FUTURE FOSSIL FUEL PRICE IMPACTS ON NDC ACHIEVEMENT; ESTIMATION OF GHG EMISSIONS AND MITIGATION COSTS

Abstract

The Shale Revolution in the US, a supply-side innovation in oil and gas production, has been dramatically changing the world’s fossil fuel energy markets – leading to a decrease in oil, gas and coal prices. Some projections suggest that low fossil fuel prices might continue at least over the next few decades. Uncertainty in fossil fuel prices might affect the levels of emission reductions expected from submitted nationally determined contributions (NDCs) and/or influence the difficulty of achieving the NDCs. This paper evaluated the impact of different (high, medium, and low) fossil fuel prices, sustained through to 2050, on worldwide GHG emissions reductions and associated costs (mainly marginal abatement costs (MACs)). Total global GHG emissions were estimated to be 57.5-61.5 GtCO2eq by 2030, with the range shown reflecting uncertainties about fossil fuel prices and the target levels of several NDCs (i.e., whether their upper or lower targets were adopted). It was found that lower fuel prices not only diminished the environmental effectiveness of global NDCs but also widened regional differences of marginal and total abatement costs, thereby generating more room for carbon leakage. One possible policy direction in terms of abatement efficiency, fairness and environmental effectiveness would be to require countries with low marginal and total abatement costs but having a major influence on global GHG emissions (such as China and India) to increase their mitigation efforts, especially in a low-fuel-price world.