An economic assessment of the Kyoto Protocol application

Scope of this paper is to investigate scenarios concerning the economic implications of the Kyoto Protocol (The Kyoto Protocol to the Convention on Climate change, http://unfccc.int/resource/docs/convkp/kpeng.pdf) in its current version including the clean development mechanisms (CDMs), the Marrakesh Accords (Seventh session of the Conference of Parties, 29 October–9 November, Marrakesh, Morocco, http://unfccc.int/cop7/index.html) and the Conference of Parties 9 in Milan (Nineth session of the Conference of Parties, 1–12 December, Milan, http://unfccc.int/cop9/index.html). The general equilibrium model, GTAP-E was used for the investigation of the experiments which are focused on the cases of the USA participation and on the role of Russia as a major emission credits seller. A significant issue in the Kyoto Protocol negotiations is the introduction of sinks in the Marrakech Accords. This seems to weaken the initial targets by replacing CO2 emissions reduction with forestation activities and reduces the cost of the Protocol compliance. It is also shown that the absence of the USA may reduce the costs for the other developed countries and may influence the total costs more than the CDMs. A new scenario is studied by introducing a guaranteed minimum of 60% in the emission credits sold by Russia. Results show that the profits of Russia are not significantly affected by the guaranteed minimum.