THE COPENHAGEN ACCORD/CANCUN AGREEMENTS EMISSION PLEDGES FOR 2020: EXPLORING ECONOMIC AND ENVIRONMENTAL IMPACTS

Many countries have pledged targets or actions to reduce greenhouse gas emissions; these have been listed in the Appendices to the Copenhagen Accord and, at the time of writing, are being transferred to the UNFCCC Cancun Agreements. This analysis examines the costs and effectiveness of these pledges, as well as the potential for fiscal revenue, using a computable general equilibrium model. The results show that while the pledges are an important and welcome start to a global solution, they are not ambitious enough for a pathway to limit average global temperature increase to below 2 degrees C. This paper estimates the costs of action at around 0.3% of GDP for both Annex I and non-Annex I countries and 0.5-0.6% of global real income. Furthermore, the fiscal revenue potential can exceed 1% of GDP for the Annex I countries if market-based instruments are used. Sensitivity analysis shows that allowing more offsets can reduce the costs of actions substantially, as can direct linking of carbon markets across Annex I countries.