sector, (b) how much the shipping sector could contribute to abating emissions cost efficiently, and (c) what the potential additional costs of implementing a separate solution for the shipping sector would be. The focus is on the year 2020. We find that the shipping sector could always contribute to efficient global emission reductions and thus could always achieve global cost savings, but also that the size of the contribution and the size of cost savings depend heavily on the MACC case assumed, i.e., on how the existence of negative abatement costs is treated in a MACC, and on the reduction potentials and costs of measures assumed.

AbstractThe upcoming European Emissions Trading Scheme (ETS) is one of the more controversial climate policy instruments. Predictions about its likely impact and its performance can at present only be made to a certain degree. As long as the National Allocations Plans are not finally settled the overall supply of allowances is not determined. In this paper, we will identify key features and key impacts of the EU ETS by scanning the range of likely allocation plans using the simulation model DART. The analysis of the simulation results highlights a number of interesting details in terms of allowance trade flows between member states, of allowance prices and of the role of the accession countries in the ETS. An important finding about the impact of the new ETS with respect to achieving emission reductions more efficiently, i.e. at lower cost, is that savings can only be realized if the cap on emissions is distributed between the ETS sector and the rest of the economy in such a way that the different abatement costs are taken into account. This would imply a relatively small allocation of emissions to the ETS sector. The second important result concerns the role of the accession countries. Even if they do not supply their hot air in the ETS market, they contribute substantially to the cost savings of the ETS by offering low‐cost abatement options. Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment.