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Towards a Global Deal on Climate Change
Nicholas Stern
Singapore, April 2008
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Part One
Risks and Targets
2
Projected impacts of climate change
0°C
Food
Water
Global temperature change (relative to pre-industrial)
1°C
2°C
3°C
4°C
5°C
Falling crop yields in many areas, particularly
developing regions
Falling yields in many
Possible rising yields in
developed regions
some high latitude regions
Small mountain glaciers
disappear – water
supplies threatened in
several areas
Significant decreases in water
availability in many areas, including
Mediterranean and Southern Africa
Sea level rise
threatens major cities
Ecosystems
Extensive Damage
to Coral Reefs
Rising number of species face extinction
Extreme
Rising intensity of storms, forest fires, droughts, flooding and heat waves
Weather
Events
Risk of Abrupt and
Increasing risk of dangerous feedbacks and
Major Irreversible
abrupt, large-scale shifts in the climate system
Changes
3
‘Probabilities’ (in %) of exceeding a
temperature increase at equilibrium
Stabilisation level
(in ppm CO2e)
2°C
3°C
4°C
5°C
6°C
7°C
450
78
18
3
1
0
0
500
96
44
11
3
1
0
550
99
69
24
7
2
1
650
100
94
58
24
9
4
750
100
99
82
47
22
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Source: Hadley Centre: From Murphy et al. 2004
•Monte Carlo estimates from Hadley Centre
•Model ‘fairly cautious’
•Those who argue e.g. for stabilisation levels of 650ppm CO2e and above are
accepting very big risks of a transformation of the planet
•Figures similar to IPCC AR4 (no probabilities in TAR)
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Structure of argument on mitigation
objectives (I)
• Risk of going above 5°C increase are very severe: e.g.
would induce massive movements of population
• On basis of implied probabilities of temperature increase,
dangerous to go beyond 550ppm CO2e
• Stabilisation to 550 or 500ppm CO2e ‛buys’ sharp
reduction in probabilities of dangerous temperature
increases relative to BAU
• Cuts of 30-50% by 2050 required for target of
stabilisation range 550- 500ppm CO2e
• Cost of action to get in range looks acceptable relative to
reduction of risks and damages avoided
5
Structure of argument on mitigation
objectives (II)
• Whilst considerations of risk steer quantity targets (i.e.
cuts), efficiency requires use of market mechanism to
keep down costs
• These cuts would need a carbon price of $30 plus per
tonne of CO2e; thus we have a “take” on marginal
abatement costs
• This is in range of marginal social cost (MSC), for paths
associated with 500-550ppm CO2e but MSC is very
sensitive to ethical and structural assumptions
• Equity demands that rich countries take much bigger
targets for cuts than poor. Trading can then provide flow
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of finance to developing countries
Part Two
Flows, Costs and Stern Review
One Year On
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Delaying mitigation is dangerous and
costly
100
450ppm CO2e
Global Emissions (GtCO2e)
90
500ppm CO2e (falling to
450ppm CO2e in 2150)
80
70
550ppm CO2e
60
50
Business as Usual
40
50GtCO2e
30
65GtCO2e
20
70GtCO2e
10
0
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
2100
Source: Stern Review
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Cost estimates
• Review examined results from bottom-up (Ch 9) & top-down
(Ch 10) studies: concluded that world could stabilise below
550ppm CO2e for around 1% of global GDP
• Subsequent analyses Edenhofer/IPCC top-down have
indicated lower figures
• So too have bottom-up IEA and McKinsey
• Starting planning now with clear targets and good policies
allows measured action and keeps costs down. Delayed
decisions/actions (or “slow ramp”), lack of clarity, bad policy
will increase costs
• Associated co-benefits (energy security, reduced pollution)
and opportunities (innovations, new markets)
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Reflections on damages in Stern
Review analysis after one year
• Emphasis on risk avoidance rather than formal modelling
well-founded
• Modelling without making risk central misses the point –
both ethics and risk crucial
• Probably under-estimated emission growth (growth of
emissions from China and India particularly)
• Probably under-estimated risks of high-temperatures
(omitted features in climate science modelling) and
damages from high temperatures (implausible ‛overly
linear’ extrapolations)
• Thus magnitude of avoided damages under-estimated10
Part Three
Emissions and Technologies
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Reducing emissions requires action
across many sectors
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Where energy emissions are headed
• Garnaut. Emissions will greatly exceed the highest of the
SRES scenarios if current trends continue
• IEA. Reference scenario: energy emissions increase by
57% between 2005 and 2030
– Coal now bigger source than oil
– China and India account for more than half of increase
– China’s emissions 2-3 times as high as India’s; both
more than double by 2030
• Country ‘responsibility’ a difficult concept – consumers
round the world demand products
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Oil/coal running out?
