Costs of a ceiling on Kyoto flexibility

This paper examines the potential costs of a ceiling on the use of flexibility mechanisms in the Kyoto Protocol using POLES, a partial equilibrium model of the world energy system. The results suggest that if emission trading were restricted to Annex I countries, halving the traded volume would increase costs by 11 billion $/year. If emission trading were to operate at a global level, reducing the trade to half the perfect market volume would increase annual costs by 12 billion $/year. Global carbon emissions might however be 1% lower. The sensitivity of the results is discussed. (C) 2000 Elsevier Science Ltd. All rights reserved.