Climate Change 2001:
Working Group III: Mitigation
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Static Eficiency
This argument is related to the positive allocative effects caused by trade. The argument is fundamentally dependent on the assumption of differences in the marginal reduction costs between countries in a well-defined market. This might lead to gains arising from trade for both sides. Trade reduces the overall costs of compliance with any specified set of internationally accepted reduction targets. Lile et al. (1999) and Edmonds et al. (1996) find the rationale for Annex I countries is that reduction costs in developing countries are much lower than their own. Ellerman et al. (1998) and Holtsmark and Hagem (1998) arrive at similar conclusions. However, some bottom-up, project-based country studies that quantify national mitigation-cost curves and the consequences (e.g., Jackson (1995); EC 1999)) identify lower mitigation costs in developed countries and thus smaller cost differences internationally. Table 10.8 gives studies on the costs of Kyoto targets under different flexibility arrangements.

Table 10.8: Studies on costs of Kyoto targets under different grades of where-flexibility
In this table the essential results (welfare implications) are presented with respect to achieving the Kyoto targets under different institutional seetings for the use of flexibility instruments. The following features are summarized in the table:
1. Reference and year of publication; footnote says where the reference is available
2. Welfare measure and scenario; the scenarios are not all with respect to the Kyoto-targets and the welfare measure is not the same in all studies
3. Different grades of “where-flexibility”
4. Comments on the study summarizes the most important features of the models used for the study.

Study Welfare measure and scenario Different grades Comments
No trade Double-bubble23 Less than A1 trade24 x%-Cap25 Annex 1 trade More than A1 trade26 A 1 trade +CDM Full/global trade
McKibbin, Shackelton and Wilcoxen (1999) %-change of GNP per region in 2010;
not Kyoto: Stab. at 1990 level
USA: -.5
Jap: -.1
Aus: -2.2
OtherOECD (OOECD): -1.2
OECD
USA: -.5
Jap: -.3
Aus: -1.5
OOECD: -.9
gain $90 bil27 US-unilateral reduction: -.6
            G-Cubed(Global General Equilibrium Growth Model), fossil fuels only; with monetary effects, no ‘no-regret’, 8 regions, 12 sectors, no terms of trade, capital flows, 1995$
McKibbin, Shackelton and Wilcoxen (1998) %-change of GNP per region in 2010;
not Kyoto: Stab. at 1990 level
USA:-.3
Jap:-.8
Aus:-2.5
OOECD:-1.4
Chi:0
LDC:+2.7
USA:+.1
Jap:-.1
Aus:-1.3
OOECD:-1.2
Chi:0
LDC:+1.8
    USA:-.2
Jap:-.2
Aus:-2
OOECD:-.5
Chi:0
LDC:+1.4
    USA:0
Jap:0
Aus:-.7
OOECD:-.2
Chi:-.5
LDC:+.228
 
McKibbin, Ross, Shackelton and Wilcoxen (1999) %-change of GNP per Region in 2010;
not Kyoto: Stab. at 1990 level
USA:-.6
Jap:-.5
Aus:-1.6
OOECD:-1.3
Chi:-.1
LDC:+.7
      USA:-.5
Jap:-.4
Aus:-.8
OOECD:-.6
Chi:-.1
LDC:+.7
    USA:-.2
Jap:-.1
Aus:-.4
OOECD:-.2
Chi:-.4
LDC:0
 
