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

Nico Bauer, Valentina Bosetti, Meriem Hamdi-Cherif, Alban Kitous, David McCollum, Aurélie Méjean, Shilpa Rao, Hal Turton, Leonidas Paroussos, Shuichi Ashina, Katherine Calvin, Kenichi Wada, Detlef van Vuuren

Research output: Contribution to journalArticlepeer-review

78 Scopus citations

Abstract

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 trade and substitution patterns of coal, oil, and gas differ across models. 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.

Original languageEnglish
Pages (from-to)243-256
Number of pages14
JournalTechnological Forecasting and Social Change
Volume90
Issue numberPA
DOIs
StatePublished - Jan 1 2015
Externally publishedYes

Funding

The research leading to these results has received funding from the European Community's Seventh Framework Programme [FP7/2007–2013] under grant agreement n° [ 265139 ]. Funding from the German Federal Ministry of Education and Research (BMBF) in the Call “Economics of Climate Change” (funding code 01LA11020B , Green Paradox) is gratefully acknowledged by Nico Bauer. Funding from Office of Science of the U.S. Department of Energy , as part of the Integrated Assessment Research Program, is gratefully acknowledged by Katherine Calvin. The views expressed are purely those of the authors and may not in any circumstances be regarded as stating an official position of the European Commission or the U.S. Government.

Keywords

  • Carbon leakage
  • Climate change mitigation policies
  • Copenhagen Accord
  • Fossil fuel markets
  • Inter-fuel substitution

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