CO2 intensity target, flexibility versus environmental effectiveness: the Chilean INDC case

At the 21st session of the Conference of the Parties (COP21) in Paris, among the 161 countries in attendance, Chile was one of seven to submit intensity-based emissions reduction commitments as part of its Intended Nationally Determined Contributions (INDCs). This paper aims at assessing the potential impacts of these intensity-based INDCs on the Chilean economy by 2030 using the computable general equilibrium model GEMINI-E3. We simulate 12 scenarios considering three scenarios of economic growth in Chile and four greenhouse gas intensity targets.

Sensitivity analysis shows that emissions intensity targets become less stringent when assuming high levels of economic growth. We also find that the choice of an intensity-based target may result in highly uncertain effective emissions in 2030. Only six of the simulated scenarios lead to emissions below the 2016 levels. The associated domestic CO2 taxes range from 75 to 279 US$ per ton with an estimated 2030 GDP loss for the Chilean economy of between 0.07% and 1.4%.