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Flexible Target Distribution and Emission Trading: Benefits and Implications

Explore the impact of redistributing emission reduction targets among Annex 1 regions and implementing emission trading. Analyze the outcomes of different scenarios with a focus on welfare implications for various regions. Identify key findings on permit trading, welfare changes, and participation in the proposed regime.

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Flexible Target Distribution and Emission Trading: Benefits and Implications

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  1. GTAP_E Presented by Belay Fekadu, Farzad Taheripour, Patrick Georges, David Mayer-Foulkes, Marianne Aasen, Hyun-Sik Chung, Kenatro Katsumata, Christa Clapp

  2. Presentation Outline

  3. Annex 1 without USA

  4. Emissions targets • Present Kyoto vs. Post-Kyoto flexible target (E.g. Emission/ GDP (i.e. emission intensity) as a new flexible target variable.) • We are pessimistic: Kyoto target not reached • Redistribute reduction target such that reduction intensity ratio (=total Annex 1 reduction/Annex 1 GDP) be the same for all Annex 1 regions.

  5. Reduction intensity ratio: sum reductions Annex 1 / sum GDP Annex 1 -837.2 / 22544597.25 = -3.714E-05 - Multiply the ratio with GDP of each Annex region to get redistribution of Kyoto reduction Experiment: • Emission trading among Annex 1 countries • 2 scenarios: Kyoto and “our” distribution of Kyoto reduction target

  6. Redistribution of Kyoto-reductions

  7. New shocks in the model

  8. The Results and Analysis • When emission trading allowed, initial allocation of emission quotas doesn’t matter. Each region has the same percentage reduction in emissions in the two scenarios. Reduction emission (%)

  9. ..but it matters to welfare..?

  10. USA becomes exporter of permits in our scenario

  11. Summing up and conclusion • USA largely gains from permit trading, and minor gains from tot improvement • EU loses more in scenario two, since they have to buy more permits • EEFSU gain less in scenario two, due to decrease in revenue from permit trading • Japan loses more in scenario two, since buy more permits • RoA1 lose less in our scenario, buy less permits • USA will participate in our regime!

  12. Summing up and conclusion • With our scenario, US gains from staying in Annex 1 group • In Kyoto scenario, they don’t, and left

  13. Energy Substitution Possibilities

  14. Tax Replacement Implications

  15. Concluding Comments

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