International climate regime beyond 2012 - are quota allocation rules robust to uncertainty?

Bringing the United States and major developing countries to control their greenhouse gas emissions will be the key challenge for the international climate regime beyond the Kyoto Protocol. But in the current quantity-based coordination, large uncertainties surrounding future emissions and future abatement opportunities make the costs of any commitment very difficult to assess ex ante, hence a strong risk that the negotiation will be stalled. The authors use a partial equilibrium model of the international allowance market to quantify the economic consequences of the main post-Kyoto quota allocation rules proposed in the literature and to assess how robust these consequences are to uncertainty on future population, economic, and emissions growth. They confirm that, regardless of the rule selected, the prices of allowances and the net costs of climate mitigation for all parties are very sensitive to uncertainty, and in some scenarios very large. This constitutes a strong barrier against adopting any of these schemes if no additional mechanism is introduced to limit the uncertainty on costs. On the other hand, parties'preferred (least-cost) rules are essentially robust to uncertainty. And although these preferences differ across countries, the authors'analysis suggest some bargaining is possible if developing countries make a commitment and join the allowance market earlier in exchange for tighter quotas in the North. This underscores the importance of the rules governing the entry of new parties into the coordination. But the magnitude of the win-win potential strongly depends on how different abatement costs are assumed to be between industrial and developing countries, and on how long that gap is assumed to persist.Montreal Protocol,Climate Change,Global Environment Facility,Environmental Economics&Policies,Economic Theory&Research,Environmental Economics&Policies,Climate Change,Energy and Environment,Carbon Policy and Trading,Montreal Protocol

The Resilience of the Indian Economy to Rising Oil Prices as a Validation Test for a Global Energy-Environment-Economy CGE Model

This paper proposes to test the global hybrid computable general equilibrium model IMACLIM-R against macroeconomic data. To do so, it compares the modeled and observed responses of the Indian economy to the rise of oil price during the 2003- 2006 period. The objective is twofold: first, to disentangle the various mechanisms and policies at play in India's economy response to rising oil prices and, second, to validate our model as a tool capable of reproducing short-run statistical data. With default parameterization, the model predicts a significant decrease in the Indian growth rate that is not observed. However, this discrepancy is corrected if three additional mechanisms identified by the International Monetary Fund are introduced, namely the rise in exports of refined oil products, the imbalance of the trade balance allowed by large capital inflows, and the incomplete pass-through of the oil price increase to Indian customers. This work is a first step toward model validation, and provides interesting insights on the modeling methodology relevant to represent an economy's response to a shock, as well as on how short-term mechanisms – and policy action – can smooth the negative impacts of energy price shocks or climate policies. Running headline

Endogenous structural change and climate targets.

This paper envisages endogenous technical change as resulting from the interplay between the economic growth engine, consumption, technology and localization patterns. We perform numerical simulations with the recursive dynamic general equilibrium model IMACLIM-R to study how modeling induced technical change affects costs of CO2 stabilization. IMACLIM-R incorporates innovative specifications about final consumption of transportation and energy to represent critical stylized facts such as rebound effects and demand induction by infrastructures and equipments. Doing so brings to light how induced technical change may not only lower stabilization costs thanks to pure technological progress, but also triggers induction of final demand - effects critical to both the level of the carbon tax and the costs of policy given a specific stabilization target. Finally, we study the sensitivity of total stabilization costs to various parameters including both technical assumptions as accelerated turnover of equipments and non-energy choices as alternative infrastructure policies.induced technical change; structural change; climate policy; carbon tax;transportation; infrastructures

The Resilience of the Indian Economy to Rising Oil Prices as a Validation Test for a Global Energy-Environment-Economy CGE Model

International audienceThis paper proposes to test the global hybrid computable general equilibrium model IMACLIM-R against macroeconomic data. To do so, it compares the modeled and observed responses of the Indian economy to the rise of oil price during the 2003- 2006 period. The objective is twofold: first, to disentangle the various mechanisms and policies at play in India's economy response to rising oil prices and, second, to validate our model as a tool capable of reproducing short-run statistical data. With default parameterization, the model predicts a significant decrease in the Indian growth rate that is not observed. However, this discrepancy is corrected if three additional mechanisms identified by the International Monetary Fund are introduced, namely the rise in exports of refined oil products, the imbalance of the trade balance allowed by large capital inflows, and the incomplete pass-through of the oil price increase to Indian customers. This work is a first step toward model validation, and provides interesting insights on the modeling methodology relevant to represent an economy's response to a shock, as well as on how short-term mechanisms – and policy action – can smooth the negative impacts of energy price shocks or climate policies. Running headlin

