CO2 emissions mitigation and fossil fuel markets: Dynamic and international aspects of climate policies

Journal Article · Thu Jan 01 00:00:00 EST 2015 · Technological Forecasting and Social Change, 90(A):243–256

DOI:https://doi.org/10.1016/j.techfore.2013.09.009· OSTI ID:1188869

Bauer, Nico; Bosetti, Valentina; Hamdi-Cherif, Meriem; Kitous, Alban; McCollum, David; Mejean, Aurelie; Rao, Shilpa; Turton, Hal; Paroussos, Leonidas; Ashina, Shuichi; Calvin, Katherine V.; Wada, Kenichi; Van Vuuren, Detlef

This paper explores a multi-model scenario ensemble to assess the impacts of idealized and non-idealized climate change stabilization policies on fossil fuel markets. Under idealized conditions climate policies significantly reduce coal use in the short- and long-term. Reductions in oil and gas use are much smaller, particularly until 2030, but revenues decrease much more because oil and gas prices are higher and decrease with mitigation. A first deviation from the optimal transition pathway relaxes global emission targets until 2030, in accordance with the Copenhagen pledges and regionally-specific low-carbon technology targets. Fossil fuel markets revert back to the no-policy case: though coal use increases strongest, revenue gains are higher for oil and gas. To balance the carbon budget over the 21st century, the long-term reallocation of fossil fuels is significantly larger - twice and more - than the short-term distortion. This amplifying effect results from coal lock-in and inter-fuel substitution effects. The second deviation from the optimal transition pathway relaxes the global participation assumption. The result here is less clear cut across models, as we find carbon leakage effects ranging from positive to negative because leakage and substitution patterns of coal, oil, and gas differ. In summary, distortions of fossil fuel markets resulting from relaxed short-term global emission targets are more important and less uncertain than the issue of carbon leakage from early mover action.

• Research Organization: Pacific Northwest National Laboratory (PNNL), Richland, WA (United States)
• Sponsoring Organization: USDOE
• DOE Contract Number: AC05-76RL01830
• OSTI ID: 1188869
• Report Number(s): PNNL-SA-97770; KP1703030
• Journal Information: Technological Forecasting and Social Change, 90(A):243–256, Journal Name: Technological Forecasting and Social Change, 90(A):243–256
• Country of Publication: United States
• Language: English