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The direct costs for fossil fuel consumption are accompanied by environmental and public health benefits associated with a reduction in the extraction and burning of the fuels. These benefits come from a reduction in the damages caused by these activities, especially a reduction in the emissions of pollutants that are associated with combustion, such as SO2, NOx, CO and other chemicals, and particulate matter. This will improve local and regional air and water quality, and thereby lessen damage to human, animal, and plant health, and to ecosystems. If all the pollutants associated with GHG emissions are removed by new technologies or end-of-pipe abatement (for example, flue gas desulphurization on a power station combined with removal of all other non-GHG pollutants), then this ancillary benefit will no longer exist. But such abatement is limited at present and it is expensive, especially for small-scale emissions from dwellings and cars (See also Section 8.6).
Mitigation policies are less effective if they lead to loss of international competitiveness or the migration of GHG-emitting industries from the region implementing the policy (so-called carbon leakage). The estimated effects, reported in the literature, on international price competitiveness are small while those on carbon leakage appear to beat the stage of competing explanations, with large differences depending on the models and the assumptions used. There are several reasons for expecting that such effects will not be substantial. First, mitigation policies actually adopted use a range of instruments and usually include special treatment to minimize adverse industrial effects, such as exemptions for energy-intensive industries. Second, the models assume that any migrating industries will use the average technology of the area to which they will move; however, instead they may adopt newer, lower CO2-emitting technologies. Third, the mitigation policies also encourage low-emission technologies and these also may migrate, reducing emissions in industries in other countries (see also Section 8.7).
The results in the studies assessed come from different approaches and models. A proper interpretation of the results requires an understanding of the methods adopted and the underlying assumptions of the models and studies. Large differences in results can arise from the use of different reference scenarios or baselines. And the characteristics of the baseline can markedly affect the quantitative results of modelling mitigation policy. For example, if air quality is assumed to be satisfactory in the baseline, then the potential for air-quality ancillary benefits in any GHG mitigation scenario is ruled out by assumption. Even with similar or the same baseline assumptions, the studies yield different results.
As regards the costs of mitigation, these differences appear to be largely caused by different approaches and assumptions, with the most important being the type of model adopted. Bottom-up engineering models assuming new technological opportunities tend to show benefits from mitigation. Top-down general equilibrium models appear to show lower costs than top-down time-series econometric models. The main assumptions leading to lower costs in the models are that:
Finally, long-term technological progress and diffusion are largely given in the top-down models; different assumptions or a more integrated, dynamic treatment could have major effects on the results.
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