Climate Change 2001:
Working Group III: Mitigation
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8.2 Impacts of Domestic Policies

Evaluation of the economic impacts of domestic mitigation policies can no longer be made independently of the linkages between these policies and the international framework. However, it is important to disentangle the mechanisms that are themselves independent of the international regimes from those specifically driven by the interplay between these regimes and domestic policies. In addition, the existence of an international framework does not rule out the importance of domestic policies for addressing the specific problems of each country.

This section basically relies on national studies, including integrated economic regions such as the European Union (EU), but it also reports the results of multiregional studies for the concerned countries or region.

Table 8.1: List of the models referred to in this chapter
Model
Region
Reference
ABARE-GTEM
USA/EU/Japan/CANZ
In Weyant, 1999
ADAM
Denmark
Andersen et al., 1998
AIM
USA/EU/Japan/CANZ
in: Weyant, 1999
Japan
Kainuma et al., 1999; Kainuma et al., 2000
China
Jiang et al., 1998
CETA
USA/EU/Japan/CANZ
In: Weyant, 1999
E3-ME
UK/EU/World
Barker 1997, 1998a, 1998b, 1998c, 1999
ELEPHANT
Denmark
Danish Economic Council, 1997; Hauch, 1999
ECOSMEC
Denmark
Gørtz et al., 1999
ERIS
 
Kypreos et al, 2000
G-Cubed
USA/EU/Japan/CANZ
In: Weyant, 1999
GEM-E3
EU
Capros et al., 1999cvv
GEM-E3
Sweden
Nilsson, 1999
GemWTrap
France/World
Bernard and Vielle, 1999a, 1999b, 1999c
GESMEC
Denmark
Frandsen et al., 1995
GRAPE
USA/EU/Japan/CANZ
In: Weyant, 1999
IMACLIM
France
Hourcade et al., 2000a
IPSEP
EU
Krause et al., 1999
ISTUM
Canada
Jaccard et al., 1996; Bailie et al., 1998
MARKAL
World
Kypreos and Barreto, 1999
Canada
Loulou and Kanudia, 1998, 1999a and 1999b; Loulou et al., 2000
Ontario (Canada)
Loulou and Lavigne, 1996
Quebec, Ontario, Alberta
Kanudia and Loulou, 1998b; Kanudia and Loulou, 1998a; Loulou et al., 1998
Canada, USA, India
Kanudia and Loulou, 1998b
EU
Gielen, 1999; Seebregts et al., 1999a, 1999b; Ybema et al., 1999
Italy
Contaldi and Tosato, 1999
Japan
Sato et al., 1999
India
Shukla, 1996
MARKAL-MACRO
World
Kypreos, 1998
USA
Interagency Analytical Team, 1997
MARKAL-MATTER
EU
Gielen et al., 1999b, 1999c
MARKAL and EFOM
EU
Gielen et al., 1999a; Kram, 1999a. 1999b
Belgium, Germany, Netherlands, Switzerland
Bahn et al., 1998
Switzerland, Colombia
Bahn et al., 1999a
Denmark, Norway, Sweden
Larsson et al., 1998
Denmark, Norway, Sweden, Finland
Unger and Alm, 1999
MARKAL Stochastic
Quebec
Kanudia and Loulou, 1998a
Netherlands
Ybema et al., 1998
Switzerland
Bahn et al., 1996
MEGERES
France
Beaumais and Schubert, 1994
MERGE3
USA/EU/Japan/CANZ
In: Weyant, 1999
MESSAGE
World
Messner, 1995
MISO and IKARUS
Germany
Jochem, 1998
MIT-EPPA
USA/EU/Japan/CANZ
In: Weyant, 1999
MobiDK
Denmark
Jensen, 1998
MS-MRT
USA/EU/Japan/CANZ
In: Weyant, 1999
MSG
Norway
Brendemoen and Vennemo, 1994
MSG-EE
Norway
Glomsrød et al., 1992; Alfsen et al., 1995; Aasness et al., 1996; Johnsen et al., 1996
MSG-6
Norway
Bye, 2000
MSG and MODAG
Norway
Aaserud, 1996
NEMS + E-E
USA
Brown et al., 1998; Koomey et al., 1998; Kydes, 1999
Oxford
USA/EU/Japan/CANZ
In: Weyant, 1999
POLES
USA, Canada, FSU, Japan, EU,Australia, New Zealand
Criqui and Kouvaritakis, 1997; Criqui et al., 1999
PRIMES
Western Europe
Capros et al., 1999a
RICE
USA/EU/Japan/CANZ
In: Weyant, 1999
SGM
USA/EU/Japan/CANZ
In: Weyant, 1999v
SPIT
UK
Symons et al., 1994
SPIT
Ireland
O’Donoghue, 1997
WorldScan
USA/EU/Japan/CANZ
In: Weyant, 1999

