Earth Community Organization (ECO)
the Global Community
Professor ZhongXiang Zhang
for Discussion Roundtables 1, 2, 3, 4, 5, 6, 7, 10, 17, 23, 26, 28, 39, and 55
Table of Contents
1.0 Meeting the Kyoto Targets: The Importance of Developing Country Participation (the market of tradable permits from no emissions trading to full global trading).
This paper investigates the implications of progressively broadening the scope of the market of tradable permits from no emissions trading to full global trading. We start with the no emissions trading case where each Annex I country must individually meet its Kyoto targets. Next, we consider a case where trading of emissions permits is limited to Annex I countries only. We then expand the scope of the market to include all the non-Annex I countries but China. Finally, to investigate the role China plays in bringing down Annex I countries' compliance costs, we further broaden the market to include China into full global trading. Our results clearly demonstrate that the gain of the OECD as a whole increases as the market expands. Our results also show that developing countries themselves benefit from such an expansion too because it not only provides them for additional financial resources, but also helps to cut their baseline carbon emissions by a big margin. By contrast, the former Soviet Union tends to become worse off as the market expands. The potential conflict of interest between the former Soviet Union and developing countries underlines the importance of establishing clear rules of procedure about admitting new entrants before emissions trading begins.
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The Kyoto Protocol incorporates emissions trading, joint implementation and the clean development mechanism to help Annex I countries to meet their Kyoto targets at a lower overall cost. This paper aims to estimate the size of the potential market for all three flexibility mechanisms under the Kyoto Protocol over the first commitment period 2008-2012, both on the demand side and on the supply side. Based on the national communications from 35 Annex I countries, the paper first estimates the potential demand in the greenhouse gas offset market. Then, the paper provides a quantitative assessment of the implications of the EU proposal for concrete ceilings on the use of flexibility mechanisms for the division of abatement actions at home and abroad.
Finally, using the 12-region's marginal abatement cost-based model, the paper estimates the contributions of three flexibility mechanisms to meet the total emissions reductions required of Annex I countries under the four trading scenarios respectively. Our results clearly demonstrate that the fewer the restrictions on trading the gains from trading are greater. The gains are unevenly distributed, however, with Annex I countries that have the highest autarkic marginal abatement costs tending to benefit the most. With respect to developing countries, their net gains are highest when trading in hot air is not allowed, and China and India account for about three-quarters of the total developing countries' exported permits to the Annex I regions.
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