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Kyoto Protocol and Beyond: The Economic Cost to Germany

International Council for Capital Formation
October 18, 2005


The ratification and implementation of the Kyoto Protocol has been shown to have an impact on the Germany’s energy sector. Germany made a commitment to phase out its nuclear generating capacity by 2020. Under the assumption that Germany does retire its nuclear capacity as proposed, the economic implications of the proposed policies to limit CO2 emissions would be even more severe.

The reduction in emissions from domestic actions would not be sufficient to meet their commitment during 2008-2012 period, and the shares of reduction from domestic actions against their targets in longer term would become significantly smaller than those with continuing nuclear operations.

Germany would need to purchase credits on the international market and economic performance would deteriorate significantly. In 2010, the impact on real GDP would be 0.9% with 342,000 jobs lost. If Case 1 has to be achieved, GDP would fall 1.6% below the base case and there would be 627,000 fewer jobs in 2025. Under Case 2, GDP would fall 1.9% below the base case and there would be 744,000 fewer jobs in 2025.

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