Final Report Summary - CGEUKR (Regulation of air pollution and economic growth in Ukraine: general equilibrium approach)
The project aimed at providing the integrated assessment of trends in economic growth and air pollution in Ukraine, as well as health effects of air pollution and economic implications of carbon reduction policies both on the country and international levels.
The major CGEUKR achievements were:
1. the construction of a forward looking dynamic general equilibrium model of Ukrainian economy
2. the development of a bottom-up sub-model of the electricity sector, which was linked to a top-down recursive dynamic general equilibrium model. This hybrid model was employed to evaluate the alternative post 2012 CO2 reduction targets for Ukraine.
3. the completion of a multi-country dynamic recursive general equilibrium model, with equations that connected discharges of air pollutants with sectors' outputs and consumption of fossil fuels.
4. the provision of full assessment of health effects of NOX, CO, NMVOC, PM2.5 and PM10 air pollutants and mitigation policies for Ukraine and the European Union.
Furthermore, the project had the following principal results:
1. the economic cost of mitigation policies in Ukraine was estimated as moderate until 2020, with a maximum 3 % decline of gross domestic product (GDP) relative to the baseline. In addition, they fostered growth of least energy intensive industries and provided non negligible health improvement, which could result in up to 40 % reduction in human mortality and morbidity in 2020 in comparison to the baseline.
2. the economic costs could be even lower in case adopting a bottom-up perspective. By better capturing substitution possibilities from high to low carbon production options the cost for Ukraine would drop to 2 % of GDP in 2020 as compared to the baseline.
3. within a 'low Copenhagen pledge' framework, international cooperation could greatly reduce Annex I and II mitigation costs, resulting in 0.1 % to 0.3 % losses of global GDP per capita in 2020 relative to the baseline. Moreover, the creation of joint European Union, Russia and Ukraine emissions' market was likely to bring substantial benefits both for the European Union and former Soviet Union (FSU) countries, thus lowering the marginal abatement cost by a factor of two comparing with the scenario of the domestic European Union emissions' reduction. Finally, ancillary benefits on health were assessed, resulting in an estimated decrease of 3 % in mortality in 2020 in comparison to the baseline.
This exercise was of high policy relevance. It firstly provided concrete estimation of costs and benefits of mitigation policies in Ukraine. These results were indeed delivered and discussed by high level officials of the Ukrainian Ministry of Environmental Protection. Moreover, the results and conclusions of the project could be used on climate change negotiations in order to convince the FSU countries to adopt tighter emission targets.
Secondly, by analysing the same problem, i.e. the cost of mitigation, under the two different perspectives, the project provided interesting insights on the strengths and weaknesses of top-down and bottom-up methodologies that could offer guidelines for future research.
Thirdly, CGEUKR produced an up to date database of non-CO2 air pollutants linked to sectoral output and fuel consumption that could serve as a backbone tool for environmental impacts assessment and policy analysis that would be applicable in a broader context.
The major CGEUKR achievements were:
1. the construction of a forward looking dynamic general equilibrium model of Ukrainian economy
2. the development of a bottom-up sub-model of the electricity sector, which was linked to a top-down recursive dynamic general equilibrium model. This hybrid model was employed to evaluate the alternative post 2012 CO2 reduction targets for Ukraine.
3. the completion of a multi-country dynamic recursive general equilibrium model, with equations that connected discharges of air pollutants with sectors' outputs and consumption of fossil fuels.
4. the provision of full assessment of health effects of NOX, CO, NMVOC, PM2.5 and PM10 air pollutants and mitigation policies for Ukraine and the European Union.
Furthermore, the project had the following principal results:
1. the economic cost of mitigation policies in Ukraine was estimated as moderate until 2020, with a maximum 3 % decline of gross domestic product (GDP) relative to the baseline. In addition, they fostered growth of least energy intensive industries and provided non negligible health improvement, which could result in up to 40 % reduction in human mortality and morbidity in 2020 in comparison to the baseline.
2. the economic costs could be even lower in case adopting a bottom-up perspective. By better capturing substitution possibilities from high to low carbon production options the cost for Ukraine would drop to 2 % of GDP in 2020 as compared to the baseline.
3. within a 'low Copenhagen pledge' framework, international cooperation could greatly reduce Annex I and II mitigation costs, resulting in 0.1 % to 0.3 % losses of global GDP per capita in 2020 relative to the baseline. Moreover, the creation of joint European Union, Russia and Ukraine emissions' market was likely to bring substantial benefits both for the European Union and former Soviet Union (FSU) countries, thus lowering the marginal abatement cost by a factor of two comparing with the scenario of the domestic European Union emissions' reduction. Finally, ancillary benefits on health were assessed, resulting in an estimated decrease of 3 % in mortality in 2020 in comparison to the baseline.
This exercise was of high policy relevance. It firstly provided concrete estimation of costs and benefits of mitigation policies in Ukraine. These results were indeed delivered and discussed by high level officials of the Ukrainian Ministry of Environmental Protection. Moreover, the results and conclusions of the project could be used on climate change negotiations in order to convince the FSU countries to adopt tighter emission targets.
Secondly, by analysing the same problem, i.e. the cost of mitigation, under the two different perspectives, the project provided interesting insights on the strengths and weaknesses of top-down and bottom-up methodologies that could offer guidelines for future research.
Thirdly, CGEUKR produced an up to date database of non-CO2 air pollutants linked to sectoral output and fuel consumption that could serve as a backbone tool for environmental impacts assessment and policy analysis that would be applicable in a broader context.