Reducing Carbon Dioxide Emissions through Joint Implementation of Projects
Efficient reduction of carbon dioxide emissions requires coordination of international efforts. Approaches proposed include carbon taxes, emission quotas, and jointly implemented energy projects. To reduce emissions efficiently, requires equalizing the marginal costs of reduction between countries. The apparently large differentials between the costs of reducing emissions in industrial and developing countries, implies a great potential for lowering the costs of reducing emissions by focusing on projects in developing countries. Most proposals for joint implementation of energy projects emphasize installing more technically efficient capital equipment, to allow reductions in energy use for any given mix of input, and output. But such increases in efficiency are likely to have potentially important second-round impacts: 1) Lowering the relative effective price of specific energy products. 2) Lowering the price of energy relative to other inputs. 3) Lowering the price of energy-intensive products relative to other products. The author explores the consequences of these second-round impacts, and suggests ways to deal with them in practical joint-implementation projects. For example, the direct impact of reducing the effective price of a fuel is to increase consumption of that fuel. Generally, substitution effects also reduce the use of other fuels, and the emissions generated from them. If the fuel whose efficiency is being improved, is already the least emission-intensive, the combined impact of these price changes is less likely to be favorable, and may even increase emissions. In the example the author uses, increase in coal use efficiency was completely ineffective in reducing emissions, because it resulted in emission-intensive coal being substituted for less polluting oil and gas.
| Summary: | Efficient reduction of carbon dioxide
emissions requires coordination of international efforts.
Approaches proposed include carbon taxes, emission quotas,
and jointly implemented energy projects. To reduce emissions
efficiently, requires equalizing the marginal costs of
reduction between countries. The apparently large
differentials between the costs of reducing emissions in
industrial and developing countries, implies a great
potential for lowering the costs of reducing emissions by
focusing on projects in developing countries. Most proposals
for joint implementation of energy projects emphasize
installing more technically efficient capital equipment, to
allow reductions in energy use for any given mix of input,
and output. But such increases in efficiency are likely to
have potentially important second-round impacts: 1) Lowering
the relative effective price of specific energy products. 2)
Lowering the price of energy relative to other inputs. 3)
Lowering the price of energy-intensive products relative to
other products. The author explores the consequences of
these second-round impacts, and suggests ways to deal with
them in practical joint-implementation projects. For
example, the direct impact of reducing the effective price
of a fuel is to increase consumption of that fuel.
Generally, substitution effects also reduce the use of other
fuels, and the emissions generated from them. If the fuel
whose efficiency is being improved, is already the least
emission-intensive, the combined impact of these price
changes is less likely to be favorable, and may even
increase emissions. In the example the author uses, increase
in coal use efficiency was completely ineffective in
reducing emissions, because it resulted in
emission-intensive coal being substituted for less polluting
oil and gas. |
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