OECD Environment Working Papers

This series is designed to make available to a wider readership selected studies on environmental issues prepared for use within the OECD. Authorship is usually collective, but principal authors are named. The papers are generally available only in their original language English or French with a summary in the other if available.


Costs, Revenues, and Effectiveness of the Copenhagen Accord Emission Pledges for 2020

Tackling the problem of global climate change requires a high level of international cooperation. Many countries have pledged targets or actions to reduce greenhouse gas emissions in the Appendices to the Copenhagen Accord. This analysis examines the costs and effectiveness of these pledges, using the OECD’s ENV-Linkages computable general equilibrium model. Several scenarios are analysed to evaluate the impacts of the range of pledges, the use of offsets, and linking emission trading systems. The results show that while the emission targets currently pledged by a wide range of countries under the Accord are an important and welcome start to a global solution, the pledges are not ambitious enough to put us on a pathway to limit average global temperature increase to below 2°C. This paper also analyses the economic impacts of the pledges, and estimates the costs of action at around 0.3% of GDP for both Annex I and non- Annex I countries and 0.5-0.6% of global real income (not taking into consideration the economic benefits from avoided damages from climate change). Furthermore, the analysis reveals that the potential for increased fiscal revenue or proceeds are substantial and for the Annex I group of countries can exceed 1% of GDP (or 400 billion USD) if mitigation actions are achieved through market instruments such as carbon taxes or cap-and-trade emission schemes with auctioned emission allowances.


Keywords: greenhouse gas mitigation, computable general equilibrium model, Copenhagen accord, climate change
JEL: Q58: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Environmental Economics: Government Policy; Q54: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Climate; Natural Disasters and Their Management; Global Warming; H23: Public Economics / Taxation, Subsidies, and Revenue / Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies; F53: International Economics / International Relations, National Security, and International Political Economy / International Agreements and Observance; International Organizations; H87: Public Economics / Miscellaneous Issues / International Fiscal Issues; International Public Goods
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