Worse off from reduced cost? The role of policy design under uncertain technological advancement

A simple model is used to illustrate the effects of a reduction in (marginal) abatement cost in a two country setting. It can be shown that a the country experiencing a cost reduction can actually be worse off. This holds true for a variety of quantity and price based emission policies. The most important channel is that a country with lower abatement costs engages in additional abatement effort for which it is not compensated. Under a quantity based policy with a given allocation, a seller of permits can also be negatively affected from a lower carbon price. We also argue that abatement cost shocks to renewable energy and carbon capture and storage (CCS) are different in terms of their effects on international energy markets. A shock to renewable energy reduces fossil fuel rents benefiting energy importers, while the opposite holds for a shock to CCS. The channels obtained in the theoretical model can be confirmed in a more complex global computable general equilibrium model. Some regions are indeed worse off from shock that lowers their abatement costs

Reaching a climate agreement: Do we have to compensate for energy market effects of climate policy?

Because of large economic and environmental asymmetries among world regions and the incentive to free ride, an international climate Regime with broad participation is hard to reach. Most of the so far proposed Regimes base on an allocation of emission rights that is to be perceived as fair. Yet, there are also some arguments to focus more on the actual welfare implications of different Regimes and to aim for a "fair" Distribution of resulting costs. Using the Cpmputable General Equilibrium model DART, we analyze the driving Forces of welfare implications in different Scenarios where a global Emission target derived from the 2 degree target is reached. These include two Regimes that are often presumed to be "fair", namely a harmonized international carbon tax and a cap and trade System based on the convergence of per capita Emission rights, and additionally an "equal loss" Scenario where welfare losses relative to a Business as usual Scenario are equal for all Major world regions. We show that "eqaual losses" would mean in particular to compensate for the effects of climate policy on energy markets and e.g. to compensate for the loss of oil revenues as the Organization of Petroleum Exporting Countries (OPEC) argues for

Emissions embodied in Chinese exports taking into account the special export structure of China

Quantification of CO2 emissions embodied in China's trade is important for an informed debate on whom to blame for the recent rise in Chinese emissions or the calculation of border carbon adjustments. Applying input output techniques, we calculate these emissions in (1) a standard model, (2) a regionally disaggregated model, taking into account that export production is concentrated in more advanced and more emission efficient provinces and (3) in a model with export processing, taking into account that almost half of Chinese exports relies on a large share of imported intermediates and little domestic value and emissions added. We compare year 2007 emissions embodied for in Chinese exports in a unified framework. We also report emissions embodied in Chinese imports used for intermediate production of exports by combining calculations for China with data from global IO models. We find that both a model with 30 provinces (1730 Mt CO2) and a model accounting for export processing (1580 Mt) yield lower Chinese emissions embodied in exports compared to the standard model (1782 Mt). In the regional model, emissions are even lower (1522 Mt), if interprovincial trade is not taken into account

Reassessing renewable energy

This policy brief presents a long term assessment of low-carbon energies including renewables, nuclear and fossil energy with CCS. It targets the electricity sector from a global to a regional perspective and from centralized to decentralized energy systems. The policy brief aims at finding answers to the following questions: What role can and should renewable energy play in the next decades on the way to a low-carbon energy future? What is the optimal electricity mix (now and in the future)? What are the impli-cations of the optimal mix regarding renewable energy investment and policy? What framework would be needed to enhance international coordination

