Revisiting the case for intensity targets: Better incentives and less uncertainty for developing countries

TitleRevisiting the case for intensity targets: Better incentives and less uncertainty for developing countries
Publication TypeJournal Article
Year of Publication2010
AuthorsMarschinski, R, Edenhofer O
JournalEnergy Policy
Volume38
Issue9
Pagination5048-5058
ISBN Number0301-4215
Abstract

In the debate on post-Kyoto global climate policy, intensity targets, which set a maximum amount of emissions per GDP, figure as prominent alternative to Kyoto-style absolute emission targets, especially for developing countries. This paper re-examines the case for intensity targets by critically assessing several of its properties, namely (i) reduction of cost-uncertainty, (ii) reduction of 'hot air', (iii) compatibility with international emissions trading, (iv) incentive to decouple carbon emissions and economic output (decarbonization), and, (v) use as a substitute for banking/borrowing. Relying on simple analytical models, it is shown that the effect on cost-uncertainty is ambiguous and depends on parameter values, and that the same holds for the risk of 'hot air'; that the intensity target distorts international emissions trading; that despite potential asymmetries in the choice of abatement technology between absolute and intensity target, the incentive for a lasting transformation of the energy system is not necessarily stronger under the latter; and, finally, that only a well-working intensity target could substitute banking/borrowing to some extent but also vice versa. Overall, the results suggest that due to the increased complexity and the potentially only modest benefits of an intensity target, absolute targets remain a robust choice for a cautious policy maker. (C) 2010 Elsevier Ltd. All rights reserved.

DOI10.1016/j.enpol.2010.04.033