sectoral economic costs and benefits of ghg mitigation - IPCC

Ulrich Bartsch and Benito Müller
5 The Kyoto Scenario: Implications
5.1 Introduction
The ‘most likely’ implementation of the Kyoto Protocol will produce global emissions of 28
thousand Megatons (Mt) in 2010, and 33.8 thousand Mt of CO 2 and Methane in 2020. This
constitutes a reduction of 8 per cent from the Business-as-Usual world only, as Annex I countries
reduce emissions but fast-growing, energy intensive non-Annex I countries are left free to
increase emissions. This section presents the implications of emission reductions for the fossil
fuel markets, and for oil revenues by region.
5.2 Impacts on the Fossil Fuel Markets
5.2.1 Oil Supply
Figure 3 shows the global supply of oil, both from conventional and non-conventional sources.
The dotted lines show the Business-as-Usual case. The solid lines show the production of oil
given the ‘most likely’ implementation of the Kyoto Protocol.
The policies set out in Section 4 lead to a decline in oil production of 3 mbl/d in 2010, and 5.3
mbl/d in 2020 from the BaU projections. Most of this decline in volumes comes from nonconventional
sources: under the Kyoto scenario, the production of non-conventional oil is
delayed beyond 2015, and production increases over the next five years, to reach 4.3 mbl/d in the
final period. The Kyoto policies therefore reduce non-conventional oil production by the end of
the projections period to half its BaU level. Conventional oil production is only about 2.1 mbl/d
and 1.2 mbl/d in 2010 and 2020 below the projected BaU level. The impact of this ‘most likely’
implementation of the Kyoto Protocol on the suppliers of conventional oil is accordingly smaller
than the impact on total oil production. The call on Middle East oil increases from 24 mbl/d in
1995 to 35.6 and 39.8 mbl/d in 2010 and 2020 in the BaU case, and to 35.3 and 39.6 mbl/d in the
Kyoto case, with reductions of only 200-300 thousand barrels per day due to Kyoto.
Oil Prices
As shown in Figure 4, the ‘most likely’ implementation of the climate agreement reduces the rate
of growth of the oil price, but prices continue to increase. Kyoto ‘costs’ to the oil producers are a
combination of the quantity reactions shown in the last paragraph, and a price decline by 9 and 7
per cent from the BaU levels for 2010 and 2020.
5.2.2 Comparison Between the Three Fossil Fuels
Table 3 shows changes from BaU levels in the demand for oil, non-carbon fuel, coal and gas for
the world for the years 2010 and 2020. Demand for crude oil is the sum of demand for
conventional and non-conventional oil. As shown in the table, total demand for oil falls by 3 and
5.3 million barrels per day from BaU levels projected for 2010 and 2020, respectively. At the
same time, non-carbon fuel becomes more competitive and production increases by 2.7 and 4.7
mbl/d oil equivalent for the two periods. Most of the reduction of demand for oil is substituted by
non-carbon fuel supply. Non-carbon fuel captures almost 10 per cent of the market for liquid fuel
in 2020. In the BaU case as well as in the ‘most likely’ Kyoto case, global liquids supply is
around 112 mbl/d oil equivalent in 2020. 1 Coal demand falls by 4.4 million barrels oil equivalent
per day from BaU levels in 2010 and 2020. Gas demand falls by 4 and 4.8 mbl/d oe for the two
periods.
1 This is availability of refined oil. Note that oil production is 68.5 and refined oil production is 71.9 mbl/d
in 1995 due to refinery gains. Assuming the same ratio of crude to products, this means oil production is
102 mbl/d in 2020, non-carbon fuel is 4.8 mbl/d and total refined oil (including non-carbon fuel) is 112
mbl/d.
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