With the KO Framework Convention on Climate Change, greenhouse warm- ing moved t o a respectable position on the international environmental policy agenda. Despite the increasing number of studies, it is still not clear what the global costs of possible alternative international agreements would be and how these agreements might reshape energy production and consump- tion, much less overall economic development globally and in major world regions.
The debate is revolving around two main issues. Some model calcula- tions show little long-term effect on atmospheric GHG concentration from rush and aggressive emission reductions. Others argue that a t least t h e low or negative cost options for C 0 2 abatement should be utilized and initial price signals should be given t o markets and technological development about t h e possible need for more ambitious emission reductions in the future. The second major issue is still open despite a number of plausible explanations:
if studies identifying a negative tail of the cost curves are correct, why are these opportunities to save money and C 0 2 emissions not utilized.
Papers in this volume that report results about the potential economic losses associated with a large variety of policies currently proposed or under serious consideration by national or international organizations demonstrate the impressive development in the field of long-term, large-scale modeling of economy-energy interactions in recent years. A survey conducted a few years ago (Toth et al., 1989) could identify only a small number of models that had the necessary geographical coverage and detail, temporal scale and resolution, and economic and energy system disaggregation t o become useful tools in studies of various aspects of global environmental change. Despite t h e then small number of models, their results were difficult t o compare because they were based on different baseline assumptions and were driven by different exogenous conditions.
The situation is completely different today. Models are proliferating and there has been an increasing demand for their comparative appraisals from different perspectives and for different purposes and audiences. One would almost be tempted to conduct a review of the review studies covering those like, for example, by Nordhaus (1991a), the OECD Model Comparison Project (Dean, this volume; Dean and Hoeller, 1992; Hoeller et al., 1992), and IIASA7s International Energy Workshop (Manne et al., 1992).
Probably the best indicator of the development and usefulness of mod- eling projects is the activities of the 12th Energy Modeling Forum (EMF12) results of which are reported by Gaskins and Weyant (this volume). EMF12
brings together a large variety of energy-economic models into a common framework of analysis. Participating teams agreed t o run a set of standard- ized scenarios. This approach provided comparable results in the first place, but it is also helpful in understanding t o what extent differences in results are due t o incorporated or omitted relationships, underlying assumptions, or other reasons.
Despite the overall development in the modeling field, each model is de- veloped with a specific purpose and is intended t o investigate a specific range of issues. As a result, each model is better than the others along a specific set of criteria but usually a t the price of omitting important relationships.
Thus there is still plenty of room for improvements. A new global multi- sector and multi-regional general equilibrium model developed by McKibbin and Wilcoxen (this volume) is designed t o address the weakness of current models in dealing with the linkages between national environmental policies and international trade. It will certainly be worth including in the next round of an EMF-like effort.
There seems t o be a strongly held general belief about greenhouse miti- gation that if one world region acts alone, even if it is a large, economically powerful, and major emitter region, the global benefits of unilateral action will be negligible and the costs for that particular region will be high. Yet, there are contrasting views declaring that short-term and direct losses for the pioneering region will be handsomely compensated by long-term and indirect benefits accruing from being the first.
One of the few concrete G H G / C 0 2 emission mitigation proposals seri- ously considered in policy circles these days is that of the European Commu- nity t o stabilize its C 0 2 emissions by 2000 a t the 1990 level. The proposed policy instrument is a gradually phased-in combined carbon and energy tax.
Manne and Richels (1993) investigated the economic costs of this proposal and its impact on expected future C 0 2 emissions by using an appropriately modified version of their five-region global model Global 2100 (Manne and Richels 1992). Koopman et al. (this volume) address the same issue but they use a variety of models (which were developed for different purposes) and their own calculations under different scenarios of carbonlenergy t a x recycling and off-setting. One important general lesson is worth highlight- ing here. In the modified Global 2100 model, the EC region is probably the most homogeneous one except for the single-country regions of the USA and China. Yet, the Koopman et al. study documents the amazingly wide range of differences among EC member countries in economic development, macroeconomic structure and export composition, household expenditures, and carbon intensity of electricity generation. These differences are likely t o
be further enhanced by the admission of new applicants over the next few years and imply the necessity for yet another compensation/redistribution scheme among member countries under an EC-wide tax regime.
If there are major differences in economic structure, energy use, and re- lated carbon emissions among countries in a relatively homogeneous region like the EC, then the differences across world regions are even bigger. This suggests that a uniform reduction in C 0 2 emissions worldwide might not be the best solution for political and economic reasons. Therefore, many au- thors propose a global tradable C 0 2 emission permit scheme. Three papers analyze various aspects of such trading schemes and they all extend earlier frameworks of analysis by experimenting with innovative ideas. Edmonds et
al. (this volume) take a modified version of the Edmonds-Reilly-Barns model and investigate the costs of three alternative mechanisms of implementing a hypothetical international protocol: uniform taxes, tradable permits, and individual (regional) targets. Manne and Rutherford (this volume) combine carbon permit trading with oil and gas trade in yet another derivative of the Global 2100 model. The study by Okada and Yamaji (this volume) is based on an extended version of the IEA/ORAU model (Edmonds and Reilly 1985) and incorporates regional C 0 2 taxes and carbon fixation options with their associated costs into a global, interregional trade model of carbon emission rights.
Despite the already mentioned improvements in energy-economic model- ing, one persistent problem keeps bothering both economists and engineers.
This problem is the apparent, and in some cases astonishing, gap in C 0 2 abatement cost assessments between macroeconomic (dubbed top-down) and engineering-economic (bottom-up) models. Wene (this volume) offers his ex- planation from the systems engineer's view. Yet, the final word on this issue, if at all possible, seems t o be far away. This is an important research area in the future.
The last paper in Section 3 represents a transition between global and regional models. Matsuoka et al. (this volume) present a general GHG emis- sion and absorption model that also includes a simple climate model. The overall model is global with a specific focus on the most dynamic region of the world economy, the Asia-Pacific region. Their results are preliminary but the approach holds the promise of an improved understanding of the costs and benefits of global warming in this extremely diverse part of the world.