CO2 emission mitigation and fossil fuel markets: Dynamic and international aspects of climate policies

This paper explores a multi-model scenario ensemble to assess the impacts of idealized and non-idealized climate change stabilization policies on fossil fuel markets. Under idealized conditions climate policies significantly reduce coal use in the short- and long-term. Reductions in oil and gas use are much smaller, particularly until 2030, but revenues decrease much more because oil and gas prices are higher than coal prices. A first deviation from optimal transition pathways is delayed action that relaxes global emission targets until 2030 in accordance with the Copenhagen pledges. Fossil fuel markets revert back to the no-policy case: though coal use increases strongest, revenue gains are higher for oil and gas. To balance the carbon budget over the 21st century, the long-term reallocation of fossil fuels is significantly larger ? twice and more ? than the short-term distortion. This amplifying effect results from coal lock-in and inter-fuel substitution effects to balance the full-century carbon budget. The second deviation from the optimal transition pathway relaxes the global participation assumption. The result here is less clear-cut across models, as we find carbon leakage effects ranging from positive to negative because leakage and substitution patterns of coal, oil, and gas differ. In summary, distortions of fossil fuel markets resulting from relaxed short-term global emission targets are more important and less uncertain than the issue of carbon leakage from early mover action.

Authors:

BAUER Nico, BOSETTI Valentina, HAMDI-CHERIF Meriem, KITOUS Alban Gabriel, MCCOLLUM David, MEJEAN Aurelie, RAO Shilpa, TURTON Hal, PAROUSSOS Leonidas, ASHINA Shuichi, CALVIN Katherine, WADA Kenichi, VAN VUUREN Detlef

Publisher:

ELSEVIER SCIENCE INC

Format medium:

Online