Unilateral Emission Pricing and OPEC s Behaviour

Transcription

1 Unilateral Emission Pricing and OPEC s Behaviour Christoph Böhringer 1 Knut Einar Rosendahl 2 Jan Schneider 1 1 University of Oldenburg 2 Norwegian University of Life Science; Statistics Norway International Energy Workshop, Cork June 3, / 19

2 Introduction National or regional climate policies in the abscence of a global agreement with binding reduction targets Risk of carbon leakage, i.e. relocation of emissions to regions without regulation Most numerical studies: major share of the leakage through price changes in the international fossil fuel markets Most studies on carbon leakage so far have assumed competitive behaviour in international energy markets What about OPEC? 2 / 19

3 Introduction Böhringer et al. (2014) EU climate policy and five different assumptions about OPEC s behaviour Conclusion Leakage through the oil market might even turn negative if OPEC acts as a dominant producer Mechanism Strategic game for carbon rents and resource rents between OPEC and the EU 3 / 19

4 Numerical Model and Data Numerical Model Multi-region, multi-sector static CGE model of global trade and energy Constant elasticity of substitution in production, consumption, and trade Trade following Armington s approach of differentiated goods Data GTAP 9 dataset (base-year 2011) Detailed input-output, bilateral trade, and fuel-specific CO 2 data Aggregated towards our research question 4 / 19

5 Model sectors and regions Sectors and commodities Energy Coal Crude oil Natural gas Refined oil products* Electricity EITE sectors Chemical products Non-metallic minerals Iron and steel industry Non-ferrous metals Transport Air transport Water transport Other transport Other industries and services All other manufactures and services Countries and regions Europe EU 28 plus EFTA United States of America Saudi Arabia Remaining OPEC-core** Remaining OPEC Remaining OECD China Japan India Russia Other middle income countries Other low income countries *Included in the group of energy-intensive and trade-exposed industries (EITE). **Qatar, Kuwait, United Arab Emirates. 5 / 19

6 Core Setting Assumptions about OPEC COM OPEC behaves as a competitive producer - no strategic OPEC response DOM OPEC utilizes market power to maximize its profit in the oil market, i.e., OPEC behaves as a dominant producer EU climate policy EU implements a uniform CO 2 price to achieve a global target of CO 2 emissions EU persues the same target for global CO 2 emissions under COM and DOM determined by the global level of CO 2 emissions under a domestic reduction of 20% in the EU without strategic OPEC response (COM) 6 / 19

7 Research Question Examine the implications of OPEC s strategic responses more thoroughly by extending our former analysis along four key dimensions: (i) the size of the climate coalition, (ii) the size of the oil cartel, (iii) oil-gas price linkages in the EU and Japan, and (iv) subsidies for oil consumption within OPEC. 7 / 19

8 Scenario Extensions Dimension Description Acronym Climate coalition Cartel size Oil-gas price link Oil consumption subsidy *Qatar, Kuwait, United Arab Emirates. Coalition of countries that jointly reduce CO 2 emissions to meet a global emission reduction target. OPEC members that jointly act as a dominant producer on the international crude oil market. Import prices for natural gas in the EU and Japan are linked to the international crude oil price. OPEC members subsidize domestic crude oil consumption (in DOM). EU; EUxUSA; EUxUSAxChina; OECD; OECDxChina OPEC; OPEC-core*; Saudi Arabia NO LINK; YES LINK NO SUB; YES SUB 8 / 19

9 Oil Market in the Core Setting 2 COM DOM 1 % change from business-as-usual Crude oil price OPEC supply Non-OPEC supply EU consumption Non-EU consumption 9 / 19

10 Leakage in the Core Setting COM DOM 18 Leakage rate (in %) Total Leakage Coal Leakage Gas Leakage Oil Leakage 10 / 19

11 Benchmark Emissions Gt of CO Coal Gas Oil 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 EU USA Remaining OECD China EU USA Remaining OECD China 0% Absolute Share 11 / 19

12 Oil Market for different Climate Coalitions under COM 2 EU EUxUSA OECD EUxUSAxCHN OECDxCHN 1 % change from business-as-usual Crude oil price OPEC supply Non-OPEC supply Coalition consumption Non-Coalition consumption 12 / 19

13 Oil Market for different Climate Coalitions under DOM 2 EU EUxUSA OECD EUxUSAxCHN OECDxCHN 1 % change from business-as-usual Crude oil price OPEC supply Non-OPEC supply Coalition consumption Non-Coalition consumption 13 / 19

14 Emission Reductions for different Climate Coalitions under DOM 4.0 Oil Gas Coal Gt of CO COM DOM COM DOM COM DOM COM DOM COM DOM EU EUxUSA OECD EUxUSAxCHN OECDxCHN 14 / 19

15 Leakage for different Climate Coalitions Coal Leakage Gas Leakage Oil Leakage 18 Leakage rate (in %) COM DOM COM DOM COM DOM COM DOM COM DOM EU EUxUSA OECD EUxUSAxCHN OECDxCHN 15 / 19

16 Conclusions OPEC s ability to lower the coalition s CO 2 price and thus to shift over rents is reduced markedly when China becomes part of the abatement coalition due to lots of low-cost coal-related abatement options in China When only OPEC-core or Saudi Arabia act dominantly instead of OPEC as a whole, the respective economic effects resemble to a large extent the results for a fully competitive crude oil market setting A price linkage between the crude oil price and gas import prices and subsidies to domestic consumers in OPEC do not markedly change OPEC s supply decision when facing an EU climate policy 16 / 19

17 Böhringer, Christoph, Knut Einar Rosendahl, and Jan Schneider Unilateral Climate Policy: Can OPEC Resolve the Leakage Problem?. The Energy Journal, 35(4): , DOI: 17 / 19

18 Costs in the Core Setting 0.9 COM DOM Hicksian EV as % share of business-as-usual GDP Global EU OPEC ROW 18 / 19

19 Costs under different Climate Coalitions Hicksian EV as % share of business-as-usual GDP EU EUxUSA OECD EUxUSAxCHN OECDxCHN COM DOM COM DOM COM DOM COM DOM Global Coalition OPEC ROW 19 / 19