Technology Change and US Participation in the Kyoto Protocol

Jeffrey Binggeli and Joachim Schleich

Research design based on GTAP-E

Scenario 1: US participates in Kyoto Protocol (KP); no technological change (TC) in the electricity generation from coalquota for USA, full trading among all Annex 1; afall ("Coal, "Electricity", "USA") = 0;

Scenario 2: US does not participate in KP; no TCno quota for USA, full trading among other Annex 1, afall ("Coal, "Electricity", "USA") = 0;

Scenario 3: US does not participate in KP; TCno quota for USA, full trading among other Annex 1, afall ("Coal, "Electricity", "USA") = 10;

Scenario 4: US participates in KP; TCquota for USA, full trading among all Annex 1, afall ("Coal, "Electricity", "USA") = 10;

Selected resultsScenario 1 Scenario 2 Scenario 3 Scenario 4

KP(w/ US) & noTC KP(w/o US) & noTC KP(w/o US) & TC KP(w/ US) & TC

USCO2 (Total) (% chng) -26.61 0.78 -0.38 -26.98CO2 (Coal) (% chng) -39.81 0.05 -3.11 -41.25Electricity output (% chng) -5.2 0.23 1.09 -4.08Coal output (% chng) -37.71 -3.09 -5.9 -38.9Gas output (% chng) -24.54 -0.92 -0.76 -24.06Electricity price (% chng) 18.27 0.29 -1.1 16.07Coal price (% chng) 136 0 -0.3 132

WelfareUS (% chng) -0.26 0.01 0.04 -0.21Rest (% chng) -0.17 -0.18 -0.18 -0.16

Welfare Decomp USET (m USD) -10549 0 0 -9918Allocation (m USD) -13363 -51 -47 -13234TC (m USD) 0 0 2637 3107ToT (m USD) 5022 762 762 5016

CO2-Price (97 USD/ton) 79 74 74 77

Conclusions

TC in electricity generation from coal in the US results in:- a decrease in coal output (dominating technology effect) - a decrease in electricity generation in the US under Kyoto only- substitution of gas by coal- higher welfare gains to US, if US participates in KP (b/c of

lower MAC)- TC in US is more beneficial to other countries, if US

participates in KP- TC of 10% is not enough to make US participation in KP

beneficial (from US perspective!) because of „Hot Air“ from Russia

- Would need TC >> 50% to make US benefit from participation

Backup: Coal demand (qf)

• Equation INTDEMAND• # industry demands for intermediate inputs, including cgds #• (all,i,TRAD_COMM)(all,j,PROD_COMM)(all,r,REG)

• !< Top level : demand for non-energy intermediate inputs >!• qf(i,j,r) = (D_NEGY(i,j,r)*D_VFA(i,j,r)* [ - af(i,j,r) + qo(j,r) - ao(j,r)• - ESUBT(j) * [pf(i,j,r) - af(i,j,r) - ps(j,r)• !HL debug: added! - ao(j,r)] ])• ! level 3 : electricity !• + (D_ELY(i,j,r)*D_VFA(i,j,r)* [- af(i,j,r) + qen(j,r)• - ELELY(j,r) * [pf(i,j,r) - af(i,j,r) - pen(j,r)] ])• ! fourth level : coal !• + (D_COAL(i,j,r)*D_VFA(i,j,r)* [- af(i,j,r) + qnel(j,r)• - ELCO(j,r) * [pf(i,j,r) - af(i,j,r) - pnel(j,r)] ])• ! fifth level : remainding fossil fuels !• + (D_OFF(i,j,r)*D_VFA(i,j,r)* [- af(i,j,r) + qncoal(j,r)• - ELFU(j,r) * [pf(i,j,r) - af(i,j,r) - pncoal(j,r)] ]);