FEBRUARY 2000

ECN-C--00-012
CICERO WP 1999:14

BURDEN DIFFERENTIATION: GHG EMISSIONS,UNDERCURRENTS AND MITIGATION COSTS

The joint CICERO-ECN project on sharing
the burden of greenhouse gas reduction among countries

J.R. Ybema
J.J. Battjes
J.C. Jansen
F.T. Ormel

CICERO
Senter for klimaforskning

Center for International Climate and Environmental Research – Oslo

Acknowledgement
This report is the third Working Paper of the Burden Sharing study project that aims to identify
the most promising rules applicable for differentiation of greenhouse gas emission reduction
burden among countries. The project is carried out jointly by CICERO (Oslo, Norway) andECN (Petten, The Netherlands) under ECN project number 7.7170. The project has started in
October 1998 and will be completed by mid-2000. ISSN number: 0804-452X.
The Burden Sharing study project is financed by the Dutch National Research Programme on
Global Air Pollution and Climate Change and by own contributions of the participating institutes.

Abstract
This Working Paper addresses the following issues:• data on greenhouse gas emissions,• factors bringing about greenhouse gas emissions,• costs of emission reduction.

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CONTENTS
SUMMARY5

1. INTRODUCTION
1.1 Introduction to the report
1.2 Report outline

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2. OVERVIEW OF GREENHOUSE GAS EMISSIONS
2.1 Introduction
2.2 Defining the scope of GHG emissions
2.3 Current emission levels
2.4 Quality and availability of emission data
2.4.1 Quality of data
2.5 Data sources for sectoral emission data
2.6 Data requirements for estimating GHG emissions
2.7 Summary

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3. DRIVING FORCES OF GREENHOUSE GAS EMISSIONS
3.1 Introduction
3.2 Emissions and population size
3.3 Level of energy intensity
3.4 Reflections on aggregated data
3.5 Sectoral indicators
3.6 Summary

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4.

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INDICATORS DETERMINING THE COST OF EMISSION ABATEMENT
4.1 Introduction
4.2 Cost of specific mitigation activities
4.3 The cost burden of reduction assignments for a country
4.4 Implications for burden-sharing rules: preliminary conclusions

5. PRELIMINARY FINDINGS ON BSR DESIGN
5.1 Introduction
5.2 Data availability
5.3 On designing burden sharing rules

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REFERENCES

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34ECN-C--00-012

SUMMARY
The primary aim of the present report is to collect, and to perform a preliminary analysis of,
information on indicators that are likely to have relevance for the design of burden sharing
rules. The indicators considered relate to emission figures per country, per gas, per source, dataon energy efficiency, allowance factors for differences in emission levels, and information on
the cost to reduce emissions of greenhouse gases.
This study takes into account the six greenhouse gases mentioned in Annex A of the Kyoto
protocol: carbon dioxide (CO2), methane (CH4), nitrous-oxide (N2O), hydrofluorocarbons(HFCs), perfluorocarbons (PFCs) and sulphur-hexafluoride (SF6). At present total CO2 emissions are by far the most important in terms of global warming potential (GWP), while theshares of CH4 and N2O in global GHG emissions are also non-negligible. The IPCC estimatesthat in 1995 emissions of CO2 account for 84% and the other gases for 16 % of total GWP,
among which CH4 for 11% and N2O for 4%. As data on emissions for the latter two gases areavailable for many countries, these will be included in further project activities to the extent
possible. A disadvantage of their inclusion is the low level of reliability of the corresponding
emission data as compared to CO2 emission data. This disadvantage holds a fortiori for the remaining three ‘Kyoto’ gases. As the latter also contribute a very small share to total Global
Warming Potential, inclusion of these emissions will be given low priority in subsequent research.
From an historical point of view, the industrialised countries are the largest contributors to theglobal emissions. Particularly, Western Europe showed the highest emissions in the 19th century, while North America played a prominent role during the 20th century. Present-day developing countries are poised to become the main contributors in the 21st century.
The increase of the world population is an important driving factor of GHG emissions. Moreover, since the First World War, CO2 emissions per capita increased from less than 2 tonnes CO2
eq. per capita to over 4 tonnes CO2 eq. per capita. This increase is mainly the result of an increasing per capita demand for fossil fuels. In contrast, methane emissions seem to be closely
related to agricultural and waste emissions and have shown a relatively steady level of emissions per capita over the past 150 years.
Differences between countries in the structure of their respective economy and energy supply do
importantly contribute to the explanation of the variance of emissions per capita over countriesof comparable per capita income levels. Moreover, in contrast to the decreasing energy intensities of most OECD countries, many non-industrialised countries are still associated with highand sometimes even rising energy intensities. On the other hand, economies in transition arepresently showing rapidly decreasing energy intensities. These phenomena can also attributed
for a large part to structural developments of the economies of these respective groups of countries. Therefore, the structure of national or regional (viz. the EU) economies should be an important consideration in designing burden sharing rules.
Certain factors are of crucial importance to the direct incremental cost bill of a country, notably:• Prevailing levels of energy efficiency throughout the country’s energy system. If, generally,
the gap with international ‘best practices’ benchmarks is small (wide), the scope for improving energy-efficiency levels is correspondingly small (large) and expensive (cheap).
• The carbon intensity of energy supply. If a country’s energy supply is relatively carbonextensive (carbon-intensive), the scope for shifts to carbon-extensive primary energy carriers, including notably renewable sources of energy, will be correspondingly small (large)
and expensive (cheap).

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5•The country’s relative endowments of renewable sources of energy and natural gas will also
determine the transition costs towards a carbon-extensive economy.

Due allowance should be given to transboundary indirect effects. It should even be consideredthat countries that are extremely dependent on carbon-intensive exports, notably countries
heavily dependent on fossil fuel exports, will get appropriate, time-phased forms of assistancefrom the international community in bringing about a sound restructuring of their respective
economy.
Evidently the cost of emission limitation commitments are a very important consideration forclimate change negotiators. Consideration should therefore be given to major determinants ofthese commitments, e.g.:• For countries that have already implemented many measures in the past (such as “greening”
the tax system), further reduction will become increasingly costly.
• The risk of ‘carbon leakage’ (shifting of carbon-intensive activities to countries with morelenient emission policies) can be perceived to be serious.
• For countries with a fossil-fuel-intensive transport and energy-supply infrastructure a shift
to a less fossil-fuel-intensive infrastructure might be quite costly.
• The same may hold for countries with a low renewable energy potential, and/or for countries for which ‘going (more) nuclear’ is not politically feasible.
The aforementioned considerations, especially country-specific allowance factors, should be
duly allowed for in the design of burden-sharing rules. On the other hand, much attention should
be given to the streamlining of complicated burden-sharing rules so that they will end up in being relatively transparent and simple.

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1.

INTRODUCTION

1.1

Introduction to the report

The primary aim of the present report is to collect, and to perform a preliminary analysis of,
information on indicators that are likely to have relevance for the design of burden sharing
rules. The indicators considered relate to emission figures per country, per gas, per source, dataon energy efficiency, allowance factors for differences in emission levels, and information on
the cost to reduce emissions of greenhouse gases. The kinds of questions that will be addressedin this report are:• What are the most important greenhouse gases? (Chapter 2).
• Which greenhouse gases have large uncertainty ranges in emission figures? (Chapter 2).
• What are the primary driving forces of emissions of greenhouse gases? (Chapter 3).
• What kind of information sources with regard to emission figures is available? Which information sources are preferable to be used? (Chapter 3).
• At what level of detail should emission figures be explained? (Chapter 3).
• What is the value of aggregate emission indicators such as emissions per capita and emissions per GDP? (Chapter 3).
• For which indicators are emission data available? (Chapter 3).
• Can greenhouse gas abatement cost indicators be considered in burden sharing rules?
(Chapter 4).
• Can the potential to abate emissions be included in burden sharing rules? (Chapter 5).
• What are key aspects of promising burden sharing rules? (Chapter 5).

1.2

Report outline

Chapter 2 gives an overview of greenhouse gas (GHG) emissions. This chapter includes emission data on a large group of countries and emission trends per region. Moreover, issues related
to data sources for emission figures and the uncertainties in emission figures are addressed inthis chapter. In Chapter 3, emission figures are related to selected explanatory factors, including
aggregated indicators such as GDP, population and sectoral driving forces. Chapter 4 focuses on
the costs of emission mitigation and on indicators that explain the differences in cost of meeting
commitments. Finally, Chapter 5 presents preliminary inferences for the design of promisingburden sharing rules.

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2.

