Estimating the Size of the Potential Market for the Kyoto Flexibility Mechanisms

Abstract

The Kyoto Protocol incorporates emissions trading, joint implementation and the clean development mechanism to help Annex I countries to meet their Kyoto targets at a lower overall cost. This paper aims to estimate the size of the potential market for all three flexibility mechanisms under the Kyoto Protocol over the first commitment period 2008-2012, both on the demand side and on the supply side. Based on the national communications from 35 Annex I countries, the paper first estimates the potential demand in the greenhouse gas offset market. Then, the paper provides a quantitative assessment of the implications of the EU proposal for concrete ceilings on the use of flexibility mechanisms for the division of abatement actions at home and abroad. Finally, using the 12-region's marginal abatement cost-based model, the paper estimates the contributions of three flexibility mechanisms to meet the total emissions reductions required of Annex I countries under the four trading scenarios respectively. Our results clearly demonstrate that the fewer the restrictions on trading the gains from trading are greater. The gains are unevenly distributed, however, with Annex I countries that have the highest autarkic marginal abatement costs tending to benefit the most. With respect to developing countries, their net gains are highest when trading in hot air is not allowed, and China and India account for about three-quarters of the total developing countries' exported permits to the Annex I regions.

Climate Change in Latin America and the Caribbean: A Review of the Bonn and Marrakech Decisions and Their Effect on the Clean Development Mechanism of the Kyoto Protocol

“…The model estimate that global emission reductions during the first commitment period will be about 5.5% 0.9% relative to BAU with and without the USA participation, respectively. Source: Morozova and Stuart (2001); Polidano et.al., (2000); Grüetter (2001aGrüetter ( , 2001b; Zhang (1999) MTC: metric tons (a little bit less than 1 ton) MtC: million tons of carbon *The value provided will correspond to CDM market size if CDM is explicitly included in the scenarios column. Otherwise it will correspond to the market size corresponding to the active (trading) participation of developing countries in the global market.…”

Effects of the CDM on poverty eradication and global climate protection

“…"With the already huge and growing amount of greenhouse gas emissions and a great deal of low-cost abatement options available, China is widely expected as the world's number one host country of CDM projects" (Zhang 2006). According to Zhang (2000), about 60 percent of the total CDM flows in 2010 will go to China. Vennemo et al (2006) review various studies assessing the total CDM potential in China and find that the highest CDM-potential estimate is 788 Mt CO 2 (based on the assessments by Zhang (1999Zhang ( , 2000).…”

“…According to Zhang (2000), about 60 percent of the total CDM flows in 2010 will go to China. Vennemo et al (2006) review various studies assessing the total CDM potential in China and find that the highest CDM-potential estimate is 788 Mt CO 2 (based on the assessments by Zhang (1999Zhang ( , 2000). Therefore, in our analysis we focus on the case where China is the host of CDM projects, which are initiated by the largest purchaser of CDM credits, i.e.…”

Domestic Climate Policies and the WTO

“…For the latest list of ratifications, see the UNFCCC web site at www.unfccc.de. 2 See Zhang (2000 and2001) for detailed discussion on these supplementary provisions and on the assessment of the European Union (EU) proposal for ceilings on the use of Kyoto flexibility mechanisms. 3 The Umbrella Group refers to the so-called JUSSCANNZ countries (Japan, the United States, Switzerland, Canada, Australia, Norway and New Zealand).…”