International B - Kyoto protocol

Post KP developments

Key nations didnt ratify / withdrew

Developing nations E increased massively

Hot air

Economies in transition (EiT) were former communist nations where economies & E crashed post cold war and USSR split

EiT given generous targets based on previous economy capacity (targets above current E) - could choose target year so chose target when economy booming

• made reductions look dramatic

• lots of spare Manufacturing capacity

Meant E targets non binding

EiT could trade spare capacity permits - can increase overall E produced

EU & burden sharing

Agree as bloc (of 15 members in 1997) to reduce E as a whole by 8%

Divided it among nations - burden sharing

• some has E increase as a target (poorer)

• Germany included E.Germany so some hot air

Some nations had already started to reduce E for non CC reasons - UK coal → gas + France nuclear

Exceeded target: -11.7%

Other Annex B targets

Japan T: -6% R: +0.3%

• Fukishima disaster shifted power away from nuclear

OECD T: -6%. R: -7.8%

Total T: -4% R: -22%

US T: -7% R: +12% never ratified KP

BRICS nations had major E increase during this window

Flexibility mechanism

Ways of trading E internationally to reduce cost of reaching E target / abatement

• cheaper to abate abroad where MAC cheaper

May lead to nations accepting stricter targets

Flexibility mechanisms types

E trading

Joint implementation

Clean development mechanism (CDM)

E trading

At national Govt level - not project based

Assigned amount units (AAUs) - E amount each nation entitled to

Western nations reluctant to buy from hot air nations

E trading and hot air

EiT sells surplus E to nations who need extra credits

Surplus of 13bn t Co2e (over 5 years)

only 350mn / 13bn sold

• often only when combined with green investment schemes (GIS)

Lots of spare AAUs carried over

Joint implementation

Firm level between countries in Annex B

Additionality - project that reduces E wouldnt have taken place unless financed by foreign

• F credited for E reduction abroad

• AAUs converted to ERUs

JI during KP compliance period

Not much happened until near end of window

• late 2012 300m credits generated in a few weeks

  • Only Ukraine & Russia shifting hot air

Clean development mechanisms

Firm level between Annex B & non-Annex B

Stricter rules than under JI as outside of Annex B - so no E target in these nations

E reduction must be certified (CERs)

• additionality + real/measurable LR impact

High D for firms in EU ETS

CERs

Temporary (tCERs) given for afforestation

1.5bn tCO2e CERs generated

• >7,500 projects in 90 countries

Additionality rules tightened

CERs caveat

Production of HCFCs created byproduct which had no commercial use but was very polluting

Factories could get a big income from destroying it from CERs trading

Factories would produce a lot just to destroy it for the CERs trading revenue

Eventually banned

Compliance / carry-over

Any surplus could be carried over

AAUs > 100 - carry over E as spare from target

Effectiveness of KP

Annex B who stayed in KP reduced E more than target collectively

Almer & Winkler (2017) - effectiveness of KP OV

Used synthetic control to find good counterfactual to annex B group

• non annex B nations + US states

Treatment group - 15 larger Annex B nations

• small nations acn have larger swings in E

• Excluded EiT as non binding from hot ait

Almer & Winkler (2017) - effectiveness of KP RESULTS

Deviation from Synthetic control counterfactual - not sig effect of KP

Comparing with just US states - some sig effects

• Both +ve & -ve

• E increases in some nations compared to counterfactual

NO EVIDENCE THAT KP REDUCED E

Almer & Winkler (2017) - effectiveness of KP - Robustness checks

Change tratement yr

• 1997 adoption vs 2004 ratified

• hardly any difference

Alternative dependent variables

• Co2 pc / GHGs / Co2/GDP

• Fewer positive effects on E

Effect of Flexibility mechanisms as robustness

Decreases E in non-Annex B but increases E in Annex B

Excluding major CDM hubs:

• hardly any difference

E minus credit acquisition

• increase in negative effect but small as not many bought much of allowance

Using DiD as robustness check

When not controlling for pre-trends

• KP caused large reduction in E

When controlling for pre-trends - needed for common trend assumption

• No sig effect

Maamoun (2019) - effects of KP OV

Generalised synthetic control method - not unique synthetic control for each treated unit

Treated = 34 Annex B

• included EiT + all Annex B

Included all GHG E (not just Co2)

Treatment year = 2005 (KP ratified)

Control group = Non AnnexB + US

Controls - GDP, population

Maamoun (2019) - effects of KP RESULTS

KP reduced E by 6.8% - sig at 5%

Maamoun (2019) - effects of KP robustness

Removed EU - as may have done CC policy without KP

• -7% E at 10% lvl

Removed EiT - hot air

• -17% E 5%

Removed main CDM hosts (80% projects)

• -8.5% E 1% lvl

Controls for industrialisation

• - 7.2% 1% lvl

Comparing papers

Different method + treatment year

Taking US states as control group in Maamoun still results in E reduction (-6.7%)