OVERVIEW OF GREENHOUSE GAS EMISSIONS

2.1

Introduction

This chapter provides an overview of greenhouse gas (GHG) emissions. It presents global GHG
emission figures, historic emission patterns, and shares of countries/regions and distinct gases in
global GHG emissions. This chapter also includes a discussion of data sources for emission figures and a discussion of the uncertainty ranges in emission figures.
The present report is part of a study that aims to identify prospective burden sharing rules thatcan be applied to a wide range of countries. The emission consequences of various burden
sharing rules will be quantified in this project partially based on greenhouse gas emission data.
A set of 50 countries has been selected for which the quantitative analysis will be performed.
This includes most industrialised countries and a selection of developing countries. The groupof developing countries includes the larger ones, such as China, India and Brazil, and various
smaller countries with specific features. It is noted that this report does not yet present emission
data for all 50 countries selected.

2.2

Defining the scope of GHG emissions

Different greenhouse gases and the global warming potential
To the extent possible, this study takes into account the contributions of the greenhouse gases
included in the Kyoto protocol:• Carbon dioxide (CO2)• Methane (CH4)• Nitrous oxide (N2O)• Hydrofluorocarbons (HFCs)• Perfluorocarbons (PFCs)• Sulphurhexafluoride (SF6).
Since the annual emissions and the radiative forcing characteristics in the atmosphere differ
considerably per greenhouse gas, it is important to have a measure to assess the warming impactof each gas to compare the impact of the different greenhouse gases. The Global Warming Potential (GWP) is developed to compare emissions of different greenhouse gases. The GWP relates the impact of a certain GHG emission to that of CO2. The GWP broadly reflects the time
cumulated radiative forcing of a gas with allowance for the differences in atmospheric lifetimesof greenhouse gases. The radiative forcing is commonly calculated over a 100-year timeframe.
This choice is somewhat arbitrary and it can easily be argued that some GHGs should involve a
longer or shorter time period. However, the 100-year timeframe is used in this study to be consistent with what has been chosen by the UNFCCC for the Kyoto Protocol and most other studies (Gielen and Kram, 1998; UNEP, 1994; Beeldman et al., 1998). GWPs of non-CO2 GHGs
range from 21 for methane to 23900 for sulphur hexafluoride (for a 100-year timeframe). Since
these figures involve average approximations, it does not really mean that the impact of a particular methane emission is exactly 21 times higher than that of CO2. In this manner, all greenhouse gases can be expressed as CO2 equivalents as each CO2 equivalent is supposed to behave
identically in the atmosphere (see Table 2.1).

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Table 2.1 GWP in CO2 equivalents
Substance
Carbon Dioxide
MethaneNitrous Oxide
HFCs
PFCs
Sulphurhexafloride

Chemical Formula
CO2
CH4
N2O
CHF compound
CF compound
SF6

GWP (100 years)1
21
310
140-11700
6500 and 9200
23900

Source: IPCC (1995).

Although the impact of CO2 is small in terms of GWP, CO2 still contributes the most to theoverall global warming due to its large emission quantities. Figure 2.1 shows the contributionsof the GHG emissions to the total global warming.
CO 2
84%

SF 6
0%

HFC
PFC 1%
0%

N 2O
4%

CH
11%

Figure 2.1 Share of greenhouse gases in total greenhouse gas emissions, 1995, calculated bymeans of a GWP with a 100-year time horizon
Consistent with the Kyoto Protocol, precursors of ozone such as NOx and volatile organic compounds are not considered. In addition, CFCs and HCFCs are not taken into account as thesegases are already regulated under the Montreal Protocol. The Kyoto protocol includes emissions
by sources and removal by sinks resulting from direct human-induced land-use change and forestry activities. The latter is limited to afforestation, reforestation and deforestation since 1990.

Sources and sinks of greenhouse gas emissions
CO2 emissions result from the burning of fossil fuels. Therefore, all sectors that use large
amounts of fossil fuels, such as power generation, transport, industry and households, can be
regarded as essential contributors to CO2 emissions. CO2 is stored in biomass like forests. On
the other hand, deforestation results usually in CO2 emissions. Besides, CO2 emissions are also
due to some industrial processes such as the production of cement and ammonia (IPCC, 1996).
Anthropogenic methane emissions are largely due to livestock (i.e. enteric fermentation), riceproduction, landfills and energy production (mining of coal and natural gas) (IPCC, 1996).
Nitrous oxide is emitted as a result of fertiliser use in agriculture and combustion processes andby the chemical industry (e.g. production of fertiliser) (IPCC, 1996).
After the Montreal Treaty, HFCs are mainly emitted as CFC and HCFC alternatives causing no
direct damage to the ozone layer. These compounds are used as insulation and packaging foams,
solvent, cooling equipment, fire extinguishers, dry cleaning and as aerosols. HFC-23 is also
emitted by the chemical industry. PFCs are mainly emitted in primary aluminium production,whilst additional emissions occur where PFCs are used as CFC alternatives. SF6 emissions aremainly related to the use of high voltage equipment because of its insulating and arc extinguishing qualities (IPCC, 1996).

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Specific sector and source categories mentioned in Annex A of the Kyoto-protocol are given in
Table 2.2.
Table 2.2 Sectors and source categories mentioned in annex A of the Kyoto protocol
Energy/ fuelcombustion

Energy/ Fugitive
emissions fromfuels

Industrial processes

Agriculture• Energy
industries• Manufacturingindustries andconstruction• Transport• Other sectors• Others• Solid fuels• Oil and naturalgas• Others• Mineral Products• Chemicalindustry• Metal Production• Other production• Production of
halocarbons andsulphurhexafluoride• Other• Entericfermentation• Manure
management• Rice cultivation• Agricultural soils• Burning ofresidues• Other

Waste• Solid waste
disposal on land
• Wastewater
handling• Wasteincineration• Other

Source: Kyoto Protocol, Annex A.

Source: IPCC 1995.

Figure 2.2 Global energy-related CO2 emissions
Energy-related CO2 emissions have increased over the past decades as shown in Figure 2.2.
Western Europe was the main contributor to CO2 emissions before 1900. By that year, emissions in North America also started to grow strongly and caught up with Europe between worldwars one and two. For the former USSR, the CO2 emissions started to increase around 1920. In
1970, CO2 emissions from the Western countries and formerly centrally planned countries comprised about 80% of the global emissions, decreasing to about 65% by 1990. This drop is
mainly due to the strong increase of emissions in other world regions (notably in China, otherAsia and Latin America). Between 1890 and 1990 the level of CO2 emissions in these regions
has increased by a factor 19. By comparison, in Europe and North America CO2 emissions increased by a factor 7. Hence, starting out from a low base emissions in non-western regions are
increasing particularly strongly. This process is expected to continue in the near future and will
eventually result in present-day developing countries becoming the largest emitters.

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2.3

Current emission levels

The IMAGE model estimates world emissions for 1990 at 26 Pg CO2, 436.2 Tg CH4 and 16.0
Tg N2O. In CO2 equivalents, these figures compare to 26 Pg CO2, 9.2 Pg CO2 eq. for methane
and 5.0 Tg CO2 eq. for Nitrous Oxide (Alcamo et al., 1998). Statistical differences in thesources considered give rise to differences among the various estimates of world emissions.
These kinds of variations should be taken into account when interpreting the data below.
Tables 2.3 and 2.4 show greenhouse-gas emission data for eighteen selected industrialised
countries for 1990 and 1995, respectively. The United States appears to be the largest contributor to all major GHG emissions. As a share of global emissions, the contributions of the US areas follows: CO2 31%, CH4 12% and N2O 8%. Overall, the US contributes about 25% to the
GHG emissions in terms of CO2 equivalent. For most countries, CO2 is the largest contributor tonational emissions, except for New Zealand where methane is responsible for the largest contribution.
In case of CO2 and CH4, Germany, the United Kingdom, and the United States together contribute about 80% and 75% to the total emissions of the 18 countries considered in Table 2.3, respectively. The corresponding shares for PFCs and SF6 of Canada, Germany, and the UnitedStates together are 71% and 84% respectively. Although the USA is the largest emitter of all
countries that did report HFCs emissions, it is difficult to conclude which countries are the main
contributors to the emissions due to lack of data. Finally, France, Germany, and the UnitedStates are together responsible for 64% of the N2O emissions of the 18 reporting countries ofTable 2.3.
Table 2.3 Greenhouse gas emissions 1990 for a selection of 18 industrialised countries in[Tg CO2-Eq]1
Austria
Belgium
CanadaChech Republic
FinlandFranceGermany
Iceland
IrelandMonacoNetherlands
New Zealand
NorwaySlovak Republic
SwedenSwitzerland
United Kingdom
United States
Total 18 countries

CO2

CH4

N2O

61.88
116.09464.00165.4953.80
378.381014.16
2.15
30.72
0.07
167.55
25.48
35.54
60.03
55.45
45.07
583.754965.51
8225

12.33
13.31
67.20
18.65
5.17
63.36
119.32
0.29
17.03

3.66
9.55
26.66
8.00
5.58
56.33
70.06
0.12
9.11

23.18
35.83
9.07
8.59
6.80
5.12
93.74
623.91
1123

15.87
14.73
4.65
3.88
2.85
3.57
37.20
132.12
404

HFC

PFC

SF6

0.07
5.94
0.00

0.48
2.87

2.97
0.26

2.00
2.69
0.31

0.14
3.90
0.01

4.91

2.46
0.60
2.55
0.50
0.40

1.39
0.55
2.20

2.09
18.35
38

0.62
25.69
39

1.37
44.04
54

0.96

Total
78
139
567
192
65
503
1210
3
57
0
215
77
54
73
66
54
719
5810
9882

1

Non-totals are presented by two digits, whereas totals are rounded off to whole numbers. Blanks indicate no data
available.
Source: UNFCCC 1997, SBI Seventh session.

