A new article in the journal Energy Policy would be an excellent reading for a post-Kyoto era module, Everett B. Peterson, et al., Environmental and economic effects of the Copenhagen pledges and more ambitious emission reduction targets, 39(6) Energy Policy 3697-3708 (2011).
Among the take-aways from the analysis, which employed a multi-region, multi-sector dynamic computable general equilibrium model to explore the economic and welfare effects of the pledges made at Copenhagen, as well as the ramifications of deepening the pledges of Annex I parties:
- CO2 certificate prices under the high and low Copenhagen pledge scenarios actually fall from 2004 levels by 2015, largely due to surplus AAUs from Russia and the sale of CO2 emission permits by India and China. Even in 2020, certificate prices are about level with those in 2004 (approximately $17.00). Certificate prices only rise (to about $25) under a scenario in which pledges are increased to 30% reductions by Annex I countries by 2020 from 1990 levels;
- Two thirds of emissions reductions in the lower pledge scenario comes from emissions trading, and one third under the higher pledge scenario, or an uptick to a 30% reduction scenario;
- There is likely to be substantial carbon leakage associated with the pledges, primarily from shifts in production in some regions and lower fuel prices associated with declines in demand. Emissions from countries not subject to emissions targets are 465–547 million tons higher in the policy simulations, or a leakage rate of approximately 10-13%;
- The reduction in global GDP ranges from 0.2% in the Lower Pledges scenario to 0.5% in the 30% Annex I scenario; however, the impact is much higher for non-Annex I countries, ranging from 0.86% for the lower pledge scenario, up to 2.04% for the 30% plege scenario; by contrast, Annex I face GDP reductions of 0.02% in the Lower Pledges to 0.13% in the 30% Annex I scenario. Russia, experiences the largest reduction in GDP of any Annex I country, ranging from 0.8% to 2.2%; China and India face the greatest GDP reductions of non-Annex I countries. The EU and Japan see increases in GDP;
- From a policy perspective, economies which commit to climate targets earlier and reduce their CO2-intensities are less vulnerable to tight CO2-emission targets in later periods.