Return to 1990: The Cost of Mitigating United StatesCarbon Emissions in the Post-2000 Period

Return to 1990: The Cost of Mitigating United StatesCarbon Emissions in the Post-2000 Period

By JA Edmonds, SH Kim, CN MacCracken, RD Sands, MA Wise.
October 1997

PACIFIC NORTHWEST NATIONAL LABORATORY
operated byBATTELLE MEMORIAL INSTITUTE
for theUNITED STATES DEPARTMENT OF ENERGY

ABSTRACT:

The Second Generation Model (SGM) is employed to examine four hypothetical agreements to reduce emissions in Annex I nations (OECD nations plus most of the nations of Eastern Europeand the former Soviet Union) to levels in the neighborhood of those which existed in 1990, with obligations taking effect in the year 2010. We estimate the cost to the United States of complying with such agreements under three distinct conditions: no trading of emissions rights,trading of emissions rights only among Annex I nations, and a fully global trading regime.

We find that the cost of returning to 1990 emissions levels in the United States in the absence of trading opportunities is approximately $108 per metric ton carbon in 2010. The total cost in that year is approximately 0.2 percent of GDP. Emissions reductions are accomplished via energy conservation across a broad range of residential, commercial, industrial and transportation activities and by replacing coal fired power stations with natural gas facilities.

International trade in emissions permits lowers the cost of achieving any mitigation objective by equalizing the marginal cost of carbon mitigation among countries. This is sometimes referred to as “where” flexibility. “Where” flexibility allows least expensive emissions reductions to be undertaken first, regardless of where they occur among trade participants. For the four mitigation scenarios in this study, economic costs to the United States remain below1% of GDP through at least the year 2020. This was the case even in the scenarios where theUnited States met its mitigation targets without international trading of carbon permits.