The Costs of Implementing the Kyoto Protocol and Its Implications to China.

The MERGE model is used to analyze the costs of the Kyoto commitment under different scenarios. The results show that costs can be reduced sharply if "hot air" rights are traded. Costs can be further reduced through the clean development mechanism (CDM) and through the global trading mechanism in 2010. However, emissions trading is not so effective in reducing costs in the long run. If China controls its emissions, it will be a very important market for the international trading of carbon emissions rights. The importance of China will increase along with the decrease of "hot air" in former Soviet Union. The CDM can be an opportunity for China to increase its international trade and encourage the inflow of foreign investment. [ABSTRACT FROM AUTHOR]