Allocating CO2-Emissions by Using Equity Rules and Optimization

Abstract

In order to reduce the risks of a climate change, a major problem in developing an effective international policy, is the allocation of the responsibility for reducing greenhouse gas emissions among regions. The report presents two approaches to provide for the allocation problem of emission reductions of the most important greenhouse gas CO2. The first deals with a description of the emission debt concept. We use an equity rule by which all past and future dwellers on earth are permitted to emit an equal CO2 quotum per year. Furthermore, the level of the equal emission quotum is dependent on the policy related CO2-equivelant concentration targets. The regional emission debt is the amount of CO2, based on a equal share per capita, emitted in a region in the past exceeding the amount allowed. The resulting initial allocation of emission rights may be used as a start for a concept of tradable emission rights. In the second approach the allocation problem is formulated as an optimization problem. This contains an "optimal" trade off between rough estimates for cosial and economic consequences of reducing fossil CO2-emissions in order to meet policy targets, as expressed in a CO2-equivalent concentration level. The optimization algorithm developed is a first attempt in solving the optimization problem, where restictions are dependent on simulation runs with IMAGE (an Intergrated Model to Assess the Greenhouse Effect). The algorithm is used to find an allocation of regional fossil CO2-emissions in order to maximize welfare of future generations, givin a maximum allowable concentration level. Results of both approches indicate that if the world community is to accept constraints on CO-emissions, industrialized regions will have to take the main responsibility in reducing CO2-emissions either by reducing emissions in their own regions and in developing regions.