World Economic Implications of Kyoto mechanisms Contemplation of baseline emissions paths and a ceiling on emissions t

8. PRODUCTION STRUCTURE: The aggregate non-energy good (Y) is produced from labor, capital, and the composite energy, through a nested CES technology. A composite energy good is produced either from the conventional fossil fuels - oil, gas, and coal - through a nested CES technology (with an elasticity of interfuel substitution ?fuel ) or from a backstop source through a Leontief technology. Oil and gas are nested together and substitute with an elasticity of substitution twice as large as the elasticity between their aggregate and coal. The production of the energy good from either fossil fuel or the backstop fuel is further distinguished by the final user so there is an energy good produced for industry and another one produced for households. ESUB between 04 and 0.64 PRODUCTION STRUCTURE: The aggregate non-energy good (Y) is produced from labor, capital, and the composite energy, through a nested CES technology. A composite energy good is produced either from the conventional fossil fuels - oil, gas, and coal - through a nested CES technology (with an elasticity of interfuel substitution ?fuel ) or from a backstop source through a Leontief technology. Oil and gas are nested together and substitute with an elasticity of substitution twice as large as the elasticity between their aggregate and coal. The production of the energy good from either fossil fuel or the backstop fuel is further distinguished by the final user so there is an energy good produced for industry and another one produced for households. ESUB between 04 and 0.64

9. Final Demand Trade of the macro good with an Armington structure: Imports are imperfect substitutes for domestically produced goods. There is one representative agent in each region that demands a composite consumption good that is produced by combining the Armington good and the household energy aggregate good according to a CES configuration. ?end describes the elasticity of substitution between the composite macro good and the energy aggregate. Aggregate end-use energy is composed of oil, gas, and coal with an interfuel elasticity of substitution equal to one. The backstop fuel is a perfect substitute for the energy aggregate. Purchase of the good is financed from the value of the household's endowments of labor, capital, energy specific resources, and revenue from any carbon tax. Final Demand Trade of the macro good with an Armington structure: Imports are imperfect substitutes for domestically produced goods. There is one representative agent in each region that demands a composite consumption good that is produced by combining the Armington good and the household energy aggregate good according to a CES configuration. ?end describes the elasticity of substitution between the composite macro good and the energy aggregate. Aggregate end-use energy is composed of oil, gas, and coal with an interfuel elasticity of substitution equal to one. The backstop fuel is a perfect substitute for the energy aggregate. Purchase of the good is financed from the value of the household's endowments of labor, capital, energy specific resources, and revenue from any carbon tax.

15. Welfare losses to developed and developing countries because of energy demand reductions: energy price decreases and international spill over effects Productivity losses Higher emissions: higher welfare losses developing countries like China, LSA and SSA suffer in low Armington case because of lower substitution opportunities between imported and domestic goods Japan benefits both from low energy prices and low oil supply elasticities Low oil supply elasticities: MIDA suffer most Backstop cost: all regions suffer, MIDE most because depended from fuelsWelfare losses to developed and developing countries because of energy demand reductions: energy price decreases and international spill over effects Productivity losses Higher emissions: higher welfare losses developing countries like China, LSA and SSA suffer in low Armington case because of lower substitution opportunities between imported and domestic goods Japan benefits both from low energy prices and low oil supply elasticities Low oil supply elasticities: MIDA suffer most Backstop cost: all regions suffer, MIDE most because depended from fuels