Christa Clapp

The Copenhagen Accord/Cancún Agreements Emission Pledges for 2020: Exploring Economic and Environmental Impacts

Many countries have pledged targets or actions to reduce greenhouse gas emissions; these have been listed in the Appendices to the Copenhagen Accord and, at the time of writing, are being transferred to the UNFCCC Cancun Agreements. This analysis examines the costs and effectiveness of these pledges, as well as the potential for fiscal revenue, using a computable general equilibrium model. The results show that while the pledges are an important and welcome start to a global solution, they are not ambitious enough for a pathway to limit average global temperature increase to below 2°C. This paper estimates the costs of action at around 0.3% of GDP for both Annex I and non-Annex I countries and 0.5–0.6% of global real income. Furthermore, the fiscal revenue potential can exceed 1% of GDP for the Annex I countries if market-based instruments are used. Sensitivity analysis shows that allowing more offsets can reduce the costs of actions substantially, as can direct linking of carbon markets across Annex I countries.

National and Sectoral GHG Mitigation Potential

Determining comparability of effort between mitigation actions and targets proposed by different countries is an ongoing issue for international climate negotiations. A number of indicators have been proposed to reflect comparability of effort and differences in national circumstances; key amongst these are greenhouse gas (GHG) emissions (per capita), GDP per capita, as well as GHG mitigation potential. This paper focuses on mitigation potential to provide a comparative assessment between six OECD member economies: Australia, Canada, the EU, Japan, Mexico and the US. GHG mitigation potential is defined to be the level of GHG emission reductions that could be realised, relative to the projected emission baseline in a given year, for a given carbon price. Data for the selected countries were obtained across the time horizon of 2005-2050 from a total of 19 models, including models that are used to inform climate policy-makers in each of these economies. The paper examines the implications of model structure, and assesses how baseline scenarios vary between the models, before analysing the GHG mitigation potential estimates. GHG mitigation potential is compared for carbon prices of USD 20, 50 and 100/tCO2e. For an assumed carbon price of USD 50/tCO2e, mitigation potential in Japan is estimated to be relatively lower than for the other five economies, ranging from 5-20% emission reduction from baseline in 2020. Although noticeably fewer models report data for Mexico at this price level, the models show deeper potential reductions in the range of 25-37% at the same carbon price. Mitigation potential estimates for Australia, Canada and the US show a wider range of 14-39% reduction relative to 2020 baselines. The EU shows a relatively tighter range of 16-29% emission reductions to 2020. The results of this study show greater emission reduction potentials in the year 2050 than in the year 2020 across the six economies examined, reflecting structural and technical changes that occur over time, including the availability of carbon capture and storage from 2030. In general, the paper finds closer agreement across the models for mitigation potential in 2020 than for later years, reflecting greater uncertainty as projections extend into the future.