Instruments for Climate Policy

Instruments for Climate Policy

Limited versus Unlimited Flexibility

New Horizons in Environmental Economics series

Edited by Johan Albrecht

Instruments for Climate Policy focuses on economic and political aspects related to the recent proposals and the debate on limits in flexibility, and discusses EU and US perspectives on climate policy instruments and strategies. This is followed by chapters on economic efficiency and the use of flexible instruments as well as contributions to the debate on ‘when flexibility’, on the arguments behind the EU ceilings proposal and on voluntary approaches to climate policy. One of the main conclusions reached with respect to proposals for limiting flexibility is the need to evaluate simultaneously their economic, ecological and international political consequences. The authors include both important policymakers and leading academics in the area.

Chapter 6: On the optimal timing of reductions of CO2 emissions: An economist's perpective on the debate on 'when flexibility'

Henri L.F. de Groot

Subjects: economics and finance, environmental economics, environment, climate change, environmental economics


6. On the optimal timing of reductions of CO2 emissions: An economist’s perspective on the debate on ‘when flexibility’ Henri L.F. de Groot 1. INTRODUCTION It is by now commonly agreed that global warming will have serious economic and environmental consequences. Man-made greenhouse gas emissions significantly contribute to global warming. Recent concerns about the negative impacts of global warming have resulted in the Kyoto Protocol (agreed upon in December 1997), which sets emission standards for participating countries. These standards are strict and boil down to reductions of CO2 emissions of about 20–40 per cent, as compared to emissions that would have been reached without any action being taken. More specifically, developed countries have committed themselves to reducing greenhouse gases to on average 5.2 per cent below their 1990 levels in the period 2008–12. The annual discounted economic costs of complying with these standards are likely to be substantial, estimates being in the range of 0.5 to 2 per cent of GDP (OECD, 1999), depending on how countries will conform to the standards. However, even if these reductions are achieved, they are far from sufficient to reach stabilization of greenhouse gases in the atmosphere in 2100 that are currently thought to be acceptable. Additional measures than those agreed upon in Kyoto will thus be required to achieve stabilization of concentrations of greenhouse gases. In this sense, despite the costs and difficulties of achieving consensus about the Kyoto Protocol, it is only a small step in...

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