Potential for reducing carbon emissions from non-Annex B countries through changes in technology

Abstract

Continued questions surrounding the efficacy and enforceability of the Kyoto Protocol make it worthwhile to examine alternative, cost-effective approaches to climate policy. This paper examines the feasibility of an approach that does avoid the problem of targets and timetables, and concentrates on solving the most obvious gap in the Kyoto Protocol: how to change the future trajectory of emissions from the non-Annex B, Eastern European, and Former Soviet Union countries. The paper begins by estimating how large a near-term reduction in emissions could be achieved if these countries were moved to levels of carbon intensity of Annex B countries. This static calculation shows that such an improvement in China, India, Eastern Europe, and Russia would provide annual emission reductions two to three times as large as those to which the Annex B countries would be committed under the Kyoto Protocol in 2010. The paper also extends a dynamic model of economic growth with embodied technology improvement based on Swan [ Swan, T.W., 1956. Economic Growth and Capital Accumulation. Economic Record 32(2), 334–361.] and Solow [Solow, R.M., 1960. Investment and Technology Progress, Stanford Symposium of Mathematical Methods in the Social Sciences, eds. Kenneth J. Arrow, Samuel Karlin, and Patrick Suppes, Stanford University Press.]. The key feature of this model is the new investment increases total factor productivity, by “embodying” new technology, and it can be adapted to include the assumption that new investment also embodies technology with lower carbon emissions. The model reveals that even though new investment in non-Annex B countries has far lower emissions per unit of output than the existing capital stock, new investment still does not embody the level of technology observed in Annex B countries. The model estimates that the potential for reducing emissions through changing technology in developing countries over the next 15 years is similar in magnitude to the reductions in emissions that would be achieved if all Annex B countries were to achieve their Kyoto Protocol emission caps.