9.3 Sectoral Ancillary Benefits of Greenhouse Gas Mitigation
The direct costs for fossil fuel consumption are accompanied by environmental
and public health benefits associated with a reduction in the extraction and
burning of the fuels. These benefits come from a reduction in the damages caused
by these activities, especially a reduction in the emissions of pollutants that
are associated with combustion, such as SO2, NOx, CO and
other chemicals, and particulate matter. This will improve local and regional
air and water quality, and thereby lessen damage to human, animal, and plant
health, and to ecosystems. If all the pollutants associated with GHG emissions
are removed by new technologies or end-of-pipe abatement (for example, flue
gas desulphurization on a power station combined with removal of all other non-GHG
pollutants), then this ancillary benefit will no longer exist. But such abatement
is limited at present and it is expensive, especially for small-scale emissions
from dwellings and cars (See also Section 8.6).
9.4 The Effects of Mitigation on Sectoral Competitiveness
Mitigation policies are less effective if they lead to loss of international
competitiveness or the migration of GHG-emitting industries from the region
implementing the policy (so-called carbon leakage). The estimated effects, reported
in the literature, on international price competitiveness are small while those
on carbon leakage appear to beat the stage of competing explanations, with large
differences depending on the models and the assumptions used. There are several
reasons for expecting that such effects will not be substantial. First, mitigation
policies actually adopted use a range of instruments and usually include special
treatment to minimize adverse industrial effects, such as exemptions for energy-intensive
industries. Second, the models assume that any migrating industries will use
the average technology of the area to which they will move; however, instead
they may adopt newer, lower CO2-emitting technologies. Third, the
mitigation policies also encourage low-emission technologies and these also
may migrate, reducing emissions in industries in other countries (see also Section
8.7).
9.5 Why the Results of Studies Differ
The results in the studies assessed come from different approaches and models.
A proper interpretation of the results requires an understanding of the methods
adopted and the underlying assumptions of the models and studies. Large differences
in results can arise from the use of different reference scenarios or baselines.
And the characteristics of the baseline can markedly affect the quantitative
results of modelling mitigation policy. For example, if air quality is assumed
to be satisfactory in the baseline, then the potential for air-quality ancillary
benefits in any GHG mitigation scenario is ruled out by assumption. Even with
similar or the same baseline assumptions, the studies yield different results.
As regards the costs of mitigation, these differences appear to be largely
caused by different approaches and assumptions, with the most important being
the type of model adopted. Bottom-up engineering models assuming new technological
opportunities tend to show benefits from mitigation. Top-down general equilibrium
models appear to show lower costs than top-down time-series econometric models.
The main assumptions leading to lower costs in the models are that:
- new flexible instruments, such as emission trading and joint implementation,
are adopted;
- revenues from taxes or permit sales are returned to the economy by reducing
burdensome taxes; and
- ancillary benefits, especially from reduced air pollution, are included
in the results.
Finally, long-term technological progress and diffusion are largely given in
the top-down models; different assumptions or a more integrated, dynamic treatment
could have major effects on the results.
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