Limited versus Unlimited Flexibility
New Horizons in Environmental Economics series
Edited by Johan Albrecht
Chapter 6: On the optimal timing of reductions of CO2 emissions: An economist's perpective on the debate on 'when flexibility'
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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