Consequences of ceilings on the use of Kyoto mechanisms. A tentative analysis of cost effects for EU member states

To safeguard that domestic actions will be taken to meet commitments, the Kyoto Protocol suggests that domestic action should be the main means for reaching the reduction commitments. Imposing ceilings on the purchase of emission reductions is one of the ways to limit the net use of Kyoto mechanisms. Several kinds of ceilings have been suggested. This analysis gives some insight into the cost consequences for EU Member States that result from different types of ceilings for Kyoto mechanisms. The impacts of ceilings can be very large but the precise impact is difficult to estimate due to uncertainties about the price of emission reductions and the price elasticity of the supply of emission reduction. Consequently, decisions on ceilings on the use of Kyoto mechanisms need to be taken with great care. 7 refs