Bernstein, Montgomery, Rutherford and Yang (1999) Hicks Equivalent Variation (HEV), %-change from baseline per region, Protocol costs USA: -.5
Jap: -.6
EU15: -.4
OOE: -1.
SEA: -.2
OAS: .1
Chi: +.3
FSU: -.4
MPC: -1.4
ROW: -.1
      US: -.25
Jap: - .25
EU15: -.25
OOE: -.75
SEA: 0
OAS: 0
Chi: +.3
FSU: +4.4
MPC: -1.1
ROW: -.1
    US: -.2
Jap: 0
EU15 -.1
OOE: -.4
SEA: +.25
OAS: +.2
Chi: +.25
FSU: -.4
MPC: -.3
ROW: 0
MS-MRT (Multi-sectoral, multi-regional General Equilibrium Model) (GEM), terms-of-trade, capital flows, leakage, 10 regions, 5 energy, 4 non-energy sectors, 1995$
Bernstein, Montgomery and Rutherford (1999) HEV US:-.56
Jap:-.64
EU:-.45
OOE:-.92
SEA:-.18
OAS:-.1
Chi:+.34
FSU:-.42
MPC:-1.39
ROW:-.1
    US:-.43
Jap:-.52
EU:-.33
OOE:-.78
SEA:-.13
OAS:-.08
Chi:+.31
FSU:+.05
MPC:-1.26
ROW:-.0829
US:-.36
Jap:-.23
EU:-.25
OOE:-.76
SEA:-.04
OAS:-.01
Chi:+.22
FSU:+4.44
MPC:-1.15
ROW:-.08
  US:-.32
Jap:-.18
EU:-.20
OOE:-.67
SEA:+.06
OAS:+.09
Chi:+.55
FSU:+3.47
MPC:-.92
ROW:+.0130
US:-.14
Jap:-.03
EU:-.05
OOE:-.3
SEA:+.25
OAS:+.19
Chi:+.34
FSU:+.48
MPC:-.36
ROW:+.03
MS-MRT GEM, GTAP4 Database, 10 regions, 3 fuels and electrical sectors, 2 goods
          US:-.34
Jap:-.31
EU:-.25 OOE:-.71
SEA:-.07
OAS:-.05 Chi:+.25
FSU:+2.18
MPC:-1.17 ROW:-.08
        Annex-I – B30: 30% ceiling for buyers; this restricts imports of TP
                  Annex-I – B50: 50% ceiling for buyers; this restricts imports of TP
                  Annex-I – S50: 50% ceiling for sellers; this restricts exports of TP
                  No Hot Air: The QUELRCS31 for FSU and EE are set to their baseline values
          US:-.35,
Jap:-.24
EU:-.24
OOE:-.75
SEA:-.05
OAS:-.02
Chi:+.22
FSU:+4.18
MPC:-1.15
ROW:-.08
         
