At meetings in Bonn and Marrakech in 2001, the Conference of the Parties to the Framework Convention on Climate Change broke through an impasse on the detailed provisions needed to allow the Kyoto Protocol to enter into force. Key ingredients in the breakthrough included US withdrawal from the process, an effective relaxation of emissions targets for Japan, Canada, and Russia, and provision of access to unrestricted emissions trading. We analyze the costs of implementation and the environmental effectiveness of the Bonn-Marrakech agreement, and its effect on the relative roles of CO2 versus non-CO2 greenhouse gases. The ability of the major sellers of permits, notably Russia and Ukraine, to restrict access to permits, and the ability to trade across all greenhouse gases controlled under the Protocol, are both found to have a significant effect for both costs and effectiveness. Nevertheless, the current agreement requires reductions that do not constitute a significant step in accomplishing the long-term objectives of the Framework Convention. While the letter of the agreement does not require substantive action, individual nations have indicated an interest in actions that will affect the distribution of costs and could improve the environmental effectiveness of the agreement. The Bush administration proposal allows for emissions growth that exceeds even that found under the weakened Protocol, but is important for re-engaging the US and offering a possible approach for developing countries in future commitment periods. Finally, the potential for reconciling competing systems is explored. © 2002 Elsevier Science Ltd.

This paper estimates the value of international emissions trading, focusing on a here-to-fore neglected component; its value as a hedge against uncertainty. Much analysis has been done of the Kyoto Protocol and other potential international greenhouse gas mitigation policies comparing the costs of achieving emission targets with and without trading. These studies often show large cost reductions for all Parties under trading compared to a no trading case. We investigate the welfare gains of including emissions trading in the presence of uncertainty in economic growth rates, using both a partial equilibrium model based on marginal abatement cost curves and a computable general equilibrium model. We find that the hedge value of international trading is small relative to its value in reallocating emissions reductions when the burden sharing scheme does not resemble a least cost allocation. We also find that the effects of pre-existing tax distortions and terms of trade dominate the hedge value of trading. We conclude that the primary value of emissions trading in international agreements is as a burden sharing or wealth transfer mechanism and should be judged accordingly.

© 2010 Elsevier

We evaluate the impact of an economy-wide cap-and-trade policy on U.S. aviation taking the American Clean Energy and Security Act of 2009 (H.R.2454) as a representative example. We use an economywide model to estimate the impact of H.R. 2454 on fuel prices and economic activity, and a partial equilibrium model of the aviation industry to estimate changes in aviation carbon dioxide (CO2) emissions and operations. Between 2012 and 2050, with reference demand growth benchmarked to ICAO/GIACC (2009) forecasts, we find that aviation emissions increase by 130%. In our climate policy scenarios, emissions increase by between 97% and 122%. A key finding is that, under the core set of assumptions in our analysis, H.R. 2454 reduces average fleet efficiency, as increased air fares reduce demand and slow the introduction of new aircraft. Assumptions relating to the sensitivity of aviation demand to price changes, and the degree to which higher fuel prices stimulate advances in the fuel efficiency of new aircraft play an important role in this result.

Under the Kyoto Protocol, the world's wealthier countries assumed binding commitments to reduce greenhouse gas emissions. The agreement requires these countries to consider ways to minimize adverse effects on developing countries of these actions, transmitted through trade. Using a general equilibrium model of the world economy, we find that adverse effects fall mainly on energy-exporting countries, for some even greater than on countries that are assuming commitments. Removing existing fuel taxes and subsidies and using international permit trading would greatly reduce the adverse impacts and also reduce economic impacts on the countries taking on commitments. Another approach, preferential tariff reduction for developing countries, would benefit many developing countries, but would not target those most adversely affected. If instead, OECD countries directly compensated developing countries for losses, the required annual financial transfer would be on the order of $25 billion (1995 $US) in 2010.

© 2000 Elsevier Science Ltd.