A Quantitative Assessment of the Implications of Including non-CO2 Emissions in the European ETS
Carlo Orecchia, Ramiro Parrado
CGE, Greenhouse gas emissions, Cap-and-trade system, Agriculture, Non-CO2 emissions, European Union, Effort Sharing Decision
Climate Change and Sustainable Development
Although CO2 emissions stand for most of greenhouse gas (GHG) emissions, the contribution of mitigation efforts based on non-CO2 emissions is still a field that needs to be explored more thoroughly. Extending abatement opportunities to non-CO2 could reduce overall mitigation costs but it could also exert a negative pressure on agricultural output. This paper offers insights about the first effect while provides a preliminary discussion for the second. We investigate the role of non-CO2 GHGs in climate change mitigation in Europe using a computable general equilibrium (CGE) model. We develop a specific modelling framework extending the model with non-CO2 GHGs as an additional mitigation alternative. These modifications allow us to analyse the implications for the European Union (EU) of including non-CO2 GHG emissions in its cap and trade system. We distinguish two targets on all GHG emissions for 2020, a reduction by 20% and 30% with respect to 1990 levels. Within each reduction cap, we consider two mitigation opportunities by means of a carbon tax levied on: 1) CO2 emissions only, and 2) All GHGs emissions (both CO2 and non-CO2 GHG). Results show that a multi-gas mitigation policy would slightly decrease policy costs compared to the CO2 only alternative.
Suggested citation: Orecchia, C., R. Parrado, ‘A Quantitative Assessment of the Implications of Including non-CO2 Emissions in the European ETS’, (2013), Nota di Lavoro 100.2013, Milan, Italy: Fondazione Eni Enrico Mattei.