Temperature control,emission abatement and costs: key EMF 27 results from Environment Canada’s Integrated Assessment Model

This paper investigates the potential impacts of alternative international climate change scenarios based on different policies and technological circumstances on future emission pathways and abatement costs. It also examines if these hypothetical scenarios could result in significant emission reductions required to control the global temperature from rising to no more than 2.5 °C above preindustrial level. Using an integrated assessment model, this paper examines these issues under 12 scenarios derived from four policy perspectives and three technology dimensions. Results show that the no-policy-change baseline scenarios lead to high global average temperatures in the future. To control the temperature efficiently, every global region will be required to undertake considerable abatement efforts. Current country pledges alone, even if fully implemented, cannot control the global temperature in the future to within a comfortable zone. There will still be large gap between the reductions needed to meet the 2.5 degree objective, associated with 550 ppm and the reductions associated with existing abatement efforts. Further stringent policies together with favourable technological conditions may lead to the desired level of temperature control. Participation by only a subset of nations not only makes achieving the temperature goal difficult but also costly. To achieve temperature control efficiently, global coordination and full participation by all regions are necessary and global participation may reduce global abatement costs. It is worth noting that abatement costs vary widely across regions under different policy and technology scenarios.     

Optimal carbon dioxide abatement and technological change: should emission taxes start high in order to spur R&;D?

Many European politicians argue that the EU should set tougher emission targets than what is required by the Kyoto protocol, and moreover, that emission trading with other countries outside EU should be limited so as to keep emission quota prices high. One of the arguments, frequently cited for such a policy, is the need for technological development. However, the literature on climate change and technological innovation does not unambiguously support the need for setting high emission taxes today. In this paper we investigate the relationship between emission taxes and technological change further by modeling innovation activity explicitly. In our model both the amount of R&D and the amount of carbon abatement are decided in a decentralized way by the market as a response to an emission tax. Moreover, we introduce several distinct failures in the market for new innovations, among others, insufficient patent protection and intertemporal knowledge spill-overs. Our findings suggest that governments should under some circumstances set a higher carbon tax today if we have technological change driven by R&D than if we have pure exogenous technological change. Based on numerical simulations these circumstances are (a) positive intertemporal knowledge spillovers and/or (b) weak patent protection.