The costs of climate policies in a second best world with labour market imperfections

International audienceThe critical role of labour market imperfections is explored in climate stabilisation costs formation, using a dynamic recursive energy-economy model that represents a second best world with market imperfections and short-run adjustments constraints along a long-term growth path. The degree of rigidity of the labour markets is a central parameter and a systematic sensitivity analysis of the model results confirms this. When labour markets are represented as highly flexible, the model results are in the usual range of existing literature, i.e. less than 2% GDP losses in 2030 for a stabilisation target at 550ppm CO2 equivalent. However, when labour markets rigidities are accounted for, mitigation costs increase dramatically. Accompanying measures are identified, namely labour subsidies, which guarantees against the risk of large stabilisation costs in the case of high rigidities of the labour markets. This complements the usual view that mitigation is a long-term matter that depends on technology, innovation, investment and behavioural change. The results support the view that mitigation is also a shorter-term issue and a matter of transition on the labour market.Le rôle déterminant des imperfections du marché du travail dans la formation des coûts de l'atténuation du changement climatique est exploré, avec un modèle de l'interface énergie-économie, récursif et dynamique, qui représente un monde de second rang avec des imperfections du marché du travail et des contraintes d'ajustement de court terme le long d'une trajectoire de croissance à long terme. Le degré de rigidité des marchés du travail est un paramètre central, ceci étant confirmé par une analyse de sensibilité systématique des résultats. Lorsque les marchés du travail sont représentés comme très flexibles, les résultats se situent dans la fourchette habituelle de la littérature existante (c'est-à-dire moins de 2% de pertes de PIB mondial en 2030 pour une cible de stabilisation à 550 ppm équivalent CO2). Cependant, lorsque les rigidités du marché du travail sont prises en compte, le coût de l'atténuation augmente très significativement. Des mesures d'accompagnement, à savoir des subventions sur le travail, garantissent contre le risque de coûts de la stabilisation élevés dans le cas de fortes rigidités sur le marché du travail. Cette vision complète la conception habituelle selon laquelle l'atténuation est une question de long terme qui dépend de la technologie, de l'innovation, de l'investissement et des changements de comportements. L'article signale que l'atténuation est aussi un problème de plus court terme et une question de transition sur les marchés du travail

IMACLIM-R: a modelling framework to simulate sustainable development pathways

To assess the sustainability of future development pathways requires models to compute long-run Economy-Energy-Environment scenarios. This paper presents the IMACLIM-R framework, aimed at investigating climate, energy and development inter-related issues. The model was built in an attempt to address three methodological challenges: to incoporate knowledge from economics and engineering sciences, to support the dialogue with and between stakeholders, to produce scenarios with a strong consistency, concerning especially the interplay between development patterns, technology and growth. These goals led to the development of a recursive structure articulating a static general equilibrium framework including innovative features and sectorspecific dynamic modules now concerning energy, transportation and industry. This paper provides the general rationale of the model and the description of all its components.

IMACLIM-R: a modelling framework to simulate sustainable development pathways

International audienceTo assess the sustainability of future development pathways requires models to compute long-run Economy-Energy-Environment scenarios. This paper presents the IMACLIM-R framework, aimed at investigating climate, energy and development inter-related issues. The model was built in an attempt to address three methodological challenges: to incoporate knowledge from economics and engineering sciences, to support the dialogue with and between stakeholders, to produce scenarios with a strong consistency, concerning especially the interplay between development patterns, technology and growth. These goals led to the development of a recursive structure articulating a static general equilibrium framework including innovative features and sectorspecific dynamic modules now concerning energy, transportation and industry. This paper provides the general rationale of the model and the description of all its components

Rheology of confined granular flows

International audienc