Assessing the impacts of the Kyoto Protocol Impacts of Kyoto mechanisms on economic outcomes

ABARE project 1748 Greenhouse gas emission abatement targets agreed to by individual countries are set out in Annex B to the Kyoto Protocol. The protocol includes provision for the use of mechanisms such as emissions trading, the clean development mechanism and joint implementation to help parties meet their target commit- ments. Implementation of the Kyoto Protocol would have significant global economic implications. In this paper the economic impacts of the Kyoto Protocol are examined, with an emphasis on the importance of emissions trading in reducing abatement costs. Lower economic costs, in turn, reduce the impacts on global energy markets. The potential for the clean development mechanism to further decrease the costs of meeting abatement commitments is examined.