Comparative Analysis of Alternative Post-2012 Climate Policies and Ancillary Benefits for Ukraine: A General Equilibrium Approach

Abstract

The goal of this study is to evaluate alternative post-2012 carbon dioxide reduction targets for Ukraine. In order to assist national policymakers in the adoption of a feasible and effective policy, a special focus is made on the assessment of ancillary benefits associated with CO₂ reduction. These benefits are defined as health benefits due to a simultaneous reduction of energy-related NO_X, SO_X and TSP air pollutants. The methodology is based on a forward-looking dynamic multi-sectoral computable general equilibrium model of a Ramsey–Cass–Koopmans type. The model employs domestic emissions trading as an instrument for CO₂ reductions in the country. Model results show that CO₂ abatement corresponds to the national interests of Ukraine. First, an imposed cost on carbon stimulates energy efficiency. Second, it promotes structural changes in favour of the country’s least-energy intensive industries, supporting both mid-term and long-term strategies of the country’s development. Third, it results in a substantial reduction in the mortality and morbidity statistics from air pollution. The magnitude of these effects strongly depends on the stringency of CO₂ reduction.

The research leading to these results has received funding from the European Community’s Seventh Framework Programme FP7/2007–2013 under grant agreement no. PIIF-GA-2008-220852.

The author would like to thank Dr. Francesco Bosello (Fondazione Eni Enrico Mattei) for his comments and suggestions.