13.3.3.3 Implications of regime stringency: linking goals, participation and timing

Several studies have analysed the regional emission allocations or requirements on emission reductions and time of participation in the international climate change regime with the aim of being able to ensure different concentration or temperature stabilization targets (Berk and den Elzen, 2001; Blanchard, 2002; Winkler et al., 2002a; Criqui et al., 2003; WBGU, 2003; Bollen et al., 2004; Groenenberg et al., 2004; Böhringer and Löschel, 2005; den Elzen and Meinshausen, 2005; den Elzen and Lucas, 2005, den Elzen et al., 2005c; Höhne et al., 2005; Michaelowa et al., 2005a; Böhringer and Welsch, 2006; Höhne, 2006; Persson et al., 2006). A large variety of system designs for allocating emission allowances/permits were analysed, including contraction and convergence, multistage, Triptych and intensity targets. The studies cover a broad spectrum of parameters and assumptions that influence these results, such as population, GDP development of individual countries or regions, global emission pathways that lead to climate stabilization (including overshooting the desired concentration level), parameters for the thresholds for participation and ways to share emission allowances. For example, the studies include very stringent requirements for developed countries with more lenient requirements for developing countries as well as less stringent requirements for developed countries and more ambitious constraints for developing countries within a plausible range. The conclusions of these studies and their implications for international regimes can be summarized as follows:

• Under regime designs for low and medium concentration stabilization levels (i.e. 450 and 550 ppm CO₂-eq, category A and B; see Chapter 3, Table 3.10) GHG emissions from developed countries would need to be reduced substantially during this century. For low and medium stabilization levels, developed countries as a group would need to reduce their emissions to below 1990 levels in 2020 (on the order of –10% to 40% below 1990 levels for most of the considered regimes) and to still lower levels by 2050 (40% to 95% below 1990 levels), even if developing countries make substantial reductions. The reduction percentages for individual countries vary between different regime designs and parameter settings and may be outside of this range. For high stabilization levels, reductions would have to occur, but at a later date (see Box 13.7).
• Under most of the considered regime designs for low and medium stabilization levels, the emissions from developing countries need to deviate – as soon as possible – from what we believe today would be their baseline emissions, even if developed countries make substantial reductions. For the advanced developing countries, this occurs by 2020 (mostly Latin America, Middle East and East Asia). For high stabilization levels, deviations from the reference level are necessary only at a later date.
• Reaching lower levels of GHG concentrations requires earlier reductions and faster participation compared to higher concentrations.
• For many countries, the overall target set is critical; it dictates the emissions reduction requirements more specifically than does the approach chosen to meet that target.
• The wide diversity of approaches means that not all countries participate under all regimes – even if an identical concentration target is achieved. Obviously, required national actions differ enormously, depending on whether a country participates in a system. However, the difference in reductions required between the various approaches is small for participating countries.

Several studies have gone one step further and have, based on emission allocations, calculated emission reduction costs and possible trades of emission allowances at a regional level for different concentration or temperature stabilization targets (Criqui et al., 2003; WBGU, 2003; Bollen et al., 2004; Böhringer and Welsch, 2004, 2006; Böhringer and Löschel, 2005; den Elzen and Lucas, 2005; den Elzen et al., 2005c; Persson et al., 2006). Researchers have also analysed a large variety of system designs. With cost analysis even more assumptions are relevant, such as detailed assumptions on emission reduction costs per sector and region. Costs have been calculated using a variety of models, ranging from those with detailed sectoral representation focussing on the technological aspects to macroeconomic models focussing on the economy as a whole. How (and what) costs are calculated plays a role. Some studies present annual direct mitigation costs (only direct abatement costs) or energy costs, such as mitigation costs and costs of losses of fossil fuel exports or gains from increased exports of biofuels. Other studies present full macro-economic costs, calculated as (cumulative) GDP losses in a specific target year. The cumulative impact of climate policies on GDP may be lower than expected from the annual abatement costs levels due to the fact that climate policy leads mostly to the substitution of investments and activities and much less to an overall reduction of the GDP. The conclusions of these studies on costs can be summarized as follows:

Global costs

• The total global costs are highly dependent on the baseline scenario, marginal abatement costs estimates, the participation level in emission trading and the assumed concentration stabilization level (see also Chapter 11).
• The total global costs does not vary significantly for the same global emission level; however, costs will vary with the degree of participation in emission trading (how and when allowances are allocated). If, for example, some major emitting regions do not participate in the reductions and in emission trading immediately, the global costs of the participating regions may be higher (see also Chapter 3, e.g. Bollen et al., 2004; den Elzen et al., 2005c).

Regional costs

• Regional abatement costs are largely dependent on the assumed stabilization level and baseline scenario. The allocation regime is also an important factor, although in most countries the extent of its effect is less than that of the stabilization level (see Criqui et al., 2003; den Elzen and Lucas, 2005; den Elzen et al., 2006b). The allocation parameter having the largest effect is the timing of participation. Under a staged approach, whether a region participates early or late is of great importance. If, for example, convergence of the per capita emissions were to occur by the end of this century, developing regions would incur high costs relative to what might occur in the reference or baseline cases. Conversely, if convergence were to occur by the middle of the century, developed countries would incur higher costs relative to what they might incur in a reference or baseline case (see Nakicenovic and Riahi, 2003; den Elzen et al., 2005a; Persson et al., 2006).
• Abatement costs (only costs from reducing emissions) as a percentage of GDP vary significantly by region for allocation schemes that ultimately lead to convergence in per capita emissions by the middle of this century. The costs are above the global average for the Middle East and the Russian Federation, including surrounding countries, and – to a lesser extent – for Latin America. The costs are near the world average for the OECD regions and below the world average for China. The other developing regions, such as Africa and South-Asia (India), experience low costs or even gains as a result of financial transfers from emission trading. (Criqui et al., 2003; den Elzen and Lucas, 2005).
• In addition to the abatement costs of reducing emissions, other costs arise from changes in international trade. Fossil fuel-exporting regions are also likely to be affected by losses in coal and oil exports compared to the baseline, while some regions could experience increased bio-energy exports (i.e. the Russian Federation and South America) (see Nakicenovic and Riahi, 2003; van Vuuren et al., 2003; Persson et al., 2006; and also Chapter 11).
• The economic impacts in terms of welfare changes show a similar pattern for different allocation schemes. For example, allocation schemes based on current emissions (sovereignty) lead to welfare losses for the developing countries. Allocation schemes based on a per capita convergence lead to welfare gains for developing countries, without leading to excessive burdens for industrialized countries. (Böhringer and Welsch, 2004)