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Environmental economics

Support to sectoral policies: Climate change

See also other climate change related studies on DG Environment's website.

Economic Evaluation of Sectoral Emission Reduction Objectives for Climate Change (2001)

The objectives of this 2 year long study were (i) to identify the (least-cost) contribution of different sectors and gases for meeting the Community’s quantitative reduction for greenhouse gases under the Kyoto protocol; and (ii) to determine a package of cost-effective policies and measures for all sectors and gases towards meeting the goals.

Economic analysis of EU-wide emissions trading in CO2 (2000)

In preparation of the Green Paper on greenhouse gas emissions trading within the European Union (2000), the cost implications of EU-wide emissions trading carbon dioxide were estimated by E3-Lab with the PRIMES (*) energy systems model. The results are available here:

In addition, the Institute for Prospective Technological Studies (IPTS) made a preliminary aggregate analysis using the POLES (**) energy systems model. These results are available here:

Although the models are different in some major characteristics they come to fairly similar conclusions about the achievable cost savings. They estimate them to be 25 and 30 percent compared with a situation without EU-wide emissions trading. The models are restricted to energy-related CO2 emissions and thus fail to capture the impacts of the six gas basket and the inclusion of carbon sinks as means to implement the Kyoto commitments. However, this omission is not likely to alter the main conclusions.

(*) PRIMES is a partial equilibrium model focusing on European Union energy markets and as such very useful in analysing in detail the impact of various forms of carbon emission trading on energy markets. On the other hand it fails to capture some of the impacts which carbon emission trading may induce in the wider economy (e.g. exchange rate effects, trade balances). PRIMES generates results for each of the 14 Member States (Luxembourg is excluded) separately and has also been used to investigate the effects of carbon emission trading limited to a subset of Member States. Because of the detailed sectoral breakdown it allows also for the analysis of carbon emission trading restricted to a number of economic sectors.

(**) POLES is a partial equilibrium world-wide energy market model, but has a different geographical split than PRIMES. It encompasses the whole world, but has a less detailed breakdown of Member States. This renders it an excellent tool to shed light on interactions with international energy markets as a consequence of EU carbon emission trading. As a deficit POLES is less suited to illuminate in detail the effects of sectorally and geographically limited permit markets. As PRIMES, the POLES model fails to capture general economy-wide effects like changes in international trade.

Economic Evaluation of Quantitative Objectives for Climate Change (1999)

This study identifies the least-cost packages of specific policies and measures for meeting the Community's quantitative reduction targets for greenhouse gases under the Kyoto Protocol.

The study analyses separately carbon dioxide, methane and nitrous oxide emissions, and how the different sectors of the economy (i.e. power production, industry, tertiary-domestic, transport, waste sector and agriculture) could reduce the emissions. Potentials and costs of reduction of methane and nitrous oxide are assessed and the respective cost curves are derived. Energy related carbon dioxide emissions are analysed using the PRIMES energy systems model for EU Member States.

The study also analyses the costs and emission reductions of an emissions trade in carbon dioxide for meeting the goals set in the Kyoto Protocol in a cost-effective way. The costs of different trading scenarios in carbon dioxide emissions are analysed using the POLES model, which models global long-term energy consumption.

Annex D by country: (pdf ~400K)

Reduction of the emissions of HFC's, PFC's and SF6 in the European Union (1999)

The report provides a first estimate of the development of the EU-wide use and emissions in 2005 and 2010 of the three industrial halogenated gases included in the Kyoto protocol, namely hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6). It also makes a preliminary assessment of the options and costs of controlling these three gases, as well as of the barriers for implementing reduction policies.

Options to Reduce Methane Emissions (1998)

This study analyses methane emissions in the EU and strategies to control them. It considers options for the reduction of emissions from each of the main source sectors, agriculture, waste, coal mining and the oil and gas industry, and assesses costs and applicability of the mitigation options available to produce cost curves for reducing emissions. The study also makes projections of methane emissions to 2020 under a ‘business as usual’ scenario on a sectoral basis and combines estimates of achievable reductions from all sectors to give an EU wide projection of methane emissions if a mitigation strategy were implemented.

Options to Reduce Nitrous Oxide Emissions (1998)

This study assesses nitrous oxide (N2O) emissions in the EU and strategies to control them. It considers in detail options for reducing emissions from the agricultural and chemical sectors, and emissions from combustion processes, and assesses their cost-effectiveness and potential reductions, which could be achieved. The study also makes projections of N2O emissions up to 2020 under a ‘business as usual’ scenario and under a ‘with measures’ scenario.