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EMF OP 55: Energy Security and Global Climate Change Mitigation

Industrialized countries may reducetheir costs of meeting carbon constraints if they penalize fuels notonly on the basis of their carbon intensity, but also on the basis oftheir import-export status. Simulations of these policies show thatparticipating industrialized countries can reduce their costs and henceincrease their willingness to participate. However, they will imposehigher costs on the world, because the most carbon intensive fuels willnot be taxed the most heavily. Such a bias creates a “how” inefficiencyin addition to the “where” and “when” efficiency created by currentinternational agreements to control greenhouse gas emissions. Althoughcountries have always had such incentives, these considerations must bemore fully acknowledged in today’s energy markets, after September2001.