          US:-.43
Jap:-.30
EU:-.30
OOE:-.80
SEA:-.08
OAS:-.05
Chi:+.23
FSU:+4.57
MPC:-1.15
ROW:-.08
         
          US:-.39
Jap:-.24
EU:-.25 OOE:-.82
SEA:-.02
OAS:.03
Chi:+.26
FSU:+4.27
MPC:-1.23
ROW:-.03
         
Cooper et al. (1999) Change in potential output (GDP) in 2010 in % US:-2.5 (-1.8)
Ca:-3.9
Jp:-1.8 (-1.9)
Ge:-2.2(-2.4)
Fr:-2.2(-2.2)
It:-2.3
UK:-1.9
EU:-2.2
Chi:+1.6
Rus:+0.9
US:-1.(-.5)
Ca:-1.
Jap:-.3(-.3)
Ger:-2.2(-4.9)
Fr:-2.2(-2.2)
It:-2.3
UK:-1.8
EU:-2.2
Chi:+.7
Rus:-1.(+2.5 income)
    US:-1.4(-.8)
Ca:-1.2
Jap:-.5(-.5)
Ger:-.8(-.9)
Fr:-.6(-.5)
It:-.7
UK:-1.
EU:-.7
Chi:+.6
Rus:-1.4 (+4.income)
      Oxford Model, Energybased macroeconomic GEM, 6 fuels, 4 sectors, 22 regions
Tulpulé (1998, 1999) %-loss of GNP Annex 1: -1.2
Non-Annex I: 0
Annex I: -.3
Non-Annex I: 0
    Annex I: -.3
Non-Annex I: 0
      GTEM, GTAP3-database, 19 regions, 16 tradeables, S(y)=j(i), transport costs for trade
Brown et al. (1999) % loss of GNP, global -.8       -.2       GTEM, GTAP 4 –database, 18 regions, 23 tradeables, 3 GHG GWP:1,21,310; technological change rising with GHG-penalty, ref-scen = no policy, 1992 $
Böhringer (1999) (CO2 -emissions in bill. tCO2) HEV, % of BAU income -.2 (28.51)     -.15 (28.74) -.04 (29.03)       global GEM, GTAP4 and OECD/ IEA- data, 7 sectors, 11 Regions
Manne and Richels (1997) consumption loss 1990- 2100 discounted with 5% to 1990 in $ WG1 8.7 tril       5.9 tril     3.2 tril  
10% cut in 2010 4.4 tril       2.7 tril     1.9 tril  
WRE 1.8 tril       0.9 tril     0.8 tril  
Manne and Richels (1998) annual US- Costs, 1990 bill. $ in 2010 (2020) 85 (102)           51 (77), 15 % of potentials available due to complexities of flexibility instruments 23 (45) MERGE 3.0 (model for evaluating the regional and global effects of GHG reduc- tion policies), 9 regions, leakage, Global Trade (GT) non- AI restricted by baseline bounds,
Manne and Richels (1999b) Kyoto Forever => K-constraints through 21 st c. for AI and baseline for NonAI (no leakage); US GDP loss in bil $ 87     (a) 55
(b) 61
1/ 3 limitation of satisfying Kyoto obligations by AI- countries
    49 15 % of potential available 23 (a) buyers market - sellers are price takers
(b) sellers market – buyers are price takers
Capros (1998) costs only for regions and not Kyoto targets (15%), EU     * with 15%           POLES for world level, extensive assessment for EU
Holtsmark (1998) % loss of 1990 GDP per country USA:+.49
Ca:+.51
EU32 :-.05
DK:+.59
Fin: 0
Swe: 0
Nor:+ 1.36
Rus:+.17
OthEIT:-.07
AuNZ:+.24
Jap:+.09
N-AI:+.91
      USA:+.48
Ca:+.5
EU:-.07
DK:+.37
Fin: 0
Swe: 0
Nor:+1.22
Rus:+.16
OthEIT:-.07
AuNZ:+.17
Jap:+.08
N- AI:+.46
    USA:+.4
Ca:+.42
EU:-.04
DK:+.25
Fin: 0
Swe: 0
Nor:+1.26
Rus:-.4
OthEIT:-.27
AuNZ:+.17
Jap:+.07
N-AI:+.42
partial & static ACT, strategic OPEC, 3 regional gas markets, multi GHG, national tax with marginal excess burden to account for double dividend hypothesis, no “no regrets”, terms of trade
Holtsmark and Hagem (1998) Costs in % of 1990 GDP per country,
EU targets are differentiated as agreed in June 1998
USA:+.29
Ca:+.46
EU:-.12
DK:+.53
Fin:-.12
Swe:+.08
Nor:+ 1.23
Rus:-.18
OthEIT:-.15
AuNZ:+.06
Jap-.08:
N-AI:+.13
      USA:+.27
Ca:+.42
EU:+.15
DK:+.23
Fin:-.11
Swe:+.02
Nor:+1.18
Rus:-.17
OthEIT:-.14
AuNZ:-.36
Jap:-.07
N-AI:+.11
    USA:+.18
Ca:+.3
EU:-.11
DK:+.1
Fin:-.1
Swe:-.1
Nor:+1.23
Rus:-.33
OthEIT:+.33
AuNZ:-.12
Jap:-.07
N-AI:+.08
partial & static ACT, strategic OPEC, 3 regional gas markets, multi GHG, national tax with marginal excess burden to account for double dividend hypothesis, no “no regrets”, terms of trade
Sands et al. (1998) US Costs; non- Kyoto- Targets, 4 policy scenarios: e. g.: 1990 + 10% (M90+ 1) M90:+.2
M90+.1:+.07
M90-.1:+.43
M95:+.07
      M90:-.18     M90:-.09 SGM, IEA and Government- data, 7 regions, 9 prod sectors, input sectors, determines global C- tax, hot air
Kainuma et al. (1998), (1999) % GDP loss per region; Asia USA:+.4
Jap:+.25
EU:+.3
EEFSU:+.2
Chi:+.2
Ind:-.25
Kor:-.55
MEA:+.15
USA:+.3
Jap:+.05
EU:+.4
EEFSU:- 2.2
Chi:+.15
Ind:-.15
Kor:-.35
MEA:+.8
    USA:+.3
Jap:+.15
EU:+.3
EEFSU:-3.6
Chi:+.2
Ind:-.15
Kor:-.25
MEA:+.65
USA:+.3
Jap:+.1
EU:+.15
EEFSU:-2.7
Chi:+.4
Ind:-.15
Kor:-.35
MEA:+.633
 

