sectoral economic costs and benefits of ghg mitigation - IPCC

Ulrich Bartsch and Benito Müller
Impacts of the Kyoto Protocol on Fossil Fuels
Ulrich Bartsch and Benito Müller
1 Introduction and Overview
This paper shows the main effects on the fossil fuel markets of climate change policies, with a
special focus on the oil market and oil revenues. The methodology used is a comparison of
model based projections for the world with and without implementation of climate change
agreements over a time horizon between the base year 1995 and the year 2020. The research is
based on a global economic-environmental simulation model (the CLIMOX model), which
produces projections for emissions, and for quantities and prices of fossil fuels and other
commodities. The paper covers two scenarios.
The first which we label the Business-as-Usual case examines the development of emissions,
supply of and demand for fossil fuels and other commodities, and prices towards the year 2020 in
a world which does not adopt specific measures directed against greenhouse gas emissions. The
BaU case serves as a baseline against which the results of climate change policy simulations can
be compared.
The second scenario which we label the Kyoto scenario assumes that the Kyoto Protocol is
successfully implemented. A literature survey and actual policy declarations were used to
produce projections of the ‘most likely’ policies to be implemented by the Annex I countries.
These projections were summarised into policy packages for the regions on which the
simulations are based.
This paper is structured as follows: a description of the model follows in Section 2. Section 3
describes basic assumptions concerning the baseline path of the world economy and fossil fuel
supplies over the time horizon. This is followed by a description of the Kyoto scenario in Section
4. Section 5 shows main results of the analysis, and Section 6 gives a brief summary of a
comparison of results with other studies. Conclusions follow in Section 7.
The paper is a partial summary of a major forthcoming book, Fossil Fuels in a Changing
Climate: Impacts of the Kyoto Protocol and Developing Country Participation, by Ulrich
Bartsch and Benito Müller, Oxford University Press, 2000. The book will be published in Spring
2000, and will contain a full set of assumptions and results of several policy scenarios. Apart
from options for the implementation of the Kyoto Protocol, we develop a post-Kyoto scenario
with full developing country participation. The scenario is based on a global compromise
formula, which aims at providing a politically acceptable solution to the problem of the initial
allocation of international emission rights by recognising notions of fairness and justice.
The book will present results of a large research project recently completed at the Oxford
Institute for Energy Studies. The research was carried out in co-operation with the Center for
International Climate and Environmental Research Oslo (CICERO) and funded by a grant from
the Royal Ministry of Petroleum and Energy (Norway).
2 The Oxford Model for Climate Policy Analysis (CLIMOX)
2.1 Introduction
The projections and simulations shown here are produced with the Oxford model for climate
policy analysis (CLIMOX) developed at the Oxford Institute for Energy Studies. It is a global
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