The role of technological availability for the distributive impacts of climate change mitigation policy Michael L ¨ uken n , Ottmar Edenhofer, Brigitte Knopf, Marian Leimbach, Gunnar Luderer, Nico Bauer Potsdam Institute for Climate Impact Research (PIK), Research Domain Sustainable Solutions, PO Box 60 12 03, 14412 Potsdam, Germany article info Article history: Received 13 December 2010 Accepted 1 July 2011 Available online 19 August 2011 Keywords: Climate policy Welfare redistribution Energy–economy–environment model abstract The impacts of the availability of low-carbon technologies on the regional distribution of mitigation costs are analyzed in a global multi-regional integrated assessment model. Three effects on regional consumption losses are distinguished: domestic measures, trade of fossil energy carriers and trade of emission permits. Key results are: (i) GDP losses and a redirection of investments in the energy system towards capital-intensive technologies are major contributions to regional consumption losses. (ii) A devaluation of tradable fossil energy endowments contributes largely to the mitigation costs of fossil fuel exporters. (iii) In case of reduced availability of low-carbon technologies, the permit market volume and associated monetary redistributions increase. The results suggest that the availability of a broad portfolio of low-carbon technologies could facilitate negotiations on the permit allocation scheme in a global cap-and-trade system. & 2011 Elsevier Ltd. All rights reserved. 1. Introduction Ambitious climate change mitigation policy leads to welfare redistribution among world regions. Several reasons to explain differing regional mitigation costs have been identified in the literature, especially region-specific abatement costs that depend on assumptions on the availability of low-carbon technologies (den Elzen et al., 2008; Luderer et al., 2009), regional endowments with fossil energy carriers (den Elzen et al., 2008; Leimbach et al., 2010a) and specifications of the climate regime, such as different climate targets (Clarke et al., 2009; Edenhofer et al., 2010) or the interna- tional burden sharing (den Elzen and Lucas, 2005; Rose et al., 1998). However, the effort to separate and quantify the main effects that determine the distribution of regional mitigation costs in a compre- hensive framework to our knowledge has not yet been undertaken in the literature. This paper aims to fill this gap. The availability of a broad portfolio of low-carbon technologies has been identified as a key influencing factor for reducing mitigation costs on a global scale. Bauer et al. (2009b), Edenhofer et al. (2010) and Weyant (2004) show that restrictions on the deployment of low-carbon technologies lead to higher costs. Several studies emphasize a differentiated impact on the mitigation costs of world regions (Bosetti et al., 2009; Crassous et al., 2006; den Elzen et al., 2008; Leimbach et al., 2010b; Luderer et al., 2009; Richels and Blanford, 2008). Edenhofer et al. (2006), Manne and Richels (2004) and Kypreos (2005) point out that technological learning contributes largely to the efficient applica- tion of innovative low-carbon technologies under climate policy. Special attention has recently been paid to mechanisms that arise from interactions among world regions, especially the trade with energy carriers. Due to the redirection of investments towards low- carbon technologies, the global demand for fossil energy carriers decreases, resulting in a devaluation of fossil energy endowments. This is proposed as an explanation for relatively high con- sumption losses for major exporters of fossil fuels (den Elzen et al., 2008; Luderer et al., 2009; Leimbach et al., 2010a,b). Another strand of literature analyzes the impact of different climate policy regimes on mitigation cost and concludes that more stringent climate targets lead to higher mitigation costs on a global level (Clarke et al., 2009), which affects world regions differently (Bosetti et al., 2009; Crassous et al., 2006; Edenhofer et al., 2010; den Elzen and H ¨ ohne, 2010). A delay of climate policy increases global costs (Clarke et al., 2009), but has also a differentiated impact on regional costs according to Luderer et al. (2009). The burden sharing regime constitutes a further key factor on regional mitigation costs: in a global cap-and-trade system, emission permits are allocated to regions based on the outcome of negotiations (‘initial allocation’) and can be traded to reconcile supply and demand of permits among regions, thereby creating extra regional costs or revenues (den Elzen and Lucas, 2005; Leimbach et al., 2010a; Rose et al., 1998). As the contributions to regional mitigation costs are either related to trade or to domestic actions within each world region, they can be grouped as follows: The domestic effect covers the reaction of regional energy systems and macroeconomies to climate policy apart from Contents lists available at ScienceDirect journal homepage: www.elsevier.com/locate/enpol Energy Policy 0301-4215/$ - see front matter & 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2011.07.002 n Corresponding author. Tel.: þ49 178 8588126. E-mail address: bmlueken@web.de (M. L ¨ uken). Energy Policy 39 (2011) 6030–6039