Since similar data are also available for the year 1995, figures can be compared to determine thechanges taken over the period 1990-1995. As both tables only involve 18 countries, the changes
found should not be considered as a global trend but rather as a trend within the Western world.
From 1990 to 1995, total GHG emissions of the 18 countries considered increased by 1.7%; ofwhich CO2 emissions by 1.4%, N2O emissions by 1.4%, HFC emissions by 72%, PFC emissions by 12%, and SF6 emissions by 24%. In contrast, CH4 emissions showed a slight decrease(0.42%).

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Table 2.4 Greenhouse gas emissions 1995 in [Tg CO2-Eq]1
Austria
Belgium
CanadaChech Republic
FinlandFranceGermany
Iceland
IrelandMonacoNetherlands
New Zealand
NorwaySlovak Republic
SwedenSwitzerland
United Kingdom
United States
Total 18 countries

CO2

CH4

N2O

62.02
121.30499.53128.82
56.05
385.35894.50
2.28
33.93
0.13
183.40
27.37
37.88
48.52
58.11
44.17
543.345214.71
8341

12.18
13.34
78.37
15.39
5.06
59.72
101.83
0.29
17.05

3.97
10.01
33.42
6.70
5.58
53.79
67.89
0.12
8.06

22.32
34.34
9.85
6.64
6.22
4.94
80.16
650.48
118

18.14
14.48
4.34
2.42
2.85
3.66
29.45
144.77
410

HFC

PFC

SF6

0.01
0.07
6.02

0.48
1.89

0.00

0.10

2.88
0.01

1.67
0.05

6.00
0.01

8.45
0.18
0.24

2.39
0.02
1.44
0.32
0.39
0.07
0.57
29.19
42

1.46
4.37
0.57

0.59
0.50
0.00
0.08

0.20
0.26
2.55
76.65
93

Total
78
146
620
151
67
499
175
3
59
0
236
81
54
58
69
54
657
6147
10053

1.24
0.72
0.81
30.83
48

1

Non-totals are presented by two digits, whereas totals are rounded off to whole numbers. Blanks indicate no data
available.
Source: UNFCCC 1997, SBI Seventh session.

In 1995, the United States is also the largest contributor to the GHG emissions of the 18 countries considered. In the United States, the emissions of the six gases covered by the Kyoto protocol increased by 5.8%. Even in relative terms, the contribution of the US to the GHG emissions increased during this period.
Figure 2.3 relates the last column of Tables 2.3 and 2.4 by showing the growth or reduction in
CO2 equivalent emissions in 1995 compared to 1990. Monaco, Canada, The Netherlands and theUnited States showed the highest emission growth rates amongst the 18 industrial countries
considered with growth rates of 82%, 9.4%, 9.7% and 5.8%, respectively.
[% change from 1990]

100
81,7

80

60

40

20
9,7
5,8
-20,7

-3,8

0,1

-8,6

SwedenSwitzerland

United Kingdom

1,7Total 18 countries

0,6

Slovakia

Iceland

New ZealandGermany

Netherlands-3,8Monaco-11,2Ireland-0,9Norway-40

Finland

CanadaBelgium-20

Austria

0

Czech Republic-21,5France

0,4

4,9

3,8

3,6

United States

9,4
4,5

Figure 2.3 Emissions in 1995 cf. 1990
Source: UNFCCC 1997.

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Figure 2.4 presents the reduction targets according to the Kyoto protocol and the agreements
among EU member states. A comparison between Figure 2.3 and 2.4 shows that only in the
Czech Republic, France, Germany, Iceland, Ireland, Norway and Slovakia emissions have been
going down.
For the other countries considered, the rates of change of GHG emissions during the period
1990-1995 were higher by far than allowed by the Kyoto Agreement (c.f. Figures 2.3 and 2.4).
Most probably, this is also the case in more recent years as most industrial countries saw theirenergy use increasing between 1995 and 1998 (IEA, 1998).
[% change from 1990]
15

13
10

10

4

5

Total

United States-12,5 -7
United Kingdom

Germany-8
Switzerland

France-8
SwedenFinland0

Slovakia

Czech Republic-6

NorwayCanada-10-8

New Zealand-21

Netherlands

0

Monaco0

Ireland-8

Iceland-6

Austria-5-13 -7,5
Belgium

1
0

-15

-20

-25

Figure 2.4 Reduction agreements for 2010 according to the Kyoto protocol

2.4

Quality and availability of emission data

2.4.1 Quality of data
The quality of the statistics with respect to GHG emission differs considerably per greenhousegas and emission source. Several studies (Gielen and Kram, 1998, Second national communication Australia) have reported uncertainty ranges for the emission data for GHGs. Table 2.5 illustrates the uncertainty ranges of the differences per gas according to different references.
Table 2.5 Uncertainties reported in Second National Communications
CH4
N2O
HFC
PFC
[%]
CO2
Australia
20-80
20-80
Denmark
2
100
100
Canada430
40Netherlands
2
25
50
50
100

SF6

LUC
30-40

50

Source: Gielen and Kram 1998; Second national communication Australia.

Besides national communications, energy statistics can also be used to assess energy-related
emissions. Few non-Annex 1 countries have submitted national communications but there are
ongoing efforts in various countries to produce an emission inventory.

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2.5

Data sources for sectoral emission data

For countries of which no national communication is published, historical emission data can beassessed in a fairly reliable way by using energy statistics. Every national communication is
subject to an in-depth review of the reliability and transparency of the statistics and its consistency with respect to the guidelines for producing national communications. However, the studyof Gielen and Kram (1998) has raised questions about the consistency of national emission figures for trace gases such as SF6 and PFC.
To be able to quantify burden-sharing rules, specific information about countries is needed.
Clearly, it is preferred to use a country’s emission inventory as reference. However, this is notavailable for all countries. Below, countries are listed of which national communications areavailable. First national communications generally present data from the year 1990, and second
national communications for the year 1995. Most first national communications do not present
data for the gases PFC, HFC and SF6. In the first and second national communications, all Parties provided statistics on anthropogenic emissions of CO2, CH4, N2O. In the second national
communications, data were added for emissions of HFCs, PFCs and SF6. In addition, emission
statistics related to land-use change are also reported. However, problems arise with the assessment of the emissions of HFCs, PFCs and SF6 since data are lacking for a number of years in
the 1990-1995 period.

First National Communication (when Second National Communication is not available)
Egypt, Italy, Kazakhstan, Korea (Rep.), Latvia, Lithuania, Luxembourg, Mexico, Russian Federation, Senegal, Uruguay, Zimbabwe.

Second National Communication
Australia, Austria, Belgium, Bulgaria, Canada, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Iceland, Ireland, Japan, The Netherlands, New Zealand,
Norway, Poland, Portugal, Romania, Slovak Republic, Spain, Sweden, Switzerland, United
Kingdom, United States of America.

No data yet
Bangladesh, Belarus, Bolivia, Brazil, China, India, Indonesia, Kuwait, Mongolia, Nigeria, Saudi
Arabia, South Africa, South Korea, Taiwan, Turkey, Ukraine, Yemen. Some of these countries
are working on emission inventories, which we hope will be available shortly. These are Bolivia, Kazakhstan and Yemen. Other countries working on emission inventory are Costa Rica,
Ecuador, Ghana, and Suriname.
When no data are available from the country itself, an estimate will have to be made based onother sources. A first estimate of the energy-related GHG emission can be derived by using the
IEA energy balances. Data about topics such as population in 1990, population growth estimatesand climate have to come from other sources. Population data are readily available, for instance
via the UN, the FAO, the US Census Bureau and other organisations. Climate data to assess
temperature correction may be derived from Schipper at the IEA. For a number of countries,
data may not be available (e.g. Kuwait, Mongolia and Turkey). In these cases, the methodologyof the IPCC can best be used to assess these figures lacking.

