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The Economics of a Lost Deal: Kyoto - The Hague - Marrakesh

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  • Hourcade Jean-Charles
  • Frederic Ghersi

Abstract

This paper examines prospects for compromise between competing perspectives on four key climate change issues: costs, level of domestic action, environmental integrity, and developing world involvement. It focuses on the policy issues stemming from uncertainty about abatement costs. Based on extensive simulations of a model integration tool, SAP12 (Stochastic Assessment of Climate Policies, 12 models), the analysis considers options for fine-tuning the Kyoto Protocol, such as concrete ceilings or levies on carbon imports; "environmental restoration payments" to be made on excess emissions; and credits for sequestration activities in Annex B countries. It demonstrates that a restoration payment (implemented through a safety valve) emerges as a superior means of addressing the cost uncertainty issue. The paper concludes that had this approach been taken at the COP6 climate negotiations in The Hague, there would have been substantial room for compromise on payments of $35 to $100 per ton of carbon. Examining the Marrakesh (COP7) climate accord, it derives some lessons for attempts at completing Kyoto’s unfinished business or at moving on to a new framework.

Suggested Citation

  • Hourcade Jean-Charles & Frederic Ghersi, 2002. "The Economics of a Lost Deal: Kyoto - The Hague - Marrakesh," The Energy Journal, , vol. 23(3), pages 1-26, July.
    • Handle: RePEc:sae:enejou:v:23:y:2002:i:3:p:1-26
    DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No3-1
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    References listed on IDEAS

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    1. Lecocq, Franck & Hourcade, Jean-Charles & Ha Duong, Minh, 1998. "Decision making under uncertainty and inertia constraints: sectoral implications of the when flexibility," Energy Economics, Elsevier, vol. 20(5-6), pages 539-555, December.
    2. M. Ha-Duong & M. J. Grubb & J.-C. Hourcade, 1997. "Influence of socioeconomic inertia and uncertainty on optimal CO2-emission abatement," Nature, Nature, vol. 390(6657), pages 270-273, November.
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