Marginal Abatement Costs of CO2 Emission Reductions, Geographical Flexibility and Concrete Ceilings: an Assessment Using the POLES Model

Institut d'Economie et de Politique de l'Energie, Université Pierre Mendès France, BP 47 38040 Grenoble Cedex 9, France
Energy Policy (Impact Factor: 2.58). 10/1999; 27(10):585-601. DOI: 10.1016/S0301-4215(99)00051-8
Source: RePEc

ABSTRACT The Kyoto Protocol envisage the setting-up of flexibility mechanisms allowing Annex B countries to fulfil their commitments to reducing greenhouse gases with respect for the principle of economic efficiency. The current negotiations relate in particular to the possibility of setting up a system of tradable emissions permits for Annex B countries and also of introducing “ceilings” to trade. This paper analyses the stakes and economic potential of adopting this instrument, both for those countries that made commitments in Kyoto and for developing countries. It is based on a formal approach that allows for a consistent framework of analysis. The emission permit market, is, in fact, simulated on the basis of a reference scenario and of marginal abatement cost curves and estimated by the POLES model; after analysing these marginal abatement cost curves and comparing them with those produced by other models, we explore two different configurations for a competitive market: a market limited to the Annex B countries and a world market. The results produced by the model show that widening the market to include developing countries is more effective than the Annex B market solution; it reduces the cost of implementing Kyoto for OECD countries and at the same time allows the countries of the South to benefit from selling the permits. This research also shows that introducing restrictions on exchanges for Annex B countries could have a counter-productive redistribution effect, with the ethical argument that underlies that particular measure.

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Available from: Patrick Criqui, Sep 26, 2015
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    • "Klepper and Peterson [2] declared that the definition of regional MACCs just " sounded convincing " , mainly discussing the role fossil fuel prices played in differentiating MACCs at firm and regional level theoretically, and used general equilibrium DART model for empirical simulations. Criqui, Mima and Viguier [3] generated MACCs from EPPA and POLES, and concluded that although social economic parameters, technological improvement and substitution elasticity varied across models, the rank of regional MACCs didn't change. Elzen and Lucas [4] used FAIR model, which linked long-term global abatement targets with regional emission quotas and abatement costs, illustrating evaluating regimes need both an assessment of initial allocation and distribution of abatement costs. "
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    ABSTRACT: ScienceDirect 1876-6102 © 2014 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license ( Peer-review under responsibility of the Organizing Committee of ICAE2014 Abstract The Kyoto Protocol inspires the idea of establishing emissions trading scheme, regarding economic-effectiveness as a significant factor to achieve reduction targets and meet obligation. With this trend, marginal abatement cost curves (MACCs) have been used in climate policy analysis under general equilibrium framework, and have been proved a valid device to highlight the superiority of ETS. This paper focuses on the comparison of MACCs at industry level in China, derived by us from CGE, GCAM and TIMES respectively. It's clear that there is no dynamic adjustment process in these models, so we use linear interpolation method to introduce carbon tax to simulate actual situation. Meanwhile, we also take data from potential and cost study into account. To make our work more targeted, we pay close attention to energy-intensive industries with high carbon emissions level such as electricity, cement and steel, which are most likely to be covered in carbon market. The results indicate how MACCs change and illustrate why they change, depending on applied methodology and underlying assumptions. As we ignore the indirect effects, for instance, tax distortions and non-financial costs during above simulation, the emissions abatement cost we achieve by using integral calculus won't be equivalent to real cost. Therefore, it's a wise decision for government department and research institute to be cautious when using MACCs as basis of policy making and academic studies.
    Energy Procedia 11/2014; 61:318-322. DOI:10.1016/j.egypro.2014.11.1115
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    • "POLES, however is a partial equilibrium model and treats growth rates as exogenous., It cannot therefore address the GDP cost of a strong low carbon option where there are real trade-offs between growth and climate policies and where there is a significant underemployment of resources in the short term, especially labor (Criqui et al., 1999). "
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    ABSTRACT: We investigate the trade-offs between economic growth and low carbon targets for developing and developed countries in the period up to 2035. Policy options are evaluated with an original version of the dynamic CGE model GDynE. Abatement costs appear to be strongly detrimental to economic growth for developing countries. We investigate options for reducing these costs that are consistent with a green growth strategy. We show that Green Climate Fund financed through a levy on carbon taxation can benefit all parties, and larger benefits are associated with investment of the Green Climate Fund to foster energy efficiency in developing countries.
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    • "An important aspect of MAC analysis is that structural factors might have a huge impact, and the results of similar abatement options might vary between different regional and local contexts. Initially, a low market price for energy relative to the introduced cost of CO 2 emissions would mean increased effects of the abatement policy [9]. "
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    ABSTRACT: Firms usually have optimization tools for evaluating various investment options; policymakers likewise need tools for designing economically efficient policies. One such tool is the MACC (marginal abatement cost curve), used to capture the least-cost sequence of abatement options. Such curves are also used for understanding the implications of government policies for markets and firms. This article explores dynamic path-dependent aspects of the Stockholm district heating system case, in which the performance of some discrete options is conditioned by others. In addition, it proposes adding a feedback loop to handle option redundancy when implementing a sequence of options. Furthermore, in an energy system, actions unrelated to climate change abatement might likewise affect the performance of abatement options. This is discussed together with implications for climate change policy and corporate investment optimization. Our results indicate that a systems approach coupled with a feedback loop could help overcome some of the present methodological limitations.
    Energy 09/2014; 76. DOI:10.1016/ · 4.84 Impact Factor
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