Besidesprimary effects such as reducing greenhouse gas emissions, the implementation
of climate policies in Annex I countries of the Kyoto protocol may have
secondary (side) effects, as the resulting increase in carbon or fossil
fuel costs may affect energy prices and, hence, the profitability of
energy-using industries in Annex I versus non-Annex I countries. From
a global warming point of view, these secondary effects or ?spillovers?
of climate policy may be either negative or positive. Negative spillovers
refer particularly to the incidence of carbon leakage, i.e. an increase
in CO2 emissions in non-abating countries due to the implementation
of climate policy in Annex I countries. Positive spillovers, on the
other hand, refer especially to the inducement of carbon-saving technological
innovations and the diffusion of these innovations, both at home and
abroad.
The
primary objective of the present report is to provide a summary assessment
of the analytical and empirical knowledge on the potential incidence
of spillovers due to climate policy in Annex I countries of the Kyoto
protocol. These spillovers include especially the prevalence of carbon
leakage as well as the induced innovation and diffusion of carbon-saving
technologies in both Annex I and non-Annex I countries. In addition,
the report aims to draw lessons, conclusions and policy implications
with regard to the opportunities and means to reduce potential negative
spillovers of climate policy (i.e. ?carbon leakage?) and to enhance
its potential positive spillovers (?induced technological change?).
The present report provides first of all a conceptual framework,
particularly on the terms ?spillovers?, ?carbon leakage? and ?induced
technological change?. Subsequently, it presents the major findings
of analytical model studies on the incidence of carbon leakage due to
climate policy in Annex I countries of the Kyoto protocol, followed
by similar analytical findings on the incidence of induced technological
spillovers. Next, it presents the major findings of the three empirical
case studies on climate policy spillovers, particularly in the energy-intensive
manufacturing industry, the wind power industry, and the biomass and
bio-energy industry. Finally, it discusses the major policy implications
of the project ?Spillovers of climate policy?.