sectoral economic costs and benefits of ghg mitigation - IPCC

Terry Barker, Lenny Bernstein, Ken Gregory, Steve Lennon and Julio Torres Martinez
Session Proceedings
Terry Barker, Lenny Bernstein, Ken Gregory, Steve Lennon and Julio Torres Martinez
1 Introduction
The Expert Meeting was opened by Ogunlade Davidson, Co-Chair of IPCC Working Group III 1 .
Davidson reiterated that the purpose of the meeting was to elicit new, previously unpublished
information on sectoral costs and benefits of GHG mitigation because the peer-reviewed
literature was either sparse or unavailable. He also stressed the need to consider the social and
welfare costs and benefits of mitigation in the sectoral analysis. He acknowledged that this would
involve a departure from well-known knowledge systems, but stressed that it was a necessary
step toward fulfilling the goals of the UN Framework Convention on Climate Change.
2 Fossil Fuels: Can the cost of mitigation be made acceptable to fossil fuel producers,
and if so, how?
The session was chaired by Terry Barker and began with an overview presentation "Impacts of
the Kyoto Protocol on Fossil Fuels" by Ulrich Bartsch and Benito Müller, followed by three
discussion papers on the coal, oil and natural gas sectors by Ron Knapp, Davood Ghasemzadeh
and Jonathan Stern respectively. In the general discussion session, comments and questions were
received from the floor. In addition, a few submitted papers are relevant to this topic and
included at the end of the proceedings of this session.
Overview Presentation: Impacts of the Kyoto Protocol on Fossil Fuels
Ulrich Bartsch of the Oxford Institute for Energy Studies presented the results of research using a
global economic-environmental simulation model (CLIMOX) which examines the development
of energy markets and emissions both in a business-as-usual (baseline) case and in an extended
Kyoto Protocol case.
In the baseline case, the model projects that conventional oil production will peak in 2015, and
that increasing amounts of non-conventional oil and non-carbon fuels (a term which included all
replacement fuels generated from renewable sources) will meet market demands for liquid fuels.
Coal demand is seen to grow steadily, and gas demand more rapidly than oil. Oil prices are
projected to rise by around 35% by 2020, with gas prices rising by around 15% and coal by less
than 10%.
In the extended Kyoto case (with the Kyoto Protocol fully implemented and with Annex I Party
emissions held at their average 2008-2012 levels until 2020), results were given in comparison to
baseline markets and prices. The model projects a small reduction in total oil demand, but with a
large reduction in non-conventional oil supplies and a large increase in non-carbon fuels. Coal
and gas demand drop, with the latter affected by a methane leakage tax (equivalent to a carbon
tax) which is assumed to be applied and particularly affects production in countries with
economies-in-transition. Oil prices are seen as falling by 7% by 2020, gas prices by 8%, but coal
prices by less than 1%. Oil revenues are seen as increasing in the base case by 98% by 2020, with
revenues 12% below the base case in the extended Kyoto case.
1
See Opening remarks by Davidson at the beginning of this Volume.
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