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Challenges of International Climate Policy

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Challenges of International Climate Policy Prof. Dr. Ottmar Edenhofer Challenges of International Climate Policy Universität Graz, 7. Juni 2010 Projections of Global Mean Temperature Different Scenarios IPCC 2007 2 Tipping Points in the Earth System T. M. Lenton & H. J. Schellnhuber (Nature Reports Climate Change, 2007) 3 Burning Embers Year 2100 range (IPCC 2007) Potential policy-relevant tipping elements that could be triggered by global warming this century, with shading indicating their uncertain thresholds. For each threshold, the transition from white to yellow indicates a lower bound on its proximity, and the transition from yellow to red, an upper bound. The degree of uncertainty is represented by the spread of the colour transition. T. M. Lenton & H. J. Schellnhuber (Nature Reports Climate Change, 2007) World Map of Wealth Capital stock per person very low high low very high medium Source: Füssel (2007) 5 World Map of Carbon Debt Carbon emissions per person from fossil fuel burning (1950-2003) very low high low very high medium Source: Füssel (2007) 6 Carbon Dept and Wealth 4 10 United States Germany Russia France Japan 3 South Africa 10 Mexico China (kg C per person and year) and person per C (kg Egypt Brazil 2 India 10 emissions 2 Bangladesh 1 10 P: Fossil CO Fossil P: Ethiopia Fitting line: ln P=0.987 ln K+c 3 4 5 10 10 10 K: Capital stock (US$2000 per person) Source: Füssel (2007) 7 What is the Optimal Level of Mitigation? Economist’s perspective: mitigation damages costs [$] T [°C] 0 5 8 Different Perspectives “fatalist” costs [$] CBA costs [$] 0 5 T [°C] 05T [°C] “environmentalist” costs [$] costs [$] “sceptic” 05T [°C] 05T [°C] 9 Driving Forces Per Capita Energy Carbon CO2 Population Production Intensity Intensity Released Pop GDP / Pop E / GDP CO2 / E CO2(A)/CO2 Carbon Cycle Ocean CO2 Acidification Emissions Impacts Other GHG Radiative Climate Emissions Forcing Change 10 Assessing the Solution Space Life-Style Change Non-Fossil CO2 Capture Technologies Energy at Plant (CCS) Per Capita Energy Carbon CO2 Population Production Intensity Intensity Released Pop GDP / Pop E / GDP CO2 / E CO2(A)/CO2 Carbon Cycle Ocean CO2 Acidification Emissions Carbon Impacts Management Other GHG Radiative Climate Emissions Forcing Change Adaptation Agricultural Radiation Practices etc. Management 11 Assessing the Solution Space Life-Style Change Non-Fossil CO2 Capture Technologies Energy at Plant (CCS) Per Capita Energy Carbon CO2 Population Production Intensity Intensity Released Pop GDP / Pop E / GDP CO2 / E CO2(A)/CO2 Carbon Cycle Ocean CO2 Acidification Emissions Carbon Impacts Management Other GHG Radiative Climate Emissions Forcing Change Adaptation Agricultural Radiation Practices etc. Management 2º/ 3º/ 4º Policies 12 The Economics of Atmospheric Stabilisation 3 stabilisation targets with different probabilities to reach the 2° target: 550ppm-eq, 450ppm-eq, 400ppm-eq Energy-related CO2 emissions Baseline 550ppm-eq 450ppm-eq 400ppm-eq Negative emissions ~15% prob. ~50% prob. ~75% prob. Year Knopf, Edenhofer et al. (2009) 13 The Great Transformation REMIND-R, ADAM 450ppm-eq, 4/6/2009, Steckel/Knopf Negative CO2 emissions CO Primary Consumption Energy [EJ] 2 emissions Based on IEA Data (1971-2005) and REMIND-R results for 450ppm-eq (ADAM); Graphic by Steckel/Knopf (PIK) 14 Discounting and Technological Change Pure Time Preference Rate 3% Pure Time Preference Rate 1% REMIND-R, ADAM 450ppm-eq, Steckel/Knopf 4/6/2009, 450ppm-eq, ADAM REMIND-R, REMIND-R, ADAM 450ppm-eq, Steckel/Knopf 4/6/2009, 450ppm-eq, ADAM REMIND-R, Primary Consumption Energy [EJ] Based on IEA Data (1971-2005) and REMIND results for 450ppm-eq (ADAM); Graphic by Steckel/Knopf 15 There is more than one path towards a carbon-free economy MERGE TIMER POLES REMIND E3MG baseline 550 ppm 400 ppm Knopf, Edenhofer et al. (2009) 16 There is more than one path towards a carbon-free economy MERGE TIMER POLES REMIND E3MG Baseline 550 ppm 400 ppm 400ppm can be achieved by all models Different possibilities to reach low stabilisation 17 Knopf, Edenhofer et al. (2009) Source: IMF International Commodities Database 18 Renaissance of Coal 19 Carbonization Pathways India USA China Europe 20 Mitigation Costs: Technology Options, 550ppm high biomass potential with all options no nuclear beyond baseline 550ppm-eq low biomass potential no CCS no renewables beyond baseline Knopf, Edenhofer et al. (2009) Renewables and CCS are the most important options Ranking of options: Robust picture throughout all models 21 Technology Options for Low Stabilisation high biomass potential with all options no nuclear beyond baseline low biomass potential no CCS no renewables beyond baseline 550ppm-eq 400ppm-eq xx xx xxx Knopf, Edenhofer et al. (2009) 