Jean-Marc Burniaux

Carbon Emission Leakages: A General Equilibrium View

In December 1997, a number of countries - referred to as the Annex 1 countries - signed the Kyoto Protocol under which they agreed to ceilings on their emissions of greenhouse gases (GHGs). Such unilateral action by a group of countries has often been criticised on the grounds that it could be undermined by the existence of so-called “carbon leakages”. Carbon leakage refers to the possible rise of GHG emissions in countries that do not participate in a carbon abatement coalition. This paper provides a discussion of the key mechanisms and factors underlying the size of carbon leakages. To this aim, we use a two-region, two-final goods simplified CGE framework, incorporating three types of fossil fuels (coal, oil and low-carbon energy), international trade and capital mobility. This framework was designed to make extensive, multidimensional sensitivity analysis tractable. Indeed, a wide range of alternative assumptions and parameterisations would have been difficult or even ... En Decembre 1997, les pays dits “de l’Annexe 1” signaient le Protocole de Kyoto par lequel ils s’engageaient a limiter leurs emissions de gaz a effet de serre (GES). On a souvent mis en doute l’efficacite de ce type d’action unilaterale par un groupe de pays a cause de l’existence possible de ce que l’on peut appeler des « fuites de carbone ». Ces fuites correspondent a l’augmentation induite eventuelle des emissions de GES dans les pays qui ne participent pas a la coalition engagee dans l’effort de reduction des emissions. On trouvera dans ce document une discussion des facteurs et des mecanismes qui determinent la taille des « fuites de carbone ». Cette analyse utilise un modele d’Equilibre General Applique (EGA) simplifie comprenant deux regions, deux biens de consommation, trois types d’energie fossile (charbon, petrole et une energie a faible contenu en carbone), du commerce international et de la mobilite interregionale du capital. Il s’agit avec ce type de modele de pouvoir ...

A Multi-Gas Assessment of the Kyoto Protocol

The Kyoto Protocol covers emissions of a range of greenhouse gases. Yet, most attempts to quantify the economic impact of implementing the Protocol’s emission targets for the period 2008-12 have focused exclusively on CO2 emissions. This paper extends previous OECD analysis confined to CO2 alone so as to cover also emissions of methane and nitrous oxide. The paper concludes that the economic costs of implementing the targets in the Kyoto Protocol are lower than suggested by an analysis confined to CO2 alone. However, over the longer term, when larger cuts in greenhouse gas emissions are required in order to have any material effect on climate, most abatement will likely have to come from CO2 and the inclusion of other gases in the analysis may not substantially alter estimates of economic costs ... Le Protocole de Kyoto couvre plusieurs gaz a effet de serre (GES). Cependant, la majorite des etudes visant a quantifier l’impact economique du Protocole pour la periode 2008-2012 prennent exclusivement en compte les emissions de dioxyde de carbone (CO2). Le but de ce document est d’elargir l’analyse faite precedemment par le Secretariat sur base du CO2 seulement en prenant egalement en compte le methane et l’oxyde nitreux. La conclusion principale est que les couts economiques de mise en œuvre du Protocole sont sensiblement plus faibles que le suggeraient les analyses basees sur le seul CO2. Dans un plus long terme cependant, lorsque des efforts plus substantiels devront etre accomplis si l’on veut exercer le moindre impact concret sur le climat, l’essentiel des reductions concernera le CO2. Dans ce contexte, la prise en compte des autres gaz ne devrait pas modifier beaucoup les estimations des couts ...

Is there a case for carbon-based border tax adjustment? An applied general equilibrium analysis

Concern that unilateral Greenhouse Gas (GHG) emission reductions could foster carbon leakage and undermine the international competitiveness of domestic industry has led to growing calls for carbon-based Border-Tax Adjustments (BTAs). This article uses a global general equilibrium model to assess the economic effects of BTAs and comes to three main conclusions. First, BTAs can reduce carbon leakage if the coalition of countries taking action to reduce GHG emissions is small, because in this case leakage (while typically small) mainly occurs through international trade competitiveness losses rather than through declines in world fossil fuel prices. Second, even though the economic effects of BTAs vary somewhat depending on how they are implemented, their welfare impact is typically small, and slightly negative at the world level. Third, and perhaps more strikingly, BTAs do not necessarily curb the output losses incurred by the domestic Energy Intensive-Industries (EIIs) they are intended to protect in the first place. This is in part because EIIs in industrialized countries make important use of carbon-intensive intermediate inputs produced by EIIs in other geographical areas. Another, deeper explanation is that EIIs are ultimately more adversely affected by the existence of a carbon price itself than by any international competitiveness losses. These findings are shown to be robust to key model parameters, country coverage, targets and design features of BTAs.

