Kyoto and technology at world level: costs of CO<SUB align=right>2</SUB> reduction under flexibility mechanisms and technical progress

Byline: Patrick Criqui, Laurent Viguier This paper is dedicated to the analysis of the consequences of CO2 emission reduction policies, as deriving, in a world perspective, from the Kyoto Protocol for the 2010 horizon. The basic methodological principles for the assessment of the Marginal Abatement Costs and for the quantification of the economic &#39;gains from trade&#39; in flexibility mechanisms are first presented in Section 2. Section 3 provides a thorough assessment, based on the POLES model results, of the marginal and total costs of compliance to the Kyoto Protocol for a &#39;non trading&#39; case and for two cases of emission trading, respectively at Annex B level and at world level. Section 4 identifies some possible consequences and policy implications of decisions on &#39;flexibility mechanisms&#39;, particularly in the perspective of induced technical change. It shows that, in principle, low flexibility schemes may induce strong price signals in a limited number of constrained countries, while high flexibility schemes may induce lower price signals but on a much broader geographical basis.