Economic impacts of multilateral emission reduction policies: simulations with WorldScan

Abstract

We explore the economic impacts of Annex 1 (A-1) emission reductions down to 20% below the 1992 level by 2020, followed by non-Annex 1 (NA-1) countries joining the abatement group and establishing a global agreement. For the global agreement, the global target is based on the Intergovernmental Panel on Climate Change (IPCC) Working Group I emission pathways to reach stabilization of CO₂ concentration in 2100 at 450, 550, and 650 ppmv, respectively (WGI450, WGI550, WGI650). We therefore do not deal with optimal emission reduction, neither for the globe, nor for separate regions, but instead take a cost-effectiveness approach given an emission reduction target. The paper illustrates some basic issues that will emerge with A-1 emission reduction policies and impacts of changing from an A-1 to a global ‘coalition’.

The tradability concept need not be implemented at all levels. One could think of an agreement in which Tradability can be approximated by different sets of policies. The main example is joint implementation, either at a project or a national level. In macro-economic modelling terms these policies are all equivalent in that they all imply a uniform price tag on CO₂ emissions combined with international financial transfers.