2.6

Data requirements for estimating GHG emissions

The methods for estimating emissions of GHG gases are divided in ‘Tiers’ encompassing different levels of activity and technology detail. Tier 1 methods are generally rather simple and,
therefore, they require less or less detailed data compared to Tier 3 which involves the mostcomplicated methods.

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The IPCC ‘Greenhouse gas inventory workbook’ is divided in 6 modules:
Energy+Industrial Processes+
Solvents and other product use (virtually non-existent)+
Agriculture+
Land-Use Change and Forestry+
Waste.
++

EnergyThis module is divided in two main categories:• Fuel Combustion
Tier 1 methods– CO2 emissions
By reference approach
By main source categories– Non CO2 from fuel combustion by source categories
Tier 2 methods– Emissions from aircraft• Fugitive
Methane emissions from coal mining and handling
Methane emissions from oil and natural gas activities
Ozone precursors and SO2 from oil refining• Methane emissions from coal mining and handling
For CH4 emissions from coal mining and handling, the amount of coal produced is themain determinant. Data can be derived from the IEA energy balances. Preferably, thedata should distinguish surface mines from underground mines. However, this distinction is usually not applied by the IEA.

• Methane emissions from oil and gas activities
To calculate CH4 emissions from oil and gas activities, data are required about the number of wells drilled, the quantity of oil produced, the quantity of oil refined, the quantityof gas produced and the quantity of gas consumed. These data are available from the
IEA and the UN statistical division. The number of wells drilled is probably the mostproblematic.
+

Industrial Processes• N2O from nitric acid––

Needed: Production data of nitric acid
As some 90% of the nitric acid is used for synthetic fertiliser production, the statistics reported for ammonia nitrate are a good bases for nitric acid. Multiplying by afactor of 63/28 nitric acid production data can be obtained. For many countries, statistics on ammonia nitrate production are published by the FAO.

• N2O from adipic acid.
––

Needed: Adipic acid production.
Roughly 120 Mton CO2 equivalents per year is emitted world-wide, of which over
75% in the USA, Western Europe and Japan. For these countries, data are available,
for other countries data might not be available.

• CH4 from silicon carbide.
––

Needed: the amount of petrol coke consumed.
IEA statistics are a good source.

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15+Solvents and other product use
Virtually non-existent.

+

Agriculture• CH4 from enteric fermentation.
––

Needed: Average annual population of each livestock type.
FAO production yearbook provides these data. The World Resource Institute provides CH4 data from livestock aggregated.

• CH4 from manure management.
––

Needed: Average annual population of each livestock type.
FAO production yearbook provides these data. The World Resource Institute provides CH4 data from livestock aggregated.

• N2O from animal waste management systems.
––

Needed: Average annual population of each livestock type.
FAO production yearbook provides these data. The World Resource Institute provides CH4 data from livestock aggregated.

• CH4 from rice cultivation.
––

Needed: Harvested area by water management type.
The World Resource Institute provides CH4 emissions figures from wet rice agriculture. The FAO is another possible source, together with the China Agricultural
Yearbook, and the IRRI rice almanac.

• CO2 from savanna burning.
––

Needed: Annual area burned per savanna type.
FAO is an authoritative source of data, although the data might be less reliable.

• CH4 from savanna burning.
––

Needed: Annual area burned per savanna type.
FAO is an authoritative source of data, although the data might be less reliable.

• Methane from burning of agricultural residues.
–

The FAO is a possible data source, but it is unclear as to whether this source canprovide all the information needed.

• N2O from agricultural soils.
––+

Needed: Total use of synthetic fertiliser.
– average annual population of each livestock type,– dry pulses and soybeans produced,– dry production of other crops,– area of cultivated organic soils.
The FAO has all the information needed.

Land-Use Change and Forestry
Data have not yet been gathered for this topic.

16

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+

Waste
• CH4 from solid waste disposal sites (SWDS).
––

Needed: Amount of waste per category of SWDS.
– fraction degradable organic carbon, amount which actually degrades,– fraction of CH4 in Landfill gas.
Consultation with national experts is the methodology recommended. Unless countries have done this themselves and published their findings, the calculation can not
be reproduced.

• CH4 from waste water handling.
––

Needed: Total population
As said before, various organisations and institutes provide population data.

• CH4 from industrial waste and sludge streams.
–––

Needed: Total industrial output.
Waste water produced per unit.
Unless the country has published statistics on total industrial output, it will be difficult to reproduce the calculation.

• N2O from human sewage.
–
–
–

2.7

Needed: Average annual per capita protein consumption.
Population.
Unless countries have published statistics on their average annual per capita protein
consumption, it will be difficult to reproduce the calculation.

SummaryThis study takes into account the six greenhouse gases mentioned in Annex A of the Kyoto
protocol: carbon dioxide (CO2), methane (CH4), nitrous-oxide (N2O), hydrofluorocarbons(HFCs), perfluorocarbons (PFCs) and sulphur-hexafluoride (SF6). The relative impact of a certain emission of a GHG can be assessed by expressing the emission in terms of a CO2 emission.
At present total CO2 emissions are by far the most important in GWP terms, while the shares of
CH4 and N2O in global GHG emissions are also non-negligible.
From an historical point of view, the industrialised countries are the largest contributors to theglobal emissions. Particularly, Western Europe showed the highest emissions in the 19th century, while North America played a prominent role during the 20th century. Developing countries are poised to become the main contributors in the 21st century.
Although the Kyoto protocol sets targets for the reduction of GHG emissions, in the second national communication only a few countries report reductions in their total GHG emission between 1990 and 1995. By contrast, most countries report a rise in total GHG emissions withgrowth rates during the period 1990-1995 up to 10%.
The quality of available data is an essential aspect in selecting BSRs. However, both the quality
and the availability of data vary substantially among countries and among the six Kyoto greenhouse gases. In general, CO2 data are characterised by the lowest and PFC by the highest uncertainty range. Data is more readily available for industrialised countries than for developing
countries.
The present project attempts to consider, in addition to CO2, the other five GHGs covered by the
Kyoto Protocol. Thereby, the emphasis will be put on inclusion of CH4 and N2O because of theimportance of their respective contributions to global GHG emissions as well as the quality ofthe data concerned.

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17

3.

DRIVING FORCES OF GREENHOUSE GAS EMISSIONS

3.1

Introduction

Chapter 2 showed that large differences exist in the emission levels per country. Many factors
contribute to these differences and these factors can considered to be the driving forces ofchanging GHG emission patterns.
A way commonly accepted of expressing environmental impact in general involves the socalled IPAT equation or Kaya identity (IPCC, 1996), which is based on concepts introduced by
Ehrlich and Holdren (1971). The IPAT equation relates the increment of environmental stress topopulation change, changes in the wealth per capita, and technological change. In case of theenergy-related GHG emissions, the IPAT formula could take the following form:
GHG = POP × (GDP/POP) × (ENERGY/GDP) × (GHG/ENERGY)(3.1)

In equation (3.1), GHG refers to greenhouse gas emissions, POP to population, Energy to totalenergy use, and GDP to Gross Domestic Product. Although equation (3.1) is very trivial from amathematical point of view, it relates energy-related GHG emissions to a number of driving
forces at an aggregate level. It is possible to adjust this equation to study the GHG emissions at
a more detailed level and to add non-energy-related GHG emissions.
Since the purpose of this study is to set burden differentiating rules and not to predict future
GHG emissions, the indicators are used somewhat differently compared to equation (3.1) in order to make cross-country comparisons how countries perform with regard to the indicators involved. The first indicator shown in this chapter involves the GHG emission levels per capita
while the second takes into account the energy use per unit of GDP. The latter is often referred
to as the energy intensity. These two aggregate indicators have frequently been suggested in the
climate negotiations to be part of burden sharing rules (see Project Working Paper No. 2). In
this chapter, these two indicators are described in more detail.

3.2

Emissions and population size

Over the past 150 years, world population has increased strongly. An estimate of the population
size for the year 1850 is 1.2 billion people. In 1994, the world population amounted to 5.6 billion people (US Census Bureau, 1999). This increase in population size has certainly affected
GHG emissions. In addition, emission levels have been estimated for the two main gases (i.e.
CO2 and CH4) over the past 150 years (CDIAC, 1999). Figure 3.1 shows the development ofthese GHG emissions together with that of population.

18

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[index]
14
World pop
(est.)(indexed to1900. 1900 = 1)12

10
CO2 emissions(indexed to 1900.
1900 = 1)
8

CH4 emissons(indexed to 1900.
1900 = 1)

6

4

2

90

85

19

80

19

75

19

70

19

65

19

60

19

55

19

50

19

45

19

40

19

35

19

30

19

25

19

20

19

15

19

10

19

05

19

00

19

95

19

90

18

85

18

80

18

75

18

70

18

65

18

60

18

55

18

18

18

50

0

Figure 3.1 Carbon dioxide emissions, methane emissions and world population
Source: CDIAC 1999.

