Economic Implications of Moving Toward Global Convergence on Emission Intensities

One key contentious issue in climate
change negotiations is the huge difference in carbon dioxide
(CO2) emissions per capita between more advanced
industrialized countries and other nations. This paper
analyzes the costs of reducing this gap. Simulations using a
global computable general equilibrium model show that the
average the carbon dioxide intensity of advanced
industrialized countries would remain almost twice as high
as the average for other countries in 2030, even if the
former group adopted a heavy uniform carbon tax of $250/tCO2
that reduced their emissions by 57 percent from the
baseline. Global emissions would fall only 18 percent, due
to an increase in emissions in the other countries. This
reduction may not be adequate to move toward 2050 emission
levels that avoid dangerous climate change. The tax would
reduce Annex I countries' gross domestic product by 2.4
percent, and global trade volume by 2 percent. The economic
costs of the tax vary significantly across countries, with
heavier burdens on fossil fuel intensive economies such as
Russia, Australia, the United Kingdom and the United States.