sectoral economic costs and benefits of ghg mitigation - IPCC

Fossil Fuels
• Assessment of the size of impact under alternative assumptions
• "Avoid or minimise" negative impact: how?
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. An OPEC study published in the
OPEC Bulletin (September 1996) identifies vulnerable countries. Choosing the net fossil fuel
exports in 2010 as a percentage of GDP (see Figure 1), shows that in 1994 OPEC Member
Countries accounted for ten of the top 14 vulnerable countries. This share ranged from 19% to as
high as 42%.
Figure 1 Net Fossil Fuel Exports in 2010 as a Percentage of GDP
IRAQ
KUWAIT
BRUNEI
QATAR
SAUDI ARABIA
UNITED ARAB EMIRATES
CONGO
VENEZUELA
LIBYA, S.P.A.J.
IRAN, I.R.
NIGERIA
ALGERIA
GABON
ANGOLA
FORMER USSR
NORWAY
OMAN
VIETNAM
TRINIDAD / TOBAGO
INDONESIA
0 10 20 30 40 50 60 70
Even though the analysis is for total fossil fuel and mainly for developing countries, it is
dominated by oil exporting developing countries. It is noted that of Annex I countries, Norway
and the Former USSR are vulnerable to a significant degree. It is also interesting to note that
even though the loser countries are dominated by OPEC, other developing countries such as
Brunei, Congo, Gabon, Angola and other exporters are also vulnerable. As many as 10 of the 12
most dependent countries by 2010 will be OPEC countries.
In assessing the impact of response measures, the OPEC World Energy Model (OWEM) has
been used. Although large carbon taxes may not be implemented in Annex I countries in an
attempt to reach the Kyoto emissions target, nevertheless, it is useful to analyse scenarios that,
like many models, assume the imposition of carbon taxes. The "Kyoto Alone" scenario assumes
that the three OECD regions each impose a carbon tax that is sufficient to reach their own Kyoto
emissions target by 2010. It is assumed that the tax is both revenue- and inflation-neutral, thereby
minimising economic damage from this policy. It is further assumed, in this scenario, that oil
prices remain at reference case levels, thereby implying that the fall in oil demand resulting from
the tax is entirely absorbed by OPEC in the form of lower production.
The second scenario considers a softer price path that allows OPEC production to expand at
approximately reference case levels in the face of Kyoto target achievements. By 2010, revenue
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