Population growth can be decomposed into two driving factors:• the natural population growth rate,• the net migration rate.
In the absence of human tragedies, positive natural rates of growth of the population can hardly
be significantly reduced at short notice. Yet, it cannot be totally excluded that inclusion of thefirst driving factor will fail to meet broad-based support. First, in principle it can be reduced – atleast at the longer term - through behavioural change. Second, reduction of the natural growthrate to a level close to long-term population stability would improve welfare prospects andprospects for sustainable development at both the individual and the national level. Third,
countries experiencing negative natural rates of growth of the population will have to meet more
stringent emission if fixed in per capita terms. For certain countries that, to date, can not be classified as ‘rich’ this might yield less ‘fair’ outcomes. Russia might be a case in point. Yet a medium-term allowance factor for a lopsided population distribution of women in the childbearing
age cohorts is defendable anyhow for countries undergoing rapid demographic transition towards a ‘steady population state’.
Population growth that is attributable to in-migration has to be allowed in any burden sharing
formula. Some countries are faced with strong immigration. These countries not only contributeto (often) relieving countries of origin somewhat of socio-economic distress but also accept additional ‘sources’ for GHG pollution from countries of origin.
In conclusion, the treatment of population growth in burden sharing rules is a potentially controversial issue. Possibly most climate change negotiators will accept the rate of change in
population as an allowance factor. Some may, however, debate full inclusion of the component
that is attributable to the natural population growth.
The effect of the oil crises in the late seventies and the early eighties are clearly indicated by theCO2 emission levels. The same holds for the economic crisis in the thirties and for both World
Wars. In addition, it can be seen that after the Second World War CO2 emissions increased at ahigher rate than population, which is mainly due to the increasing use of fossil fuels per capita.

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19[index]5,04,5CO2 emissions
per capita (in ton
CO2 Eq)4,03,5CH4 emissons
per captia (in ton
CO2 Eq)

3,0

2,5

2,0

1,5

1,0

0,5

90

85

19

80

19

75

19

70

19

65

19

60

19

55

19

50

19

45

19

40

19

35

19

30

19

25

19

20

19

15

19

10

19

05

19

00

19

95

19

90

18

85

18

80

18

75

18

70

18

65

18

60

18

55

18

18

18

50

0,0

Figure 3.2 CO2 and CH4 emissions per capita over time
Source: CDIAC 1999.

Figure 3.2 shows average global CO2 and CH4 emissions per capita. It can be seen that theworld average CH4 emission per capita are much more stable over time than the average CO2
emissions per capita. Yet over the last 30 years also CO2 emissions per capita seem to stabilise
by and large.
An explanation of the stabilising methane emissions per capita might be that these emissions areclosely linked to agricultural activities. Obviously, agriculture activities mainly comprise foodproduction. Since the demand for food per person does not vary much, the same may hold for
related CH4 emissions per capita. However, it should be noted that the CH4 emissions aremainly associated with cattle-breeding and rice production. Changes in food patterns may,therefore, affect the CH4 emissions patterns. Neglecting the latter, one may assume that methane
emissions are linked with population size.
As mentioned before, the increasing CO2 per capita levels are mainly due to an increasing fossil
fuel use. This, in turn, is mainly due to activities such as heating, energy, transport and thegrowing individual demand for goods and services.
CO2 emissions per capita at a sectoral level for nine industrial countries are depicted in Figure
3.3. This figure indicates that the (energy-related) CO2 emissions per capita decreased slightly
between 1973 and 1991 for some countries (Japan, Denmark, Finland) and decreased considerably in others (Sweden, France, Norway). The strong decrease in the latter countries is mostprobably the result of a shift in electricity supply (i.e. from a fossil-fuel-based electricity supply
to a nuclear/hydro-based electricity supply).

20

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Figure 3.3 CO2 emissions per capita in 1973 and 1991 (IEA, 1997)
According to the IEA, the average CO2 emissions per capita are relatively stable despite a slighttemporary setback between 1973 and 1985 which is mainly due to the oil crises. Although thenational emissions per capita differ in absolute terms, the development paths of the energyrelated CO2 emissions show some similarities over time as the emissions per capita are associated with a setback around 1980 for most countries implying that they suffered from the oil crises.
When non-western countries are also taken into account, the developments may be less uniform.
Figure 3.4 shows primary energy supply for a number of Western countries, Poland, Mexico,and South Korea. Although the developments in CO2 emissions may not be totally similar tothat of primary energy use, the latter is used here as an indicator for energy-related GHG emissions. The energy use in Poland and South Korea shows different patterns compared to theWestern countries. The US shows the highest energy use. For South Korea, energy use per capita increased continuously and does not seem to be affected by the oil crises.

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21[toe/cap.]

9

8

7

6
DENMARKKOREA

5MEXICOPOLANDPORTUGAL
USA

4

3

2

1

0
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

Figure 3.4 Total primary energy supply (TPES) per capita
Source data: IEA 1998.

3.3

Level of energy intensity

The level of aggregate energy intensity can also be regarded as an important undercurrent of
GHG emissions. Through adoption of energy-efficient technology energy intensity can be importantly reduced, other factors such as the structure of the economy remaining the same. Thissection focuses on the developments regarding aggregate energy intensity as indicated by energy use per unit GDP (adjusted for price inflation). Figure 3.5 shows the latter indicator overthe past 25 years.

Figure 3.5 Total primary energy supply per unit of GDP

22

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In the countries considered, energy use per unit GDP has decreased steadily. For Sweden, thisdecline is the least and less fluent, although in total the decline still is 12.5% between 1970 and
1992. The United States exhibited the highest energy intensity (i.e. energy use divided by GDP)in 1970 but this country also witnessed a sharp decline in the ensuing two decades.
A number of non-Western countries show much higher energy intensities, especially Poland.
Although the reason for this is uncertain, there is a possibility that this may be attributed to thefact that Poland was until recently a centrally planned economy with regulated energy prices
substantially below long-run marginal costs (cf. Figure 3.6).
[toe/1000 US$ 1990]
2,5

2

1,5

1

DENMARKKOREAMEXICOPOLANDPORTUGAL
USA

0,5

0
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

Figure 3.6 Total primary energy supply per unit of GDP
Source data: IEA 1998.

Removing Poland from Figure 3.6 presents a clearer view of the developments of Mexico andSouth Korea (cf. Figure 3.7). It can be observed from Figure 3.7 that the energy intensities ofboth countries show an increasing trend whereas they are decreasing for most Western countries. More or less, the same also holds for Portugal. This would suggest that countries that arehave not yet reached the ‘post-industrial services economy’ phase tend to experience increasing
aggregate energy intensity.

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23[toe/1000 US$ 1990]
0,55

0,5

0,45

0,4
DENMARKKOREAMEXICO

0,35

PORTUGAL

0,3

USA

0,25

0,2

0,15

0,1
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

Figure 3.7 Total primary energy supply (TPES) per unit of GDP
Source data: IEA 1998.

3.4

Reflections on aggregated data

The previous sections showed trends in GHG emissions in a number of industrialised and industrialising countries. Obviously, the results shown can not present a complete understandingof changing GHG emission patterns but they give an indication of a number of the essential relationships.
It was hypothesised that total GHG emissions depend, among other things, on the structure of
the economy concerned. At first sight, there also appear to be other national differences in therelationship between GHG emission levels and their apparent driving forces. For instance, theUS shows relatively high GHG emissions levels, which might be related to the fact that the spatial infrastructure in the US started to develop relatively late compared to other western countries. Therefore it might be much more directed towards the use of the truck and car (IEA,
1997). The latter could explain why the ownership of cars is deeply ingrained in the American
way of living. In addition, space is much less limited in the US compared to European countries,
which might induce relatively large dwellings and, hence a higher per capita energy use forspace heating or cooling. In addition, thin population densities as such account for higher per
capita levels of transportation services. On the other hand, countries such as Sweden and Norway have relatively low emissions per capita as a result of the ample potentials for renewableenergy sources and/or the large share of nuclear power.
In addition, energy intensities also develop differently per country as for instance, most Westerncountries exhibit decreasing energy intensities whereas energy intensities of South Korea and
Mexico (still) show an increasing trend. Poland, to the extent that it can be considered a ‘nonwestern country’, forms an exception to this general rule as over the past decade energy intensities in this country show a decreasing trend. Evidently this relates to the transition of Poland’s
economy from a less efficient, heavy-industry oriented, centrally planned one to a marketoriented economy with (more) inherent price and profit incentives towards efficient use of resources, including energy resources, and with a shift in economic structure towards less-energyintensive light industry and services.
Although the national-level driving forces described above strongly affect GHG emissions, consideration of driving forces at sub-national aggregation levels provides a more complete picture24

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of underlying factors. However, disaggregation is often complicated by the availability of data.
Therefore, it is proposed to use an aggregation level similar to that of the IPCC standard for thenational emission inventories since it can be expected that countries will not provide more information than necessary to national communications. Given data availability, an optimal levelof detail should be found. In the next section a very preliminary exploration of the (dataconstrained) possibilities is made that will be elaborated upon in the second phase of the present
project.

