Towards Assessing the Distributional Impacts of Meeting Kyoto Targets in Canada

By Amit Kanudia, Richard Loulou, Chantal Guertin on December 1, 2003
Lower-income groups spend a bigger share of their budgets on energy expenses than higher-income groups do and are therefore more responsive to changes in energy prices. As a result, lower-income groups are more likely to bear a greater impact of increased energy prices, such as the ones resulting from meeting targets of the Kyoto Protocol. However, such assessment has not yet been performed within an energy modelling framework. MARKAL-Equity was developed to achieve this. When trying to meet Kyoto targets, Canadian data show that all income groups will see a reduction in demand for energy services. However, the reduction of energy consumption is not straightforward. Some groups, specifically the middle-income group, will choose less efficient technologies, such as wood stoves, over time. Results show that the low-income group, although it reacts to the new emission constraints by demanding less energy service, does not fundamentally change its technology, and thus its fuel consumption pattern, as do other income groups. This tends to show that the low-income group does not have the ability to cope as well as other income groups. Transitional policies should therefore be aimed at the low-income households to help them cope with energy policies that will curb emissions to reach the Kyoto targets. Although this first model of MARKAL-Equity could still be enhanced, this study shows the importance of taking into account specific income group behaviours and responses to energy policies. The MARKAL-EQUITY program is part of the TERI-Canada Energy Efficiency Project undertaken with our partner, The Energy and Resources Institute (TERI) in India.

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IISD, 2003