Kyoto and technology at the European Union: costs of emission reduction under flexibility mechanisms and technology progress

This paper presents the analysis of the consequences of CO<SUB align="right"><SMALL>2</SMALL></SUB> emission reduction policies, as derived, in a European Union perspective, from the Kyoto Protocol for the 2010 horizon. The first section provides a thorough assessment, based on the PRIMES model results, of the marginal and total costs of compliance to the Kyoto Protocol for a "no trading" case and for two cases of emission trading, respectively at Annex B level and at world level. The second section deals with the importance of technical change both in the demand and the supply side for the achievement of the Kyoto emission reduction targets. Finally, the paper concludes with the key messages of the analysis.