3.5

Sectoral indicators

The challenge in choosing sectoral indicators is to strike a good balance between inclusion ofproper indicators of all major driving factors of the level of national GHG emissions and dearthof reliable detailed information on such indicators, notably in non-OECD countries. Examplesof relevant explanatory aspects are the primary energy mix, fuel conversion activities and associated efficiencies and the nature of the economic activities within main sectors, e.g. Industry
and Agriculture.
The Triptych approach forms a good point of departure (Blok et al., 1997). Hitherto, with regard
to the burden differentiation issue this approach is the only one that explicitly allows for differences in economic structure. Moreover, this approach was successfully employed for intra-EU
sharing of the EU assignment laid down in the Kyoto Protocol. For each country concerned
Triptych specifies reduction targets for three distinct broad sectors:• the ‘domestic sector’ (households, services, light industry, agriculture and transportation)and its associated non-power energy use,
• the electricity sector with the associated power generation mix (energy input mix and CHP
share),• the most energy-intensive sectors producing internationally tradable commodities (refineries,
iron & steel, chemical, aluminium, minerals and paper & pulp) and their associated nonpower energy use.
Application of the Triptych approach requires the availability of reliable and comparable national data, among other indicators, on:• energy consumption by sector (sectors as indicated above),• population forecasts,• indicative plans for the future deployment of nuclear power,• heating degree days.
Early 1998, the initiators of the Triptych approach have prepared another paper with renewed
Triptych calculations (Phylipsen et al, 1998). Apart from correction for some errors, the following points were raised:• Light industry was included in households, but part of its output is for other sectors. Therefore, in alternative calculations light industry was included in heavy industry and not inhouseholds. The effect on the resulting emission reduction targets was slightly upward forsome countries. From a practical point of view, data at aggregated industry level appear
somewhat easier to obtain for non-EU countries.
• Shifting freight transportation to heavy industry yielded broadly similar reduction target results for the distinct EU countries.
Ybema has looked at broadening the Triptych approach to include non-EU OECD countries. He
concluded that the differences between OECD countries (with also broadly similar per capita
income levels) of resulting emission reduction targets are larger than between EU member states
as result of larger differences in the various underlying energy and non-energy indicators(Ybema, 1997). As differences among countries with emerging and developing economies areeven larger than among the OECD countries, the same conclusions would hold a fortiori forthese countries. Hence, although the Triptych approach can, in principle, be quite instrumental

ECN-C--00-012

25

in consensus building, in its present form the resulting proposed objectives would be too drastic
for a number of countries to be acceptable.
In the Triptych approach, a relatively simple allowance method was applied for the countries
with an economy in a relatively mature stage of development. Broader application of a Tryptich-like approach would warrant a further elaboration of (an) allowance factor(s) such as ‘developmental emission requirements’, ‘structural transition requirements for fossil fuel exporters’and ‘infrastructural requirements for countries with low population densities’, with specific attention for exemption and graduation issues1. Should methane emissions be included, it might
be considered to analyse emissions from agriculture (notably paddy growing and animal husbandry) separately.
Though it is difficult to make any hard statement on availability of data in non-OECD countries,
based on the information presented in Chapter 2 and in an article by Judson (1999) the following conclusions seem justified:• It will be possible to apply a Triptych-like approach from a data availability perspective forat least 90 non-OECD countries. For three important sectors (Industry and Construction,
Transportation, Households and Others) these data appear to be available (Judson et al.,1999). However, at sectoral level the data required are less reliable than at aggregate level.
Also there are substantial differences between data published by the UN and by the IEA,
even though these publications are based on the same data sets.
• Two more aspects have to be considered in collecting data for a burden sharing study. One isthat the data should be of such quality that it is not a potential source of criticism for any
burden sharing rule outcome. With regard to presently less reliable data this might pose a serious problem. Another aspect is that for evaluating burden sharing rules the countries haveto be chosen in such a way that different types of countries (such as economies in transition,
OPEC, newly industrialised countries and developing countries) are well represented.

3.6

Summary

The increase of the world population is an important driving factor of GHG emissions. Methane
emissions seem to be closely related to agricultural and waste emissions and have shown a relatively steady level of emissions per capita over the past 150 years. Since the First World War,
CO2 emissions per capita increased from less than 2 tonnes CO2 eq. per capita to over 4 tonnes
CO2 eq. per capita. This increase is mainly the result of an increasing demand for fossil fuels.
Also, differences between countries in the structure of their respective economy and energy
supply result in differences in emissions per capita. The United States shows the highest CO2
emissions per capita of the world, which is probably due to its relatively low population density,
the relatively large houses in this country and a transportation infrastructure based on cars. By
contrast, some other wealthy countries with a low population density, e.g. Norway, have much
more subdued emissions per capita on account of factors such as large-scale use of renewableenergy.
In contrast to the decreasing energy intensities of most OECD countries, many nonindustrialised countries are still associated with high and sometimes even rising energy intensities. On the other hand, economies in transition are presently showing rapidly decreasing energy
intensities.
The Triptych approach has quite interesting features for stimulating the process of consensus
building but needs to be adapted to account in a more pronounced way for country-specific allowance factors such as developmental emission needs.

1

Ybema (1997) made similar observations.

26

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4.

INDICATORS DETERMINING THE COST OF EMISSIONABATEMENT

4.1

Introduction

For many countries considering to commit themselves to a certain level of emission reduction,
the expected cost consequences of commitments to limit emissions of GHGs are of paramountimportance. In fact, cost projections for a country form overriding considerations for its policy
makers and climate change negotiators to assess the burden of emission reduction commitmentsof the country concerned. Yet there is no straightforward and unique way neither to forecast the
future cost of emission mitigation policy packages nor to establish their emission impact. Different cost perspectives can be considered and, in fact, a wide range of approaches is being used
to project the cost of future emission reductions.
Some major issues will be reviewed in this chapter related to making ex ante cost projections,and ex post cost estimates, of emission reduction policy packages. The following issues will be
addressed:
1. What kind of costs can be associated with dedicated emission reduction activities?
2. What factors play a role to the cost burden of a country of mitigation programmes (dedicatedemission reduction activities)?
3. What methods to determine the cost of reduction commitments are being applied?
4. How can the cost figures be calculated?
5. Is it possible to derive cost figures from other directly measurable indicators?
It is noted that most of the literature focuses on energy related CO2 emissions. International
comparable information on the cost of emission reduction of other GHGs is scanty.

4.2

Cost of specific mitigation activities

In this section, cost concepts used for establishing mitigation costs of specific activities or programmes are outlined and reviewed2. This will set the stage for the discussion on assessing
mitigation costs of reaching specific emission (reduction) targets in the next section.
At the outset, it should be stressed that only the cost of activities to mitigate (possible) anthropogenic climate change are considered by the present project, not the cost of adaptation or nonadaptation to climate change. Banuri et al (1996) argue that, in principle, the costs of impacts aswell as the cost of risk bearing for such impacts should be covered in climate change negotiations.
However, as these costs and their incidence over the globe are quite speculative, credible quantification of the cost of climate change impacts and associated risk bearing and, hence, their inclusion inclimate change negotiations can hardly, if at all, be made operational.

2

This section draws partly on (UNEP, 1998).

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27

Cost and benefits of distinct activities can be regarded from three major perspectives: the private
perspective, the perspective of the national economy, and the perspective of society. Monetary
costs and benefits accruing to individual persons or entities are called financial costs and benefits. Costs from the perspective of the national economy, including national external effects3(such as aerosols and acid rain affecting the national territory) are often referred to as economic
costs and benefits4. When assessing the value of the effects of distinct activities from the broadest societal perspective, transborder external effects impacting on other countries are included. It
is a matter of dispute whether or not to include income distribution concerns too in social costs
and benefits and, if so, how5. Costs and benefits from the societal perspective are often referred
to as social costs and benefits.
Cash flows of financial costs and benefits can readily be measured ex post. Often some form of
periodical financial accounts is prepared by the entity concerned. Financial values are based on
the prevailing market prices. For assessing economic or social costs the opportunity costs concept plays an important role. It should be established what is the value to the economy/societyof the resources used for undertaking an activity in their best alternative application. Indirect
taxes or subsidies (apart from externality allowances) should be removed from market prices, as
the tax/subsidy components denote merely transfers (to or from the public sector) and do not
relate to real resource value.
Discussions on the burden sharing issue can either relate to the net or incremental6 economic
costs or to the incremental social costs of mitigation programmes. UNEP (1998) proposes to focus on the net social costs from a global perspective. However, it will not come as a surprise if
most climate change negotiators turn out to be most interested tacitly in the net economic costs(from a national perspective) of implementing the mitigation programme of their own country.
Yet for some other countries, notably fossil fuel exporters, the transborder costs of mitigation
measures taken by other countries can be quite significant. For these countries the social cost
concept matters most from a negotiation point of view. This report will adhere to the social cost
concept. Where useful from a negotiation point of view, the economic cost concept will also be
considered.
Furthermore, for governments wanting to implement mitigation programmes also the total financial cost of programme implementation to be borne by the public sector is relevant information for government budget preparations.
Mitigation programmes can have important benefits. Consider e.g. the introduction of a moreenergy-efficient production technology that reduces the use of fossil fuels per unit of output. It
may also reduce the use of (other) materials per unit of output. Therefore, the total costs ofmitigation programmes is not an appropriate basis for mitigation cost assessment from the perspectives of the national economy or from society at large. Only the incremental costs relative
to the ‘without programme’ situation should be considered.

