Impact of fragmented emission reduction regimes on the energy market and on CO2 emissions related to land use: A case study with China and the European Union as first movers

Abstract

In recent years, an approach based on voluntary pledges by individual regions has attracted interest of policy-makers and consequently also climate policy research. In this paper, we analyze scenarios in which the EU and China act as early-movers in international climate policy. Such a situation risks leakage between regions with ambitious emission reduction targets and those with less ambitious targets via fossil-fuel markets, displacement of heavy industry and land-use consequences. We examine some of these factors using the IMAGE model. While IMAGE does not include all mechanisms, we find the leakage rate to be relatively small, about 5% of the emission reductions in the EU and China. The far majority occurs via the energy market channel and the remainder through land-use change. Reduced oil prices due to less depletion forms the key reason for this leakage impact.