Journal Article

A model intercomparison of the welfare effects of regional cooperation for ambitious climate mitigation targets

Authors

  • GÖKÇE Akın-Olçum
  • Madanmohan Ghosh
  • Elisabeth Gilmore
  • Peter Johnston
  • Mohammad M. Khabbazan
  • Ruben Lubowski
  • Margret McCallister
  • Nick Macaluso
  • Sonja Peterson
  • Malte Winkler
  • Maosheng Duan
  • Mengyu Li
  • Ramiro Parrado
  • Sebastian Rausch
Publication Date

This paper presents the overall and distributional welfare effects of alternative multi-regional emissions trading coalitions relative to unilateral action. It focusses on meeting Paris Agreement pledges and more emissions reduction targets consistent with 2C and 1.5C temperature pathways in 2030. The results from seven computable general equilibrium (CGE) models are compared. Across all models, welfare gains are highest with a global market and increase with the stringency of targets. All regional coalitions also show overall welfare gains, although lower gains than the global market. The models show more variability in the gains by a participant. Depending on the model, participants may benefit more from some regional arrangements than from a global market or face modest losses compared to the domestic reductions alone, due to interactions between carbon targets and fossil fuel markets. The scenario with a joint China–European Union emissions trading system in all sectors is consistently favorable for participants and provides the highest economic gains per unit of emissions abated.

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Key Words

  • Climate Mitigation
  • Emissions Trading
  • Regional Cooperation
  • Welfare

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