An economic assessment of the Kyoto Protocol using a global model based on the marginal abatement costs of 12 regions

The Kyoto Protocol incorporates emissions trading, joint implementation and the clean development mechanism to help Annex 1 countries to meet their Kyoto targets at a lower overall cost. Using a global model based on the marginal abatement costs of 12 countries and regions, this paper estimates the contributions of the three Kyoto flexibility mechanisms to meet the total greenhouse gas emissions reductions required of Annex 1 countries under the three trading scenarios respectively. Our results clearly demonstrate that the fewer the restrictions on the use of flexibility mechanisms the gains from their use are greater. The gains are unevenly distributed, however, with Annex 1 countries that have the highest autarkic marginal abatement costs tending to benefit the most. Our results also indicate that restrictions on the use of flexibility mechanisms not only reduce potential of the Annex 1 countries’ efficiency gains, but also are not beneficial to developing countries because they restrict the total financial flows to developing countries under the clean development mechanism.