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 “Policy relevant but not policy prescriptive“
Science: Scope of options Science Goal-setting by politics
Data 1,5°C Target 2°C Target
such as impacts from excessive use of biomass or geoengineering
Co of nside unint rat end ion ed si de-ef fects
24 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 Player 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 Global Deal
Effectiveness – Efficiency – Equity 2 Adaptation Limiting and Technologies Trading of CO Climate-friendly Development Policy Avoided Deforestation
30 Global Deal
Effectiveness – Efficiency – Equity 22 Adaptation Limiting and Limiting and Technologies Trading of COTrading of CO Climate-friendly Development Policy Avoided Deforestation
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 C&C per GDP 4 per capita
2
0
-2
Consumption losses [%] -4
-6 Knopf Brigitte 2K, 11/09, Version REMIND-R, l a ia ia ast ic s rica orld USA ussia E hina Ind Globa Japan EU27 R C Af W Amer ther A n O Middle f the Lati t o Res
Edenhofer et al., 2009
35 Domestic Cap and Trade: Linking Emerging CO2-Markets
Canada ETS US ETS Max 740 Mt CO eq Max 7.000Mt CO eq 2 2 Start: 2010? Start: ? Swiss ETS Japan ETS
WCI ETS 3Mt CO2 Max 1.400Mt CO2eq 800+Mt CO2eq Started: 2008 Start: ? Start: 2012
Midwestern GHG RGGI ETS EU ETS South Korea Tokyo ETS 170 Mt CO Max 590Mt CO eq Max 55Mt CO Accord 2 2.000Mt CO2 2 2 Started: 2009 Start: 2013? Start: 2010 ? Mt CO2eq Started: 2005 Start: ? Mexico ETS
Max 640 Mt CO2eq Start: 2012? Australia ETS
Max 560Mt CO2eq Start: 2011?
NZ ETS
98 Mt CO2eq Start: ? “The European Commission is preparing to call on the United States to create a trans-Atlantic system of carbon trading” rd 36 Source: Flachsland (2009) - Herald Tribune, Friday, January 23 , 2009 The Value of Early Action (REMIND)
• Delay of mitigation action until 2020 will increase global costs by 70%
• Stabilisation at 450 ppm CO2 is not feasible when delaying action until 2030
ANNEX I, CHN, IND 2010
Source: RECIPE 2009 37 Global Deal
Effectiveness – Efficiency – Equity 2 Adaptation Limiting and Technologies Technologies Trading of CO Climate-friendly Climate-friendly Development Policy Avoided Deforestation
38 R&D-Investment in Energy Technologies
39 Source: Updated version of IPCC (2007), AR4 Global Deal
Effectiveness – Efficiency – Equity 2 Adaptation Limiting and Technologies Trading of CO Climate-friendly Development Policy Avoided Deforestation Avoided Deforestation
40 Source: IMF; FAO International Commodity Prices
41 Source: BP Statistical Energy Review; WRI Reducing Deforestation: Fossil vs. LUCF CO2 Emissions
CO2 emissions per person and year, 1950 - 2003
CO2 emissions from fossil fuel combustion and cement production, and including land use change (kg C per person and year from 1950 - 2003) -1000 - 0 1000 - 2000 Emissions per year from fossil fuel combustion and cement production 0 - 100 2000 - 5000 Ratio 100 - 1000 5000 - 15000 Emissions per year from land use change 43 Global Deal
Effectiveness – Efficiency – Equity 2 AdaptationAdaptation Limiting and Technologies Trading of CO Climate-friendly Development Policy Avoided Deforestation
44 Mitigation and Adaptation
45 45 Global Deal
Effectiveness – Efficiency – Equity 2 Adaptation Limiting and Technologies Trading of CO Climate-friendly Development Policy Development Policy Avoided Deforestation
46 Climate and socio-economic development
Japan
Germany UNFCCC Annex II Annex I w/o Annex II Temperature (°C) Other developing countries Least developed countries
Precipitation (mm/year, log-scaled)
47 Change in Agricultural Production
Climate-induced changes in agricultural production between 1990 and 2050 48 Füssel et al., 2010 Flood Risk by Sea Level Rise
Increase of population share threatend by sea level rise on an annual basis
49 Füssel et al., 2010 Global Deal
Effectiveness – Efficiency – Equity 2 Adaptation Limiting and Technologies Trading of CO Climate-friendly Development Policy Avoided Deforestation
50