sectoral economic costs and benefits of ghg mitigation - IPCC

Fossil Fuels
Discussion: Impact on Oil - An OPEC View
Davoud Ghasemzadeh and Faten Alawadhi
The purpose of this paper is to, first, review and comment on the paper presented by the Oxford
Institute for Energy Studies (OIES), entitled "The Impacts of the Kyoto Protocol on Fossil
Fuels", by Ulrich Bartsch and Benito Müller 1 . The paper will then try to express OPEC's view on
the implementation of Articles 4.8 of the UNFCCC and 3.14 of the Kyoto Protocol. In this part,
the impact of response measures on the economies of oil exporting developing countries and, in
particular, OPEC will be analysed.
Studies universally confirm the fears of fossil fuel exporters, particularly OPEC, that they will be
the major losers in terms of the impact of response measures.
The UNFCCC contains explicit reference to the need to protect the interests of countries
whose economies are particularly vulnerable to climate change mitigation measures.
Developing Countries’ Concerns are Incorporated in both the Convention and the Kyoto Protocol
• Articles 4.8 of the UNFCCC and 3.14 of the Kyoto Protocol reflect concerns of
developing countries.
• 4.8(h): … countries whose economies are highly dependent on income generated
from the production, processing and export, and/or consumption of fossil fuels and
associated energy-intensive products.
• 3.14: “Each Party included in Annex I shall strive to implement the commitments
…… in such a way as to minimize adverse social, environmental and economic
impacts on developing country Parties, particularly those identified in Article 4
paragraphs 8 and 9, of the Convention”.
• “Among the issues to be considered shall be the establishment of funding, insurance
and transfer of technology”.
The OIES paper reflects the need to address two fundamental issues: a) impact upon
demand, and b) consequences for oil price
Many assumptions made by the paper need to be examined. The overwhelming impression is that
a set of assumptions has been made that leads to the conclusion of very low revenue losses for oil
exporting countries. These assumptions (demand and supply issues) therefore should be critically
looked at. Before focussing on supply and demand issues, we note the inappropriate country
grouping in the model. Many important exporters are included in rest of the world, some
importers are included in the exporting group. So it is not clear who will exactly lose welfare.
The following points on the transportation and subsidies are highlighted as far as the demand
issues are concerned:
1 See the paper in this volume.
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