sectoral economic costs and benefits of ghg mitigation - IPCC

Session Proceedings
Discussion on Coal
Ron Knapp of the World Coal Institute in the UK commented on the presentation from the
perspective of the coal industry. His first comments were that the model projections were wrong
– on the basis that all model projections turn out to be wrong, the world never follows the path
that is projected. He expressed surprise at the real price increases projected for coal. Real coal
prices had gone down over the last five years (the first five years of the model projections, which
uses 1995 as the base year) whereas the model projected an increase. He noted that coal markets
were very diverse; factors like sulphur content were important in some markets and that there
were differences between internal coal markets and exports.
Knapp gave the example of aluminium production in Japan, which had fallen to zero in the few
years after the first oil shock. The output had been made up by increased production in Australia,
which had access to cheap coal-fired electricity. He foresaw the same happening with steel
industries in Annex I countries under the Kyoto Protocol if coal costs were increased
significantly in those countries. He suggested that the output would be made up in developing
countries and that coking coal exports, mainly from Annex I countries (Australia, Canada and the
USA) would simply be switched to those countries. He stated that the major impact would be on
steam coal markets and that this would adversely affect developing country coal exporters such
as Colombia, Indonesia and South Africa.
In summary, Knapp suggested that greater use of voluntary measures, the Kyoto mechanisms and
effective market solutions would reduce the impacts on coal of meeting the Kyoto targets; that
technology can deliver successful coal outcomes in response to market circumstances; and that
there was a need to promote clean coal technology for combustion efficiency and environmental
solutions.
Discussion on Oil
Davood Ghasemzadeh of the OPEC Secretariat noted that there was a need to examine critically
some of the assumptions in Bartsch’s paper. Specifically he called attention to:
• the grouping of countries in the model - in some cases, oil exporters and importers were
grouped together, while oil exporters such as Indonesia, Nigeria and some African countries
were excluded, Nigeria and other African oil exporters were grouped with other countries
that had very different economic characteristics;
• the replacement of oil by non-carbon fuels in the reference case, which was not generally
expected according to OPEC assessments and other studies, due to high infrastructure costs,
complex supply issues and technical problems, and the inclusion of these non-carbon fuels as
part of oil products; and
• the very pessimistic view of conventional oil resources.
He suggested that these assumptions led to the conclusion of very low revenue losses for oil
exporting countries. In particular, he suggested that with a more optimistic view on resources, the
supply curve remained inelastic and that price impacts would be much greater for any given
reduction in demand.
Ghasemzadeh noted that gasoline and diesel were already highly taxed in many countries, but
that in the non-transport sectors, new taxation could have a significant impact on the demand for
oil. He said that taxation on oil products should be looked at in a more disaggregated fashion, and
that a more thorough treatment of the transportation sector is necessary.
8