CANZ: Other OECD countries (Canada, Australia, and New Zealand);
FSU: Former Soviet Union.

 

8.2.1 Gross Aggregated Expenditures in Greenhouse Gas Abatements in Technology-rich Models

In technology-rich B-U models and approaches, the cost of mitigation is constructed from the aggregation of technological and fuel costs. These include investments, operation and maintenance costs, and fuel procurement, but also included (and this is a recent trend) are revenues and costs from imports and exports, and changes in consumer surplus that result from mitigation actions. In all the studies, it is customary to report the mitigation cost as the incremental cost of some policy scenario relative to that of a baseline scenario. The total cost of mitigation is usually presented as a total net present value (NPV) using a social discount rate selected exogenously (the NPV may be further transformed into an annualized equivalent). Many (but not all) report also the marginal cost of GHG abatement (in US$/tonne of CO2-equivalent), which is the cost of the last tonne of GHG reduced. Chapter 7 discusses cost concepts and discount rates in more depth.

Current B-U analysis can be grouped in three categories:

The boundaries between these three categories is somewhat blurred. For instance, NEMS and PRIMES do include behavioural treatment of some sectors, and MARKAL models use special penetration constraints to limit the penetration of new technologies in those sectors in which resistance to change has been empirically observed. Conversely, ISTUM has recently been enhanced to allow the iterative computation of a partial equilibrium (the new model is named CIMS).

Several studies go further: they are based on partial equilibrium models in which energy service demands are sensitive to prices. Therefore, even the quantities of energy services may increase or decrease in carbon scenarios, relative to the base case. For these models report not only the direct technical costs, but also the loss or gain in consumer surplus because of altered demands for energy services. The results of this new generation of partial equilibrium B-U models tend to be closer than those of other B-U models to the results of the general equilibrium T-D models, which are also discussed in this chapter. Loulou and Kanudia (1999) argue that, by making demands endogenous in B-U models, most of the side-effects of policy scenarios on the economy at large are captured. When a partial equilibrium model is used, the cost reported is the net loss of social surplus (NLSS), defined as the sum of losses of producers and consumers surpluses (see Chapter 7).

As is apparent from the results presented below, considerable variations exist in the reported costs of GHG abatement. Some of these differences result from the inclusion/exclusion of certain types of cost in the studies (e.g., hidden costs and welfare losses), others from the methodologies used to aggregate the costs, others from the feedback between end-use demand and prices, and still others from genuine differences between the energy systems of the countries under study. However, the most significant cause of cost variations seems to lie not only (see also Chapter 9) in methodological differences, but in the differences in assumptions. Finally, although most recent B-U results consider the abatement of a fairly complete basket of GHG emissions from all energy-related sources, a few essentially focus on CO2 abatement only and/or on selected sectors, such as power generation. In this chapter, only results are reported that have sufficient scope to qualify as GHG abatement costs in most or all sectors of an economy.

To facilitate the exposition of the various results, the rest of this subsection is divided into four parts, as follows:



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