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Implementing climate related measures: will the Kyoto mechanisms release the demand side potential?

Panel: Panel 1. Energy efficiency – a strategic choice for Europe

Author:
Hans Nilsson, FourFact

Abstract

There is a hope that the Kyoto-mechanisms that allow trade and exchange of emissions and emission rights on new markets will clear the market for GHG-emissions. There is however less discussion on incentives and decisions, on technologies to be used and by whom and why. Most of this seems to be left to the “invisible hand” of the market.

This paper tries to estimate the opportunities for GHG reduction in different countries and discuss what sort of measures the Kyoto-agreement and -mechanisms can induce. It will further discuss the possibility for different partners to be active in fulfilment of the obligations. The paper is primarily geared towards investigating possibilities on the demand side.

The first and most critical issue is to understand where, by whom and on what grounds decisions to invest in GHG-reducing measures are made. The mechanisms have to address the mind of the people who control the solutions. Secondly the outcome will depend on how countries want to “play their hand” in the game over the Kyoto-commitments. Here it is argued that the picture is far more complicated than looking on the GHG-budget deficit or surplus only. Several countries have very good opportunities to serve themselves with domestic actions but could also step on their own toes if the GHG-obligations are not correctly allocated among stakeholders within the country.

The Kyoto-obligations may add an incentive to improve market for more efficient technologies to the already existing incentive for a more efficient use of resources by an “informed demand” based on more rational decisions. The incentive is however not automatic. It will still require a decisive element from government action.

Paper

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