22 Technology Options for Low Stabilisation high biomass potential with all options no nuclear beyond baseline low biomass potential no CCS no renewables beyond baseline 550ppm-eq 400ppm-eq xx xx xxx Knopf, Edenhofer et al. (2009) 400 ppm neither achievable without CCS nor without an extension of renewables Biomass potential dominates the mitigation costs of low stabilisation Nuclear is not important beyond its (high) use in the baseline 23 Science: Scope of options “Policy relevant but not policy prescriptive“ Goal-setting by politics Science 1,5°C Target 2°C Target Data such as impacts from excessive use of biomass or geoengineering 24 Consideration of unintended side-effects International Environmental Agreements • In many cases global climate policy implicitly assumes full international cooperation • In reality: lack of a global authority instead: international environmental agreements (IEA) • Participation is low whenever IEA (Barrett 1994) actually achieve something Bali 2007 25 Public Good Provision as a Prisoners’ Dilemma • Provision of a global Public Good: Player 2 • (Same) benefits for everyone, Abate Pollute say e.g. 5 (per contributing party!) • (Same) costs to contribute, 3 5 say e.g. 7 6 Abate 3 -2 • Game Structure of the Prisoners’ Dilemma: Player 1 -2 0 • Individual rationality for players to act selfishly Pollute 5 0 Incentive to free-ride Suboptimal outcome • If abating global warming resembles a Public Good, then climate negotiations will face a Prisoners’ Dilemma Co-Benefits – An Assurance Game? Attempt to create focal point on Player 2 Social Optimum: Abate Pollute ‘Co-Benefits of mitigation so high that unilateral abatement 9 8 pays, irrespective of others’ decision’ Abate 9 5 A mere issue of proper perception Player 1 5 2 Pollute 8 2 Co-Benefits matter, but really large enough to resolve PD automatically? Nash Equilibrium and Social Optimum coincide The Hartwell-Paper argues that climate policy should be an indirect outcome of achieving Co- Benefits Public Good Provision as a Prisoners’ Dilemma Assurance Game Chicken Game Prisoners‘ Dilemma Player 2 Player 2 Player 2 Abate Pollute Abate Pollute Abate Pollute 9 8 3 5 3 5 6 Abate Abate 9 5 Abate 3 -2 3 -2 Player 1 Player 1 5 2 Player 1 -2 -4 -2 0 Pollute Pollute Pollute 8 2 5 -4 5 0 • Carraro: Prisoners’ Dilemma (PD) –IEA→ Chicken Game (CG) • Chicken Game shows partially cooperative behaviour The Challenge • Can a clever design of environmental agreements achieve higher participation? • Possibilities: – Promoting growth policy and new technologies – Trade restrictions – Permit trade with non- members of the agreement 29 Limiting and Trading of CO2 Effectiveness – Efficiency – Equity Climate-friendly Technologies Global Deal Avoided Deforestation Adaptation Development Policy 30 Limiting and Trading of CO2 Effectiveness – Efficiency – Equity Climate-friendly Technologies Global Deal Avoided Deforestation Adaptation Development Policy 31 The Supply-side of Global Warming Gas Oil Coal Biomass + CCS 2000 558 56 210 16 198 154 107 111 154 0 106 132 139 77 553 230 258 Carbon stocks (GtC) Carbon 1581 11372 I n t h e g r o u n d I n t h e a t m o s p h e r e 2000 Conventional reserves Unconventional reserves Conventional resources Unconventional resources Cumulative historic use Projected use (400ppm) Coal+CCS (400ppm) Biomass+CCS (400ppm) Additional projected use (BAU) Cumulative historic carbon consumption (1750-2004), estimated carbon stocks in the ground, and estimated future consumption (2005-2100) for business-as-usual (BAU) and ambitious 400-ppm-CO2-eq. scenario Source: Kalkuhl, Edenhofer and Lessmann, 2009 32 Lessons from the “Green Paradox” • Increasing resource taxes change time path of net resource price – time-path of extraction is changed – Pigouvian taxes on emissions work similar to resource taxes P Resource price R Resource extraction Increasing tax Increasing tax (Green Paradox) (Green Paradox) Optimal Optimal Accelerated Time extraction ! Time 33 Lessons from the “Green Paradox“ Emissions trading scheme (ETS): Resource Extraction > 12.000 GtC • Determines aggregated extraction path • But leaves flexibility to resource owners: • What-flexibility: Coal, oil, gas, conventional/unconventional • When-flexibility: If intertemporal flexibilty is Atmosphere as a implemented limited Ressource ~ 230 Gt CO2 How to determine caps? How to organize intertemporal permit trade? What happens to the resource rents? ... needs to be explored 34 Regional Mitigation Costs: Winners and Losers 6 4 2 0 -2 Consumption losses [%] -4 -6 Global USA Japan EU27 Russia C&C per GDP Middle East per capita Latin America Other Asia China India Africa Edenhofer et al., 2009 Rest of the World REMIND-R, Version 11/09, 2K, Brigitte Knopf 35 Domestic Cap and Trade: Linking Emerging CO2-Markets Canada ETS US ETS Max 740 Mt CO eq
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