Evolution of analysis

In the aftermath of initial agreement on the Kyoto Protocol, many economic modelling studies of the first period commitments, conducted under a programme of the Stanford-based Energy Modelling Forum, suggested that carbon prices under Kyoto could be several hundred dollars per tonne of carbon ($/tC) if emissions trading were impeded, or on the order of $100/tC (= $27.3/tCO2) even with unrestricted trading amongst the industrialized countries (Weyant 1999).14 Figure 5.3 shows results from the set of models covered in these studies, for the US and EU, for four cases: no trading (giving the marginal costs of achieving Kyoto targets domestically); full Annex I trading; a 'double bubble' in which there is no trade between the EU and the rest of Annex I but each bloc trades within itself; and full global trading, taken as crude approximation to maximal use of the CDM. Generally, increasing flexibility reduces prices as expected, but there is a huge range of prices across the models.

The main results from these modelling studies by country are reproduced in Chapter 6. The IPCC Third Assessment (IPCC 2001) numbers on the costs of Kyoto drew heavily on this set of studies, whilst noting that the models generally 'do not include carbon sinks, non-CO2 gases, the CDM, negative cost options, ancillary benefits, or targeted revenue recycling'. This rather serious set of limitations goes some way to explaining the gulf between many of these

(a) United States

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