11.4.4.2 Other modelling studies

Bollen et al. (2004), using Worldscan (a global CGE model), consider the consequences of post-Kyoto policies seeking a 30% reduction for Annex B countries below 1990 levels by 2020. They do not include the CDM, sinks or induced technological change in the modelling. Like most studies, they find dramatically lower costs when global trading occurs. With only Annex I countries participating in emissions trading, the high-growth benchmark case shows an allowance price of about 130 US$(2000)/tCO₂, and a 2.2% reduction below baseline for Annex I GDP. With global trading, the allowance price is about 17 US$(2000)/tCO₂ and there is a much lower loss of 0.6% in GDP. In a more modest scenario that focuses exclusively on maintaining the current Kyoto targets for all Annex B countries, Russ, Ciscar, and Szabo (2005) estimate a 7 US$(2000)/tCO₂ price and a 0.02–0.05% GDP loss in 2025 with global trading (using the POLES and GEM-E3 models).

A number of other studies consider post-Kyoto impact out to 2025 or 2050 based on approaches to stabilization, typically at 550 ppm CO₂-eq (category III of Table 3.10) (longer-term strategies are discussed in Chapter 3; discussions of policy mechanisms are covered in Chapter 13). For example, Den Elzen et al. (2005), using the IMAGE-FAIR modelling system, show that different assumptions about business-as-usual emission levels and abatement cost curves lead to a range of marginal costs of between 50 US$ and 200 US$/tCO₂-eq and of total direct abatement costs of between 0.4 and 1.4% of world GDP in 2050, consistent with a recent EU report (EEA, 2006).

The Stern Review (2006), which was commissioned by the UK Treasury, also considers a range of modelling results. Drawing on estimates from two studies, it reports the costs of an emissions trajectory leading to stabilization at around 500–550ppm CO₂-eq. One of the two studies (Anderson, 2006) calculates estimates of annual abatement costs (i.e. not the macro-economic costs) of 0.3% of GDP for 2015, 0.7% for 2025 and 1% for 2050 from an engineering analysis based on several underlying reports of future technology costs. His uncertainty analysis, exploring baseline uncertainties about technology costs and fuel prices, shows a 95% prediction range of costs from –0.5% to +4% of GDP for 2050. The other study is a meta-analysis by Barker et al. (2006a) and looks at the macro-economic costs in terms of GDP effects. The study aims to explain the different estimates of costs for given reductions in global CO₂ in terms of the model characteristics and policy assumptions adopted in the studies. With favourable assumptions about international flexibility mechanisms, the responsiveness and cost of low-carbon technological change, and tax reform recycling revenues to reduce burdensome taxes, costs are lowered, and in some cases become negative (i.e. GDP is higher than baseline).

In summary, various post-2012 Kyoto studies have been completed since the TAR. Nearly all those focusing on 550 and 650 ppm CO₂-eq stabilization targets (Categories B and C, Table 3.10) with a 5–40% reduction in global CO₂ below baseline by 2030, find total costs of about 1% or lower of global GDP by 2030. The critical assumption in these studies is global emissions trading, but there is limited consideration of multi-gas stabilization and endogenous technological change across the studies, and no co-benefits. The few studies with baselines that require higher CO₂ reductions to achieve the targets require higher carbon prices and report higher GDP costs. As noted in Sections 11.5 (induced technological change), 3.3.5.4 (multi-gas approaches), and 11.8.1 (co-benefits), these considerations all tend to lower costs or provide non-climate benefits, perhaps substantially.