3

External effects of specific projects are effects, positive and negative ones, that will not be captured by the future
cash-flows accruing to the project sponsors, because these effects do not translate into costs or revenues for the
project sponsors. These effects may translate into revenues (positive ones) or costs (negative ones) for other parties
than the project sponsors elsewhere in the economy or be of such a nature that these cannot be (readily) expressed
into monetary values, e.g. loss of biodiversity. In the economic analysis - concerned with assessment of the selection of projects from the perspective of their attractiveness to the economy at large - the analyst should endeavour toaccount for external effects in monetary terms to the maximum extent possible and provide qualitative information
on aspects for which this is not possible.
4
Economic pricing should allow for external costs affecting the country’s policy objectives: see e.g. (Squire and Van
der Tak 1975, pp 21-23).
5
Income distribution concerns are generally not integrated in economic prices (costs and benefits).
6
Net or incremental: after having made due allowance for mitigation programme benefits.

28

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Let us consider the incremental cost concept by reverting to the case of the energy-efficient production technology. If it can be assumed that there will be no product output changes as a resultof the mitigation programme concerned (qualitatively and quantitatively), the costs of producing
the output with the ‘without programme’ technology should be subtracted from the total costs ofproducing the same output in the ‘with programme’ case. This way, the incremental costs can beestablished.
In a number of cases the incremental costs can be negative. Implementation of these ‘no regrets’cases can be justified on pure economic grounds. However, in cases of projected negative incremental costs one should consider carefully why the activities concerned have not been implemented already anyway. It might well be that the analysts projecting negative incremental
costs have overlooked serious implementation barriers that can only be scaled at substantial additional costs (e.g. large awareness campaigns, the provision of extension services, use of foreign exchange to arrange loans from foreign financiers, etc.).
The most contentious issue in preparing projections of incremental costs or in estimating incremental costs ex post is the determination of the baseline scenario or ‘without mitigation programme’ scenario. The easiest assumption is to equate the baseline scenario with the situation
existing just before implementing the mitigation programme. In practice, in many cases project/programme analysts apply this assumption. Yet without programme implementation thesituation in the sectors involved in the mitigation programmes and in the economy as a wholewill change too. It will always be a matter of speculation how the baseline situation will develop(or, ex post, would have been changed) over time. UNEP (1998) suggests to use multiple‘credible’ baselines in order to provide insight into the sensitivity of cost projections (ex ante) or
cost estimates (ex post) of mitigation activities and programmes. Yet in practice, this will bequite cumbersome. Moreover, the fundamental flaws in assessing incremental cost cannot bescientifically removed. In conclusion, policy makers should always be made aware of the inherent weak basis for assessing mitigation costs when presenting outcomes of mitigation cost assessments of specific projects and programmes.

4.3

The cost burden of reduction assignments for a country

In the previous section, the cost concepts used for establishing costs of specific mitigation activities have been outlined and reviewed. In this section, the mitigation cost issue will be expanded to the level of assessing the costs to a country of achieving agreed GHG emission mitigation targets. In this case, the incremental (economic or social) mitigation cost concept will
form the point of departure. In order to effectuate agreed GHG reduction assignments, countries
that have made commitments have to prepare effective7 countrywide mitigation programmes.
The main issue at stake is: what will be the net overall cost impact upon a country’s economy ofsimultaneous implementation of effective country-wide implementation programmes? This typeof assessment is often referred to as an example of a macroeconomic cost assessment, i.e. an
economy-wide cost assessment.
The ensuing stocktaking of this issue in the remainder of this section will proceed along thefollowing lines:• Methods to translate an agreed emission assignment for a country into a credible country
portfolio of GHG abatement activities,• Identification of distinct types of incremental effects to a particular country of implementation of mitigation programmes by several countries,• Methods to assess these distinct types of incremental effects,• A concluding brief review of strengths and weaknesses of projecting mitigation cost burdens.

7

Effective in the sense of achieving the country’s agreed mitigation assignment.

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Methods to prepare a country mitigation programme for meeting its assignment
There are basically two types of methods to prepare country portfolios of GHG abatement activities, i.e. simulation models and least-cost optimisation models for energy systems and related
GHG emissions. Both types of models require a baseline scenario of socio-economic development over the projection time horizon with assumptions concerning population growth and economic growth rates per sector. The projection model should then be applied to make projectionsof energy demands and of attendant GHG emissions. Having established projected baseline
emission levels for a prospective ‘budget period’, projections of total emission reduction requirements can be made to meet the agreed assignment. The projection model should help tocompose least-cost GHG abatement activities.
For the application of simulation models (e.g. LEAP) assumptions need to be made on the costof energy conversion and end-use technologies, the penetration of these technologies per enduse, fuels used per energy technology and energy conversion efficiencies. With the help of scenario assumptions the model will generate projections of energy demand/supply, total energy
system costs and GHG emissions. For the application of least-cost optimisation models (e.g.
MARKAL, EFOM), in addition to assumptions on socio-economic development, information isneeded on energy costs, investment and recurrent cost of energy technologies, lifetimes of energy-technology investments and the commercialisation potential of energy technologies. Imputing the required information the optimisation models will generate least-cost projections toenergise the economy with attendant GHG emissions and total energy system costs.
Having projected national baseline emission levels, analysts using a simulation model will prepare a long-list of mitigation options in energy supply and use. Based on iterative simulations
with applications of these options and accompanying assessments of costs and application scopeat pre-feasibility level, a least-cost portfolio of mitigation options can be projected yielding in
total the required emission reduction. In addition, the total energy supply system costs corresponding with the reduction scenario can be projected. In order to obtain the incremental mitigation costs, the total energy supply system costs in the baseline scenario have to be deductedfrom the total energy supply system costs in the reduction scenario. At times, in mitigation
analyses incremental mitigation costs have been confused with total mitigation costs.
By virtue of their inherent cost-optimisation properties, least-cost optimisation models canreadily handle GHG emission constraints, produce the projected least-cost combination of energy conversion and end-use technologies and projections of the incremental (i.e. additional)
costs of the introduction of emission constraints. Least-cost models are also capable of making
better allowance of inter-activity impacts because of their ability to perform integrated economy-wide analysis, while simulation models - performing partial analyses - are less capable ofaccounting for interactions between distinct activities and sectors. E.g., when at the same timeeffective energy-saving lamp marketing campaigns and an activity to improve conversion efficiencies in the power sector are underway, energy system optimisation models (as distinct fromsimulation models) can account well for the reduced electricity savings scope for each of these
GHG reduction activities because of mutual interactions. On the other hand, data requirements
for energy system optimisation models and scarce expert capabilities to run these models areprohibitive for many developing countries. All in all, it can be concluded that there is no single
superior model that can most effectively be applied throughout the world.

Identification of effects on incremental country cost burdens
Several types of effects of implementing country mitigation programmes can be discerned on
the total incremental costs to a country including:• Direct effects
The direct incremental costs of specific mitigation activities can be obtained through ‘bottom-up’ pre-feasibility analysis at project level. In the preceding section, an outline was presented of how to assess the incremental costs of specific mitigation activities without making
allowance for the indirect effects that follow suit.