USA:+.2
Jap: 0
EU:+.05
EEFSU:-1.7
Chi:+.37
Ind:-.2
Kor:-.3
MEA:+.9

AIM, IEA, GTAP and IMF- data, 21 regions, 7 energy-, 4 non- energy goods,
Mensbrugghe (1998) % GDP loss in bill. 1985 $ +.7       +.2     +.1 GREEN- A multi-sector, multi-region dynamic general equilibrium model for quantifiying the costs of curbing CO2 emissions: 12 regions, 4 activities, autonomous energy efficiency improvements (AEEI), backstops, terms of trades
Richels et al. (1996) 20% below 1990 emissions until 2010 and the stab. emissions at his level; Annex 1 countries; trill. 1990 US$, OECD, GDP loss CETA OECD:+ 2
NOECD:+.3
            OECD:+1.3
NOECD:-.7
OECD: +2
NOECD:-.5
OECD:+1.1
NOECD: 0
OECD:+.5
NOECD:-.2
 
EPPA OECD: +5.2
NOECD:+1.1
MERGE OECD:+ 2
NOECD:+.3
MiniCAM OECD:+1.5
NOECD:-.1
Nordhaus and Boyer (1999) RICE- 98; GDP loss in 1990$ US: 84 bil.
Jap: 38 bil.
EU: 65 bil.
CANZ: 19 bil.
      US: 60 bil.
Jp: 19 bil.
EU: 36 bil.
CANZ: 11 bil.
    US: 21 bil.
Jap: 6 bil.
EU: 15 bil.
CANZ: 4 bil.
RICE- 98; 13 regions, no trade in goods, IAM;
Tol (1999a) consumption loss 1990- 2100, discounted with 5% to 1990, in trill. $; target: Kyoto forever No- AI: -.15
OECD: 2.75
EEfSU: .75
No-AI: -.2
OECD: 2.25
EEfSU: .6
  lim. purch:34
No- AI:-.15
OECD: 2.45
EEfSU: .5
No- AI: -0.15 OECD: 2.1 EEfSU: .6 No- AI: .5
OECD: 1.25
EEfSU: .4535
  No- AI: .45
OECD: .9
EEfSU: .35
Framework for Uncertainty, Negotiation and Distribution (FUND)- IAM; 9 regions, dynamic damage
          lim. sale:36
No- AI: .8
OECD: 1.9
EEfSU: -.15
         
          lim. both:
No- AI: .65
OECD:2.15
EEfSU: -.15
         
Kurosawa et al. (1999) GDP loss in bill. 1990 $ in 2010 US:
Jap:
EU: 90
CANZ:
      US:
Jap: 10
EU: 90
CANZ:
    US:
Jap:
EU: 63
CANZ:
GRAPE- IAM, 10 regions
Criqui et al. (1999) Total Cost (GDP) in 1990 $ in 2010 56419 Mio. (0.11)     only for US and 16 583 Mio. Asian countries (0.03)     5808 Mio. (0.01) POLES
Ellerman et al. (1998) Total Cost in bill. 1985 US$ +120       +88     +11 Emissions Prediction and Policy Assessment (EPPA)- Model
Zhang (1998) Reductions in total abatement costs compared to the no- trade- :   37USA: 81
Jap: 91
EU: 2.3
OOECD: 33.5
OECD: 82.4
38USA: 63.7
Jap: 71.9
EU: 39.2
OOECD: 70.8
OECD: 66
      USA: 85.2
Jap: 93.1
EU: 0.2
OOECD: 45.3
OECD: 86.5
12 regions, 6 GHG
          39USA: 81.1
Jap: 77.4
EU: 19.1
OOECD: 68.8
OECD: 79.6
         

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