New Member States: Climate Protection and Economic Growth

Funding body: Global Climate Forum (GCF), BMU

This study focuses on the effects of a burden sharing approach in the non-ETS sectors. The difficulty for non-ETS emissions is that a multitude of emitters with low emissions (e.g. cars, buildings) exist and emissions cannot be allocated to their emitters easily (e.g. emissions from agriculture). Therefore, permits are defined at national levels and national policies force or incentivize emitters to reduce energy consumption and related GHG-emissions. The allocation of non-ETS emission is a result of negotiations on EU level. In a least-cost-approach, emission reductions take place in countries (and sectors) with the lowest carbon abatement costs. Lower-income countries generally are confronted with lower mitigation costs (at the marginal cost frontier) than countries with higher income per capita. Hence, shifting emission reductions from lower to higher income countries will result in higher aggregated costs and therefore, in larger GDP losses for the EU as a whole. The idea behind a burden sharing mechanism based on a GDP-per-capita-approach is to increase the allocation of emission permits for lower income countries and decrease it for higher income countries (as compared to a cost-optimal allocation). Based on that, a burden sharing mechanism differs from a "least cost case" - presented in EU40 - such that per definition the cumulative EU-GDP is lower than in a "least cost case". Thus, the allocation is sub-optimal with respect to the cumulative EU GDP.