Emission constraints on Annex I countries have well-established, albeit varied, "spill-over" effects¹⁶ on non-Annex I countries.

• Oil-exporting, non-Annex I countries: Analyses report costs differently, including, inter alia, reductions in projected GDP and reductions in projected oil revenues. The study reporting the lowest costs shows reductions of 0.2% of projected GDP with no emissions trading, and less than 0.05% of projected GDP with Annex B emissions trading in the year 2010.¹⁷ The study reporting the highest costs shows reductions of 25% of projected oil revenues with no emissions trading, and 13% of projected oil revenues with Annex B emissions trading in the year 2010 (see Table 7-3c). These studies do not consider policies and measures¹⁸ other than Annex B emissions trading, which could lessen the impact on non-Annex I, oil-exporting countries, and therefore tend to overstate both the costs to these countries and overall costs. The effects on these countries can be further reduced by removal of subsidies for fossil fuels, energy tax restructuring according to carbon content, increased use of natural gas, and diversification of the economies of non-Annex I, oil-exporting countries.
• Other non-Annex I countries: They may be adversely affected by reductions in demand for their exports to OECD nations and by the price increase of those carbon-intensive and other products they continue to import. These countries may benefit from the reduction in fuel prices, increased exports of carbon-intensive products, and the transfer of environmentally sound technologies and know-how. The net balance for a given country depends on which of these factors dominates. Because of these complexities, the breakdown of winners and losers remains uncertain.
• Carbon leakage: The possible relocation of some carbon-intensive industries to non-Annex I countries and wider impacts on trade flows in response to changing prices may lead to leakage on the order of 5-20%.¹⁹ Exemptions (e.g., for energy-intensive industries) make the higher model estimates for carbon leakage unlikely, but would raise aggregate costs. The transfer of environmentally sound technologies and know-how, not included in models, may lead to lower leakage and especially on the longer term may more than offset the leakage.
  

Some sources of greenhouse gas emissions can be limited at no, or negative, net social cost to the extent that policies can exploit no-regret opportunities. This may be achieved by removal of market imperfections, accounting for ancillary benefits (see Question 8), and recycling revenues to finance reductions in distortionary taxes ("double dividend").

• Market imperfections: Reduction of existing market or institutional failures and other barriers that impede adoption of cost-effective emission reduction measures can lower private costs compared to current practice. This can also reduce private costs overall.
• Ancillary benefits: Climate change mitigation measures will have effects on other societal issues. For example, reducing carbon emissions in many cases will result in the simultaneous reduction in local and regional air pollution. It is likely that mitigation strategies will also affect transportation, agriculture, land-use practices, and waste management and will have an impact on other issues of social concern, such as employment, and energy security. However, not all of the effects will be positive; careful policy selection and design can better ensure positive effects and minimize negative impacts. In some cases, the magnitude of ancillary benefits of mitigation may be comparable to the costs of the mitigating measures, adding to the no-regret potential, although estimates are difficult to make and vary widely.
• Double dividend: Instruments (such as taxes or auctioned permits) provide revenues to the government. If used to finance reductions in existing distortionary taxes ("revenue recycling"), these revenues reduce the economic cost of achieving greenhouse gas reductions. The magnitude of this offset depends on the existing tax structure, type of tax cuts, labor market conditions, and method of recycling. Under some circumstances, it is possible that the economic benefits may exceed the costs of mitigation.