The cost of meeting the Kyoto Protocol

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Abstract
Estimates the cost of meeting the Kyoto Protocol with an energy‐economic optimization model. Special focus is on the Russian and Ukrainian and the potential implications of the US decision to withdraw from the Protocol. Finds that the carbon permit price can be expected to drop substantially due to US withdrawal. In fact, the aggregated emission target could be met in the absence of US participation. However, Russia and the Ukraine could be the dominant sellers of emission permits and they could increase the permit price. Clearly no climate benefits would result from trading emission permits that do not correspond to real reductions in CO2 emissions. EU countries, Japan and Canada are not likely to be supportive of paying billions of dollars that do not result in emission reductions. One way of dealing with the Russian and Ukrainian surplus is to negotiate more stringent targets for subsequent commitment periods early, and to allow banking. The model suggests that, under these conditions, early action and banking do take place.