Steffen Kallbekken

Why the CDM will reduce carbon leakage

Carbon leakage is an important concern because it can reduce the environmental effectiveness of the Kyoto Protocol. The Clean Development Mechanism (CDM), one of the flexibility mechanisms allowed under the protocol, has the potential to reduce carbon leakage significantly because it reduces the relative competitive disadvantage to Annex-B countries of restricting greenhouse gas emissions. The economic rationale behind this mechanism is explored in a theoretical analysis. It is then analysed numerically using a computable general equilibrium (CGE) model. The results indicate that, assuming appropriate accounting for leakage and under realistic assumptions on CDM activity, the CDM has the potential to reduce the magnitude of carbon leakage by more than one-half.

Can conditional commitments break the climate change negotiations deadlock

Can a conditional commitment by a major actor (for example, the European Union) induce other major actors (such as the USA, China, India, or Japan) to do more to mitigate global climate change? We analyse this question by first estimating the impact of emission reductions by one of these actors on the mitigation costs of the others and, second, by exploring how domestic politics influence the willingness of the European Union and the USA to contribute. We find that an emission cut by any actor will reduce mitigation costs for all the others and thereby expand the settlement range. These cost reductions seem, however, insufficient to induce significant unilateral policy change. Emissions trading can cut aggregate costs further, but also redistribute wealth. Domestic politics tend to add weight to the concerns of powerful actors that stand to lose from more ambitious mitigation policies.

The cost of sectoral differentiation in the EU emissions trading scheme

Abstract It is often assumed in the economic literature that the Kyoto Protocol will be implemented through a cost-efficient, comprehensive emissions trading system. However, the general experience from implementation of environmental policies suggests that governments will adopt a more differentiated approach. Emerging evidence on how the Kyoto Protocol will be implemented confirms this: climate commitments will be differentiated between sectors. This article assesses the welfare effects associated with implementing the EU Emissions Trading Directive. It also analyses how differentiation of commitments affects the sectors that have a permit obligation compared with those that are exempted from it. The findings indicate that sectoral differentiation comes at a relatively high welfare cost—almost doubling the cost of implementing the Kyoto Protocol, with only limited benefits to the sectors that are granted concessions.

Oil price scenarios and climate policy: welfare effects of including transportation in the EU emissions trading system

The stringency of policies needed to meet a climate target is influenced by uncertain oil prices because price changes cause emission changes, making the robustness of climate policy instruments important. As a result of its dependence on oil, emissions from the transport sector are particularly sensitive to oil price changes. We use a computable general equilibrium model to study the effects of including the transport sector in the EU’s emissions trading scheme under three future oil price scenarios. Our results show that there are potentially significant welfare gains from including transportation in the emissions trading scheme because the system as a whole helps absorb required changes in climate policy to meet the overall EU cap on emissions. There is, however, a cost in terms of somewhat greater permit price uncertainty.

Public Acceptability of Incentive-Based Mechanisms

Political feasibility is an important constraint on the implementation of incentive-based mechanisms such as environmental taxes, tradable permits, and subsidies. Public acceptability is a key determinant of political feasibility. Hence, it is important to understand the factors that influence public acceptability to be able to implement efficient policy mechanisms.

Incentives for small clubs of Arctic countries to limit black carbon and methane emissions

Although addressing climate change will ultimately require global cooperation, substantial progress may be achieved through small clubs of countries, where it is easier to forge and implement deals needed for policy coordination. Here we quantify the gains from cooperation in the Arctic region and find that nearly 90% of the potential for abating black carbon can be reached by countries acting in self-interest alone because soot, the main source of black carbon, causes severe harm to human health along with warming. Abating methane, by contrast, requires more cooperation because impacts are more diffused geographically. Well-designed clubs with as few as four members can realize more than 80% of the full group cooperation potential for reducing these pollutants. The pivotal player in every effective club is Russia—most other members of the Arctic Council, the institution most focused on advancing the collective interests of the region, offer little leverage on the problems at hand.Global cooperation is required to address climate change. In the Arctic region, the abatement of black carbon can be achieved by countries taking self-interested action, whereas methane abatement requires more cooperation due to its diffuse geographical impacts.

Operationalizing Equity in the 2015 Agreement : Report from Nordic-Belgian Workshop on 24.-25.10.2013 in Stockholm, Sweden

The Nordic Council of Ministers and the Government of Belgium organized a workshop on Operationalizing Equity in the 2015 Agreement on 24.-25.10.2013 in Stockholm, Sweden. The workshop aimed to foc ...

Letter: Why Urgent Emissions Reductions are Needed

Steffen Kallbekken and Torben K. Mideksa explain why economic analysis may demand sharp emissions reductions today rather than the gradual path recommended by Sheila Olmstead and Robert Stavins.