The Economics of Climate Change Mitigation

This paper examines the cost of a range of national, regional and global mitigation policies and the corresponding incentives for countries to participate in ambitious international mitigation actions. The paper illustrates the scope for available instruments to strengthen these incentives and discusses ways to overcome barriers to the development of an international carbon price, based on the quantitative assessment from two global and sectorially-disaggregated CGE models. Key step towards the emergence of a single international carbon price will most likely involve the phasing out of subsidies of fossil fuel consumption and various forms of linking between regional carbon markets, ranging from direct linking of existing emission trading systems to more indirect forms through the use of sectoral crediting mechanisms. The paper discusses regulatory issues raised by the expansion of emission trading and crediting schemes as well as the complementary contribution of non-market based instruments such as the imposition of technical standards and R&D policies. Finally, the paper emphasises the important role of international transfers, not least to overcome the relatively strong economic incentives in some countries to free ride on other regions mitigation actions. While they can take various explicit or implicit forms, transfers made primarily through market mechanisms, for instance via the allocation of binding emission reduction commitments across countries, would be most cost-effective.

GREEN - - A Multi-Region Dynamic General Equilibrium Model for Quantifying the Costs of Curbing CO2 Emissions

The OECD Secretariat has developed a multi-region, multi-sector, dynamic applied general equilibrium (AGE) model to quantify the economy-wide and global costs of policies to curb emissions of carbon dioxide (CO2). The project is called the GeneRal Equilibrium ENvironments model, hereafter referred to as GREEN. The purpose of this paper is to provide a full technical description of the GREEN model, its data base and parametrisation as of May 1991. Work is continuing to extend GREEN in several different directions to make the model more policy relevant, and a revised version of the technical manual will be issued in due course ...

Carbon Emission Leakages

Measuring the quality of governance and regulation in various ways and focusing on energy, transport and telecommunications, this paper shows that both sound governance of infrastructure investment and pro-competitive regulation in network industries are associated with stronger productivity growth in firms operating downstream.

Is there a Case for Carbon-Based Border Tax Adjustment?

Les craintes que des reductions unilaterales d’emissions de gaz a effet de serre soient en partie compensees par des fuites de carbone tout en ayant un effet negatif sur la competitivite des industries domestiques ont entraine des appels croissants en faveur de taxes carbone aux frontieres (TCFs). Cet article utilise un modele d’equilibre general applique pour evaluer les effets economiques des TCFs et aboutit a trois conclusions. Premierement, les TCFs peuvent reduire les fuites de carbone lorsque la coalition de pays prenant des mesures de reduction des emissions est reduite, car dans ce cas les fuites carbone (quoique typiquement faibles) se produisent essentiellement via des pertes de competitivite internationale, plutot que via des baisses du prix mondial des energies fossiles qui entrainent une hausse de l’intensite en carbone dans le reste du monde. Deuxiemement, les impacts des TCFs sur le bien-etre sont faibles, et typiquement legerement negatifs au niveau mondial. Troisiemement, et peut-etre de facon plus frappante, les TCFs n’attenuent pas necessairement les pertes de production subies par les industries domestiques intensives en energie (IIEs) qu’elles sont pourtant censees proteger. Cela tient en partie a ce que prises dans leur ensemble, les IIEs dans les pays industrialises utilisent de facon importante des intrants intensifs en carbone produits par les IIEs d’autres zones geographiques. Une autre explication plus profonde est que les IIEs sont in fine davantage touchees par l’existence d’un prix du carbone lui-meme, et par la contraction de la taille du marche qui s’en suit, que par de quelconques pertes de competitivite internationale. Ces resultats s’averent robustes a des hypotheses alternatives concernant certains parametres cle du modele, les pays couverts et les modalites de mise en place des TCFs.