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• Within-country indirect effects
Implementing a mitigation programme can affect the national and international competitiveness of a wide range of economic activities with associated costs and benefits. Domestic
economic activities, the competitiveness of which might be adversely affected, are carbonintensive basic industry activities such as the production of steel, cement, fertilisers, basic
chemicals such as fertilisers, etc. Because of stringent domestic carbon reduction policies,
carbon leakage i.e. relocation of carbon-intensive economic activities to countries with lessstringent carbon reduction policies may occur with welfare loss at the national level but also
at global level (diversion of production to less efficient foreign producers). On the other
hand, carbon-extensive economic activities will be stimulated, especially if these offer substitution opportunities for carbon-intensive activities. The net result of the within-country indirect effects on total welfare levels of a country depend highly on the pre-programme importance of carbon-intensive economic activities and the extent of international synchronisation of carbon reduction policies. The net result can be gauged in a crude way by top-down
economic model tools such as input-output models and general equilibrium models.
• Secondary effects
Because of substantial negative direct incremental costs to a country pursuing stringent carbon reduction policies, at the macroeconomic level effective demand may fall back. Topdown economic models may also capture these types of effects crudely. Negative secondary
effects may even be transmitted to major trading partners.
• Transboundary indirect effects of mitigation programmes in other countries
Negative indirect impacts can be experienced by exporting countries of inputs to carbonintensive industries located in countries pursuing stringent carbon-reduction policies. The
same goes for producers of carbon-intensive consumer goods. Exporters of fossil fuels will
be hit most by stringent carbon-reduction policies in major demand areas for fossil fuels. Recipient countries of investments in carbon-intensive industries may fetch positive welfare effects. These types of effects can only be captured in a very rough manner by top-down global
economic models.

4.4

Implications for burden-sharing rules: preliminary conclusions

Based on the findings in the previous sections some preliminary remarks can be made on thedevelopment of useful burden-sharing rules.
I
Due allowance should be made for the direct incremental costs to a country of implementing the least-cost mitigation programmes that would meet the burden indicated by the proposed burden-sharing rule. Certain factors are of crucial importance to the direct incremental cost bill of a country, notably:• Prevailing levels of energy efficiency throughout the country’s energy system. If, generally, the gap with international ‘best practices’ benchmarks is small (wide), the scopefor improving energy-efficiency levels is correspondingly small (large) and expensive(cheap).
• The carbon intensity of energy supply. If a country’s energy supply is relatively carbonextensive (carbon-intensive), the scope for shifts to carbon-extensive primary energy
carriers, including notably renewable sources of energy, will be correspondingly small(large) and expensive (cheap).
• The country’s relative endowments of renewable sources of energy and natural gas will
also determine the transition costs towards a carbon-extensive economy.
II Due allowance should be given to the within-country indirect effects. The blow that might
be given to specific carbon-intensive economic activities might be locally quite severe,even when these activities would be ‘best practices’ in their respective trade.

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III It appears that less attention is due to secondary effects, provided the incidence of these effects is distributed equitably throughout the economy. If the country’s policy makers havewell designed and communicated the country’s mitigation programme and created sufficient political clout to its defence, some loss of welfare seems acceptable.
IV Due allowance should be given to transboundary indirect effects. It should even be considered that countries that are extremely dependent on carbon-intensive exports, notably
countries heavily dependent on fossil fuel exports, will get appropriate, time-phased forms
of assistance from the international community in bringing about a sound restructuring of
their respective economy.
V Evidently the cost of emission limitation commitments are a very important consideration
for climate change negotiators. Consideration should therefore be given to major determinants of these commitments, e.g.:• For countries that have already implemented many measures in the past, further reduction will become increasingly costly.
• The risk of ‘carbon leakage’ (shifting of carbon-intensive activities to countries withmore lenient emission policies) can be perceived to be serious.
• For countries with a fossil-fuel-intensive transport and energy-supply infrastructure a
shift to a less fossil-fuel-intensive infrastructure is supposed to be costly.
• The same may hold for countries that have already implemented a ‘green’ tax system,
for countries with a low renewable energy potential, and/or for countries for which‘going (more) nuclear’ is not politically feasible.

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5.

PRELIMINARY FINDINGS ON BSR DESIGN

5.1

Introduction

This concluding chapter contains some main findings of the first stage of the present research
project on Burden Differentiation. Section 5.2 gives preliminary findings on data availability.
Data availability aspects are being investigated more thoroughly in the next study stages. Section 5.3 presents guidelines for structuring activities on the design of widely acceptable burden
sharing rules.

5.2

Data availability

The Kyoto Protocol covers five other greenhouse gases in addition to CO2. The IPCC estimatesthat in 1995 emissions of CO2 account for 84% and the other gases for 16 % of total global
warming potential, among which CH4 for 11% and N2O for 4%. As data on emissions for thelatter two gases are available for many countries, these will be included in further project activities to the extent possible. A disadvantage of their inclusion is the low level of reliability of thecorresponding emission data as compared to CO2 emission data. This disadvantage holds a fortiori for the remaining three ‘Kyoto’ gases. As the latter also contribute a very small share tototal Global Warming Potential, inclusion of these emissions will be given low priority in subsequent research.
For OECD countries data availability on CO2 emission reduction, at aggregated national and at
broad sectoral level, is fairly good. For non-OECD countries the data situation is less favourable. The National Communications to the FCCC Secretariat is the most authoritative data
source. It will be attempted to include the other GHGs in the project database, especially CH4
and N2O. The challenge for the present study is to identify a level of detail that makes convincingly proper allowance for country-specific circumstances on the one hand and for availabilityof reliable data on the other.

5.3

On designing burden sharing rules

For developing a burden sharing rule that is expected that for garnering broad-based support it isnecessary to:• Concentrate first on the inclusion of allowance factors for country-specific characteristics
that contribute significantly to variations in emissions per capita.
• Establish which of these are expected to get broad-based support in the climate change negotiation arena. Preliminary analysis suggests that appropriate indicators for economic
structure characteristics would appear to constitute a serious candidate allowance factor, implying a sectoral approach as exemplified by the Triptych approach.
• Develop a method to normalise unadjusted emission targets for the latter type of allowancefactors and to apply burden sharing rules to adjusted emission rates.
• An important issue outstanding is trans-national cost-effectiveness in reaching emission targets. It remains to be seen whether to allow for cost-effectiveness in burden sharing rules
themselves or, alternatively, in proposals for the mode of application of these rules.

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• Country-specific allowance factors for burden differentiation among nations with comparable living standards tend to be proposed by negotiating countries that have a keen interest inincluding these for reducing their abatement burden. The EU-wide support for the Triptych
approach in sharing the EU emission reduction assignment among its member states suggeststhat the country-specific economic structure is an allowance factor for emission differentiation, which may well meet broad-based support. This would require a relatively simple but
intuitively appealing sectoral approach in developing burden-sharing rules, based on reliable
and verifiable data.
• As for other possible allowance factors, the Triptych approach also includes a local climaterelated allowance factor. Furthermore, it can be expected that exporters of fossil fuels will
demand allowance for the negative impact on their national economies of global GHG emission reduction. The same is likely to hold for large countries with low population densities as
the transport and energy infrastructure of these countries is expected to adversely affect levels of energy efficiency. Last but not least, implicit or explicit allowance should be made for‘developmental emission requirements’.
• It is important to note that the outcomes of the Triptych approach, which makes allowancefor driving factors to national emission levels at sectoral level, has served to specify a successful initial distribution of EU emission targets. However, ensuing further negotiation
among EU member states were required for reaching a full agreement among the EU member states. Evidently, in the decisive negotiation phase researchers can never substitute official negotiators. In the best case, researchers can provide supportive clues to be used by negotiators totally at their own convenience in the quest to find a negotiated consensual solution for burden sharing.
• Inclusion of population growth as an allowance factor cannot completely be taken for
granted. Possibly most climate change negotiators will accept the rate of change in population as an allowance factor. Some may, however, debate full inclusion of the component thatis attributable to the natural population growth.
• Due allowance should be made for the direct incremental costs to a country of its least-cost
mitigation programme that would meet the burden indicated by the proposed BSR. Certain
factors are of crucial importance to the direct incremental cost bill of a country, notably:– Prevailing levels of energy efficiency throughout the country’s energy system. If, generally, the gap with international ‘best practices’ benchmarks is small (wide), the scope for
improving energy-efficiency levels is correspondingly small (large) and expensive(cheap).
– The carbon intensity of energy supply. If a country’s energy supply is relatively carbonextensive (carbon-intensive), the scope for shifts to carbon-extensive primary energy carriers, including notably renewable sources of energy, will be correspondingly small(large) and expensive (cheap).
– The country’s relative endowments of renewable sources of energy and natural gas will
also determine the transition costs towards a carbon-extensive economy.
• Due allowance should be given to the within-country indirect effects. The blow that might begiven to specific carbon-intensive economic activities might be locally quite severe.
• Due allowance should be given to transboundary indirect effects. It should even be considered to make countries that are extremely dependent on carbon-intensive exports, notably
countries heavily dependent on fossil fuel exports, eligible for appropriate, time-phased
forms of assistance from the international community in bringing about a sound restructuringof their respective economy.
• Last but not least, burden-sharing rules should be transparent and relatively simple. A goodbalance should be struck between these features on the one hand, and significant countryspecific allowance factors on the other.

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