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The usefulness of combined energy systems and a macroeconomic model, for the examination of a global impacts of an energy policy that internalizes the external costs of electricity generation, is discussed.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jeem.2005.07.003 Byline: Odd Godal (a), Ger Klaassen (b) Abstract: We examine the potential effects on permit prices and abatement costs of four compliance rules governing emissions trade across sources and periods in the Kyoto Protocol: The banking rule that allows excess permits to be used later; the restoration rate rule that penalizes borrowing; the commitment period reserve rule that limits sales; and finally, the suspension rule that restricts borrowing and sales. Our framework is a two-period model where parties may be out of compliance in the Kyoto period, but are assumed to comply at a later time. Under varying assumptions about market power and US participation, we find that the rules may have pronounced effects on individual costs, but overall efficiency is not severely affected. Author Affiliation: (a) Department of Economics, University of Bergen, Norway (b) European Commission, DG Research, B-1049 Brussels, Belgium Article History: Received 23 July 2003

The use of two-period model to analyze the effects of emission trading envisaged in Kyoto Protocol is presented.

The quality and efficiency go together for explicit and implicit compliance incentives, except for emission trading. The objectives, of the procedures and mechanisms regarding compliance, are to promote and enforce compliance.

The problem of reducing SO2 emissions in Europe is formalized and a specialized solution methodology is developed which is applied to actual situations. By utilizing a mean-variance model, the non-deterministic problem with small data samples, was properly treated. The numerical method which used a quadratic version of an interior point method was found to be efficient and robust. Using this method, the computational methods such as symbolic Cholesky factorization of sparse matrices, splitting dense columns and minimum degree ordering were successfully implemented.

Simultaneous reduction of nitrogen oxide and ammonia emissions can result in significant reductions in nitrogen deposition as well major cost-savings of about 13% to 80%. The cost-savings will come mainly from elimination of expensive nitrogen oxide emission control systems such as the US-1991 standard for automobiles. A discussion of the implications of such a finding on current emission control strategies in Europe is presented.

The impending expiration of the Helsinki Protocol on sulfur dioxide emission reduction has brought about discussions for new acid rain abatement strategies. A RAINS model which compares such strategies is presented. The model predicted that current economic restructuring and efficiency improvement efforts in Eastern Europe can result in a significant decrease in sulphur abatement costs.

Byline: Leonardo Barreto, Ger Klaassen In this paper, using the 'bottom-up' energy-system optimisation ERIS model, we examine the effects of emission trading on technology deployment, emphasising the role of technology learning spillovers. That is, the possibility that the learning accumulated in a particular technology in a given region may spill to other regions as well, leading to cost reductions there also. The effects of different configurations of interregional spillovers of learning in ERIS and the impact of the emission trading mechanism under those different circumstances are analysed. Including spatial spillovers of learning allows capturing the possibility that the imposition of greenhouse gas emission constraints in a given region may induce technological change in other regions, such as developing countries, even if the latter regions do not face emission constraints. Our stylised results point out the potential benefits of sound international cooperation between industrialised and developing regions on research, development, demonstration and deployment (RD3) of clean energy technologies and on the implementation of emission trading schemes.

Byline: Ger Klaassen, Keywan Riahi, R. Alexander Roehrl This paper examines the implications of the new dynamics-as-usual IPCC B2 scenario for the viability of international gas transmission lines and the environment in Eurasia. In doing so, it analyses the effects of increasing the number of pipelines, reducing gas extraction costs and stabilising greenhouse gas concentrations. In the B2 scenario, interregional gas transport by pipeline would increase from 150 bcm (billion cubic metres) in 1998 to nearly 900 bcm in 2040 whereas the interregional liquefied natural gas (LNG) trade would decrease over the same period. In addition, connecting the natural gas supply areas in the Former Soviet Union and the Middle East with the demand centres in South and Central Asia would increase global piped gas exports to around 1780 bcm. Reducing extraction costs or stabilising greenhouse gas concentrations would not alter this picture drastically. Although less than under a coal based scenario, carbon emissions would still increase under the B2 scenario, especially when gas extraction costs decrease. Sulphur emissions in Asia would, however, be significantly lower than in a coal-based scenario.

In this paper, we analyse the impact of carbontaxes on emission levels, when niche marketsexist for new carbon-free technologies, andwhen these technologies experience ``learning-by-doing''effects. For this purpose, a generalequilibrium model has been developed, DEMETER,that specifies two energy technologies: onebased on fossil fuels and one on a composite ofcarbon-free technologies. Initially, thecarbon-free technology has relatively high production costs,but niche markets ensure positive demand.Learning-by-doing decreases production costs, whichincreases the market share, which in turnaccelerates learning-by-doing, and so forth. Thismechanism allows a relatively modest carbontax, of about 50 US$/tC, to almost stabilise carbonemissions at their 2000 levels throughout theentire 21st century. Sensitivity analysis shows that therequired carbon tax for emission stabilisationcrucially depends on the elasticity of substitutionbetween the fossil-fuel and carbon-free technology. [ABSTRACT FROM AUTHOR]

In March 1997 the European Commission adopted a proposal that increases existing minimum levels of taxation on mineral oils by around 10 to 25% and introduces excises for other energy products. This paper analyses the macroeconomic impacts of the proposal. It employs three models: HERMES, GEM-E3, and E3ME. All models confirm that the proposalwill have positive macroeconomic impacts when the tax revenues are used to reduce social security contributions paid by employers. For the EU as a whole, both GDP and employment are expected to be higher and CO2 emissions are 0.9 to 1.6 percent lower. The positiveEU-wide effects can be observed in practically all member states. The sector impacts are modest, with the energy sector expected to face the most negative impacts. Differences between model results are due to the model type (general equilibrium or macro-econometric), the EU countries covered and the way tax exemptions were handled. Crucial assumptions to obtain the 'double dividend' are the modelling of the labour market and the impacts on EU external trade. The sensitivity of the results for the use of tax revenues, tax exemptions and tax rate increases is assessed. [ABSTRACT FROM AUTHOR]