This paper attempts to evaluate the economic impacts of the Kyoto Protocol by using AIM model. It is estimated that the GDP losses to Japan, US, EU, and Russia would be 0.42%, 0.56%, 0.44%, and 0.25%, respectively in case the Annex B countries ratify the Kyoto Protocol and reduce their emissions without emissions trading and without accounting carbon sink. On the other hand, the GDP losses to Japan and EU would grow when the United States would not ratify the Kyoto Protocol, and it is estimated to fall by 0.48% and 0.47% relative to the base case scenario, respectively. The GDP loss of Russia would be 0.17%. The GDP of US would increase by 0.01%. These losses would be recovered if Kyoto mechanisms were adopted. When the emissions trading would be introduced, the GDP losses to Japan, US, and EU would be 0.14%, 0.33% and 0.19%, respectively and Russia would gain GDP by 3.5%. When carbon sink is accounted, the economic impacts can be reduced further. Even when the amount of tradable carbon is restricted, the impacts will become much less. In addition to emission trading, effects of CDM, price induced technical change, and boycott movement are examined. The paper also analyzed the climatic impacts of the mitigation scenarios. Three scenarios are examined. First scenario assumes a goal of the Kyoto Protocol will be achieved in 2010. The second assumes that USA will not ratify the Kyoto Protocol. The third scenario assumes that the emission is reduced at the rate of 5% per decade after 2020. It is found that the temperature will increase to 2.15 ºC by the year 2100 even if the Annex B countries follow the Kyoto protocol and other appropriate countermeasures are taken. If we postpone the reduction policies, climate impacts will become worse. The implementation of the Kyoto Protocol is necessary to keep the temperature increase in 2100 below 2 ºC.

Abstract

This paper attempts to evaluate the economic impacts of the Kyoto Protocol by using AIM model. It is estimated that the GDP losses to Japan, US, EU, and Russia would be 0.42%, 0.56%, 0.44%, and 0.25%, respectively in case the Annex B countries ratify the Kyoto Protocol and reduce their emissions without emissions trading and without accounting carbon sink. On the other hand, the GDP losses to Japan and EU would grow when the United States would not ratify the Kyoto Protocol, and it is estimated to fall by 0.48% and 0.47% relative to the base case scenario, respectively. The GDP loss of Russia would be 0.17%. The GDP of US would increase by 0.01%. These losses would be recovered if Kyoto mechanisms were adopted. When the emissions trading would be introduced, the GDP losses to Japan, US, and EU would be 0.14%, 0.33% and 0.19%, respectively and Russia would gain GDP by 3.5%. When carbon sink is accounted, the economic impacts can be reduced further. Even when the amount of tradable carbon is restricted, the impacts will become much less. In addition to emission trading, effects of CDM, price induced technical change, and boycott movement are examined