Industry-Level Emission Trading in the EU
growth from emission increase. The specific differences in economic development may
either reduce or enlarge the cross-country differences with respect to the effective
reduction requirement under the Kyoto Protocol. These differences are an important
determinant for the shifts in comparative advantage, which translate into secondary
burdens or benefits from carbon abatement via changes in international prices (terms-of-
trade effects).
To summarize, BaU projections have a major influence on the magnitude and distribution
of abatement costs and hence deserve careful analysis when real policy conclusions should
be drawn.
For the baseline parametrization of our model, we have harmonized most recent economic
and energy flow information from different sources. The first step has been the
construction of a consistent benchmark data set for the year 1995 using:
• GTAP4 McDougall, Elbehri, and Truong, 1998): GTAP currently includes input-
output tables for 50 sectors in 45 regions with bilateral trade flows for 1995.
• EUROSTAT (Beutel 1999): EUROSTAT provides input-output tables with 25 sectors
for all EU member countries in 1995.
• IEA energy balances and energy prices/taxes (IEA 1999): IEA reports physical energy
flows and energy prices for industrial and household demands in a time series
until1998.