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CO 2 emission mitigation and fossil fuel markets: Dynamic and international aspects of climate policies

Nico Bauer, Valentina Bosetti (), Meriem Hamdi-Cherif, Alban Kitous, David McCollum, Aurélie Méjean, Shilpa Rao, Hal Turton, Leonidas Paroussos (), Shuichi Ashina, Katherine Calvin, Kenichi Wada and Detlef Van Vuuren
Additional contact information
Nico Bauer: PIK - Potsdam Institute for Climate Impact Research
Meriem Hamdi-Cherif: CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - EHESS - École des hautes études en sciences sociales - AgroParisTech - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement
Alban Kitous: IPTS - JRC Institute for Prospective Technological Studies - JRC - European Commission - Joint Research Centre [Seville]
David McCollum: IIASA - International Institute for Applied Systems Analysis [Laxenburg]
Shilpa Rao: IIASA - International Institute for Applied Systems Analysis [Laxenburg]
Hal Turton: PSI - Paul Scherrer Institute
Shuichi Ashina: NIES - National Institute for Environmental Studies
Katherine Calvin: Joint Global Change Research Institute - PNNL - Pacific Northwest National Laboratory - University of Maryland [College Park] - University of Maryland System
Kenichi Wada: NIES - National Institute for Environmental Studies
Detlef Van Vuuren: Utrecht University [Utrecht]

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Abstract: This paper explores a multi-model scenario ensemble to assess the impacts of idealized and non-idealized climate change stabilization policies on fossil fuel markets. Under idealized conditions climate policies significantly reduce coal use in the short-and long-term. Reductions in oil and gas use are much smaller, particularly until 2030, but revenues decrease much more because oil and gas prices are higher than coal prices. A first deviation from optimal transition pathways is delayed action that relaxes global emission targets until 2030 in accordance with the Copenhagen pledges. Fossil fuel markets revert back to the no-policy case: though coal use increases strongest, revenue gains are higher for oil and gas. To balance the carbon budget over the 21st century, the long-term reallocation of fossil fuels is significantly larger—twice and more— than the short-term distortion. This amplifying effect results from coal lock-in and inter-fuel substitution effects to balance the full-century carbon budget. The second deviation from the optimal transition pathway relaxes the global participation assumption. The result here is less clear-cut across models, as we find carbon leakage effects ranging from positive to negative because trade and substitution patterns of coal, oil, and gas differ across models. In summary, distortions of fossil fuel markets resulting from relaxed short-term global emission targets are more important and less uncertain than the issue of carbon leakage from early mover action.

Keywords: Carbon leakage; Fossil fuel markets; Copenhagen Accord; Climate change mitigation policies; Inter-fuel substitution (search for similar items in EconPapers)
Date: 2015
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Published in Technological Forecasting and Social Change, Elsevier, 2015, 90 Part A, pp.243-256. ⟨10.1016/j.techfore.2013.09.009⟩

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DOI: 10.1016/j.techfore.2013.09.009

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