Essays on the Role of Emerging Economies in International Climate Policy

Emerging economies like China and India have contributed a large share in the recent growth in global CO2 emissions, yet these countries are at a different level of economic development than industrialized countries. This dissertation asks the question of how emerging economies can contribute to international climate policies by analyzing existing and proposed policy measures. For the long run, an international regime is necessary to avoid dangerous climate change. After reviewing the literature on how different regimes would affect China and India, the impacts of one particular regime are analyzed numerically in a computable general equilibrium (CGE) model with respect to their consequences on China and India. For India, effects of the proposed policy on different household types are discussed. Furthermore, the impact of uncertainty in key abatement technologies is taken into account. For the medium run, unilateral climate policy might prevail and border carbon adjustments are proposed in order to avoid loss of competitiveness and carbon leakage. Incentives for setting certain carbon tariff rates are studied and the uncertainty in measuring emissions embodied in trade is shown, taking China as an example. Finally, a current policy measure is discussed. Taking a closer look at China, the determinants for technology transfer in the Clean Development Mechanism are analyzed.Schwellenländer wir China und Indien haben zuletzt einen Großteil des globalen Wachstums der CO2-Emission beigetragen - diese Länder sind jedoch auf einem anderen ökonomischen Entwicklungsstand als Industrieländer Diese Dissertation setzt sich mit der Frage auseinander, wie Schwellenländer zu internationaler Klimapolitik beitragen können und analysiert existierende und vorgeschlagene Politikmaßnahmen. In der langen Frist ist ein internationales Klimaregime unabdingbar, um gefährlichen Klimawandel zu vermeiden. Eine Literaturübersicht gibt zunächst Aufschluss darüber, wie verschiedene solcher Regime China und Indien beeinflussen würden, bevor die Auswirkungen eines Regimes auf China und Indien genauer in einem berechenbaren allgemeinen Gleichgewichtsmodell betrachtet werden. Für Indien werden dabei die Effekte auf verschiedene Haushaltstypen diskutiert. Zudem werden die Auswirkungen von Unsicherheiten in Schlüsseltechnologien zur CO2-Vermeidung untersucht. Mittelfristig ist jedoch keine globale Klimapolitik zu erwarten. Sich möglicherweise daraus ergebene Wettbewerbsnachteile oder Verlagerung von Emissionen konnten "Klimazölle" entgegenwirken. Die Anreize, bestimmte Zollsätze zu verwenden, werden untersucht und die Unsicherheiten der Messung von impliziten grenzüberschreitenden CO2-Flüssen am Beispiel Chinas diskutiert. Abschließend wird eine existierende Politikmaßnahme untersucht. Dabei werden die Determinanten für Technologietransfer in Projekten des Clean Development Mechanism in China bestimmt

Determinants of technology transfer through CDM: The case of China

Technology transfer (TT) is not mandatory for Clean Development Mechanism (CDM) projects, yet proponents of CDM argue that TT in CDM can bring new technologies to developing countries and thus not only reduce emissions but also foster development. We review the quantitative literature on determinants of TT in CDM and estimate determinants for CDM projects in China. China is by far the largest host country of CDM projects and it is therefore crucial to understand the factors that drive TT there. We focus on heterogeneity within a single country and results can thus be linked to specific policies of the country for better interpretation. Our probit estimations confirm results of international cross-country studies, indicating that larger projects and more advanced technologies are more likely to involve TT. In addition, we find evidence that agglomeration effects are more pronounced on the province level rather than larger regions. We also find a positive effect of FDI on TT and a complementary role of academic R&D engagement to TT

Effects of international climate policy for India: Evidence from a national and global CGE model

In order to reach the two degree target it is necessary to control CO2 emissions also in fast growing emerging economies such as India. The question is how the Indian economy would be affected by e.g. including the country into an international climate regime. Existing analyses with either a global model or a single country computable general equilibrium model miss important aspects such as distributional issues or international repercussions. By soft-linking models of these two classes, we provide a more detailed view on these issues. In particular, we analyze different options of transferring revenues from domestic carbon taxes and international transfers to different household types and how different assumptions on exchange rates affect transfer payments. We also show effects stemming from international price repercussions. Our analysis focusses on how these transmission channels affect welfare of nine different household types

A GAMS/MPSGE implementation of the PET model

This paper describes a version of the Population-Economy-Technology (PET) model implemented in the GAMS/MPSGE programming language. The implementation of the model is comparable with the original fortran version of iPETS over a number of test cases. While a number of possible configurations exist for both model types, we demonstrate that there is a configuration that makes both implementations behave very similarly and the remaining difference can be traced to different implementations of dynamic agent behavior. This paper also serves as a methodological blueprint for model translation across different programming languages