sectoral economic costs and benefits of ghg mitigation - IPCC

Jonathan Pershing
Fossil Fuel Implications of Climate Change Mitigation
Responses 1
Jonathan Pershing 2
Summary
Standard wisdom suggests that one of the consequences of efforts to mitigate climate change will
be a reduction in the demand for all forms of carbon-based fossil fuels. These include natural gas,
oil and coal. Inasmuch as the carbon emitted per unit of energy produced from each fuel is
different 3 , absent new technological developments, we might also expect to see a sharper
reduction in the use of coal than oil, and more reductions in oil than in natural gas – the use of
which may even increase due to its lower carbon content.
Standard wisdom may not, in fact, be entirely accurate. A number of issues may affect whether
there will be an impact on any individual fuel, what that impact will be, how the impact will vary
across countries, and what the relative welfare of countries might be with or without climate
change mitigation policies. However, in spite of the recognition that there may be potential
impacts from climate change mitigation policies, little effort has been made to assess them, either
in terms of evaluating the real costs to fossil fuel exporting countries, or considering possible
remedies if indeed action is warranted.
This paper suggests that while claims of impacts may be based on legitimate technical grounds,
sufficient questions exist to question whether such impacts will indeed materialize as a result of
the implementation of the Climate Convention or Kyoto Protocol commitments. For example,
most results are based on the use of macro-economic models – most of which do not take into
account fossil fuel distribution effects at the national level, or the use of CO 2 sinks or non-CO 2
greenhouse gas mitigation options. The paper also suggests that some of these impacts may be
offset through other (possibly unexamined) aspects of future energy and development paths. For
example, in a climate change policy world, energy investment in non-conventional oil supply
might be deferred – lowering the impacts on conventional fuel exporters. The paper concludes
with a brief summary of some of the policy options that may be used to minimize costs to fossil
1 An earlier version of this paper was presented at the UNFCCC Workshop on the Implementation of
Article 4, paragraphs 8 and 9, of the Climate Convention, 21-24 September 1999 Bonn, Germany.
2 The author is grateful for the useful input and valuable advice offered by colleagues in the IEA on the
issues raised in this paper, including Richard Baron, Fatih Birol, Edgard Habib, David Knapp, Jeff Piper,
Kristi Varangu and Mike Wittner. The author is particularly indebted to Sandrine Duchesne and Jenny
Gell who reviewed and provided detailed commentary on the voluminous statistical data required for this
work. The IEA has historically represented the interests of the industrial countries in discussions on
international energy policy. However, consumers as well as producers have a clear interest in maintaining
the stability of energy prices and markets, as well as in preserving the social and economic fabric of the
producing and exporting developing countries that are responsible for such a large share of the global
supply totals. This paper seeks to provide analytic input into what may be a difficult and politically
charged debate in the hopes that such technical analysis will provide additional insight and possibly aid in
the development of politically acceptable solutions to the problem of climate change. It should be noted,
however, that the views here do not necessarily reflect the views of the IEA Member countries or even of
the IEA Secretariat on these issues; in particular, any errors or interpretations are the responsibility of the
author.
3 According to the IPCC, the ratio of carbon per unit of energy produced is approximately 3:4:5 for gas:
oil:coal.
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