sectoral economic costs and benefits of ghg mitigation - IPCC

Terry Barker, Lenny Bernstein, Ken Gregory, Steve Lennon and Julio Torres Martinez
Ghasemzadeh noted that the projected model losses of 12-15% represented a revenue loss of over
$20 billion per annum to oil exporters, but that other studies projected losses up to $60 billion.
He also noted that many oil exporters are gas exporters and that these revenues would also fall.
He agreed that emissions trading would reduce the losses, but they would remain substantial. He
noted that welfare impacts were another factor that had to be examined to fully understand the
extent of the impacts of the Kyoto Protocol. He stated that welfare losses would be much higher
than revenue losses and that OPEC countries were the most vulnerable, given their high
dependence on income generated from oil and gas exports, and would suffer the highest welfare
losses.
Gazemzadeh noted that Bartsch's paper had not addressed the central theme of the session - can
the cost of mitigating carbon emissions be made acceptable to fossil fuel producers, and, if so,
how? He suggested that one way would be to restructure energy taxes based on carbon content.
This would result in a fall in OECD CO 2 emissions of at least 10%.
Ghasemzadeh called for funding as embodied in Article 3.14 of the Kyoto Protocol to help
minimise the impact. He further called for:
- broader investment funds, including transfer of technology, to help oil exporting developing
countries diversify their economies towards non-oil sectors;
- an enhanced role for natural gas;
- reduced GHG emissions associated with flaring and venting of natural gas in oil producing
countries;
- CO 2 segregation and disposal;
- mechanisms that explicitly encourage projects such as energy efficiency improvements in
OPEC countries;
- removal of direct and indirect trade barriers to developing countries;
- ending market distortions, such as subsidies on fossil fuel production; and
- genuine efforts to reduce emissions of all the Kyoto gases, not just CO 2 .
Discussion on Natural Gas
Jonathan Stern of the RIIA/Gas Strategies in the UK noted that natural gas demand had increased
by 54% since 1980 and that, outside the USA and Russia, the industry was young and growing
rapidly. He noted the need, in modelling, to separate Eastern Europe from the former Soviet
republics as their energy economies differ significantly, particularly in terms of the proportion of
gas in their energy balances.
Stern suggested that it would be important to resolve the uncertainties in model projections of
increased gas use in India and China over the next 20 years. If the high demand projections of
some models were to be believed, these two countries could account for massive increases in gas
use. Because the gas would be replacing coal, projected CO 2 emissions would fall. However, the
high capital cost of the required infrastructure made such projections doubtful. If Chinese and
Indian gas demand failed to increase significantly, Stern had no difficulty accepting Bartsch's
model's projections of gas demand. He agreed that gas demand in the OECD and former Soviet
Union would fall, counterbalanced by increases in gas demand elsewhere.
In discussing methane leakage, Stern expressed doubts about the assumptions in Bartsch's model
due to data problems associated with this subject in all countries, but particularly in countries
with economies in transition, where metering is not of a high standard. He noted that old pipes
leak more than new, and that the low pressure systems from the 19 th and early 20 th centuries leak
more than high pressure transmission lines. He stated that reducing emissions was an economic
rather than an engineering problem and that, within countries with economies-in-transition, the
major problems were in Russia and Ukraine, and in city distribution networks. He noted that
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