sectoral economic costs and benefits of ghg mitigation - IPCC

Davoud Ghasemzadeh and Faten Alawadhi
• Impact upon the transportation sector from “Kyoto” is assumed to be dominated by
substitution of oil through hydrogen.
• BUT, this is not generally expected, according to our assessment and other studies:
infrastructure costs are very high, complex supply issues, technical obstacles.
• The major impact is likely to be through improved efficiency of the internal
combustion engine and competition from hybrid fuel vehicles.
• Argument that removing hydrogen from the picture will substantially reduce losses
in oil demand is highly questionable.
• Furthermore, including hydrogen as part of oil products is, in any case, incorrect and
leads to false conclusions with regard to the impact of Kyoto upon oil products.
• A far more thorough treatment of the transport sector is necessary.
On the supply side, the following observations are made:
• The paper takes a very pessimistic view of conventional oil resources, and the
consequent need for non-conventional oil.
• The very small impact upon prices of “Kyoto” stems directly from this assumption,
so that reference case production is on an elastic segment of the supply curve.
• However, by taking a more optimistic view on resources, the supply curve remains
inelastic, and price impacts are much greater for any given reduction in demand.
• This shows the extreme significance of upstream economics in calculations of
revenue losses.
• Once more, the assumptions made tend to underestimate the impact on revenues.
• In any case, 12-15% decrease suggests losses of over $20 billion per annum - given
that this is the lowest estimate, the higher end would be much larger.
• Besides, revenue losses are not a sufficient measure of the impact of “Kyoto”:
welfare impacts are much higher.
In short, the paper has a very pessimistic view of conventional oil resources and inappropriate
assumptions in the demand side that led to the conclusion of very low revenue losses for oil
exporting countries. In addition, the OIES paper has not addressed the central theme of this
session of the workshop, i.e. "Mitigating Carbon Emissions: Can the cost be made acceptable to
fossil fuel producers, and if so, how?"
Impact of response measures on the economies of oil exporting developing countries
After this critical view on the OIES paper, in analysing the impact of response measures on the
economies of oil exporting developing countries, we try to concentrate on three main issues:
• Identification of vulnerable countries
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