Worldwide CO2 Trade without US Jan Gilbreath and Rahi Abdula

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Worldwide CO2 Trade without USJan Gilbreath
and Rahi Abdula
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Objective of the Experiment

• To determine the implications of the exclusion of
  US from the worldwide CO2 emission trading.
• How does the economic/welfare burden shift to
  Annex 1 countries?
• What are the implications for non-Annex 1
  countries?

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Design of the Experiment
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Results

• The cost of mitigation increases to 41.10 /t C
  from 29.80 /t C when US is included in the
  system.

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Welfare Effects, In US Bn
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Output and Sectoral Implications

• Across the board except USA, there is a
  substantial fuel switching away from coal and
  oil.
• Despite the relative lower CO2 emission
  contribution of gas, the gas production declined
  as well together with the CO2-intensive fossil
  fuels.
• For China and India, expected reduction in coal
  use seem doubtful, given high dependence on coal.
  
• Results show that substantial reduction in
  electricity production has to take place in
  transitional (EEFSU) and developing (CHIND)
  countries, both expected to have immense demand
  for energy to fuel their growth

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Output and Sectoral Implications
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Summary

• To meet Kyoto reduction targets without the US,
  China and India must reduce emissions
  substantially more, and both countries must cut
  coal usage nearly in half
• EU experiences substantial negative welfare
  effect twice those of any other region
• All transitional economies must reduce
  electricity use by 10 percent to 14 percent
• Without US participation in CO2 trading,
  abatement costs rise sharply for all other regions