• Years of production left in ground with proven reserves
and current consumption leaves
Oil
: 45 years
Gas
: 72 years
Coal
: 252 years
• These reserves are enough to take GHG concentrations to
very dangerous levels: e.g. if used all the coal it might add
around 400ppm to concentrations
• Have to find alternatives this century in any case – better to
do it sooner rather than later
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Many options: policy matters and prices
crucial
2030
Cost of abatement
EUR/tCO2e
40
30
20
10
0
-10 0
-20
-30
-40
-50
-60
-70
-80
-90
-100
-110
-120
-130
-140
-150
-160
Smart transit
Small hydro
Industrial non-CO2
Airplane efficiency
Stand-by losses
1
2
3
4
5
Industrial
feedstock substitution
Forestation
Livestock/
Wind;
CCS EOR;
soils
low
New coal
Solar
Forestation
pen.
Nuclear
6
7
8
9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Cellulose Industrial
ethanol non-CO2
Sugarcane
biofuel
Fuel efficient vehicles
Water heating
Soil
CCS;
coal
retrofit
Avoid
Coal-todeforestation
gas shift
WasteAsia
Co-firing
biomass
CCS;
new coal
Avoided
deforestation
America
Industrial motor
systems
Industrial
CCS
Abatement
GtCO2e/year
Air Conditioning
Lighting systems
Fuel efficient
commercial
vehicles
• ~27 Gton CO2e below 40 EUR/ton (-46% vs.
BAU)
• ~7 Gton of negative and zero cost opportunities
• Fragmentation of opportunities
Insulation improvements
Source: McKinsey
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Trade/tax/standards
• Trade/quotas give greater quantity certainty and incentives to
bring in developing countries; ambition, transparency, credibility
are key
• Tax may be simpler for some countries and/or sectors
• Tax or trade: identify single policy instrument for sector
• With appropriate periodic revisions (and auctioning) tax and
trade can be fairly similar
• Regulation may accelerate change and lower costs by reducing
uncertainty and achieving economies of scale
• But complications of interactions e.g. renewables targets and
size of carbon market
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Public-private partnerships for
technology
Public energy R&D investments as a share of GDP
0.1 8 %
0.1 6 %
F ra n c e
0.1 4 %
G e rm a n y
J a pa n
0.1 2 %
U n ite d K in g d o m
0.1 0 %
U n ite d S ta te s
0.0 8 %
0.0 6 %
0.0 4 %
0.0 2 %
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2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
0.0 0 %
Part Four
A Global Deal
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Basic Criteria for a Global Deal
• Effectiveness: the scale must be
commensurate with the challenge
• Efficiency: we must keep down the
costs of emissions reduction
• Equity: the rich countries must take the
lead
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Commitments: percentages
• G8 Heiligendamm – 50% by 2050 (consistent with
stabilisation around 500ppm C02e)
• California (and US under e.g. Obama/Clinton) 80% from 1990 levels by 2050
• France – 75% by 2050 (Factor 4), relative to 1990
• EU Spring Council: 60-80% by 2050 and 20-30%
by 2020, relative to 1990
• Germany – 40% by 2020, relative to 1990
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Target: stocks, history, flows
• Current 40-45 GtCO2e p.a. Current stocks around 430ppm CO2e;
pre-industrial stocks 280ppm
• The United States and the EU countries combined accounted for
over half of cumulative global emissions from 1900 to 2005
• 50% reduction by 2050 requires per capita global GHG emissions of
2-3T/capita (20-25 Gt divided by 9 billion population)
• Currently US ~ 20+, Europe ~10+, China ~5+, India ~2+ T/capita
• Thus 80% reductions would bring Europe, but not US, down to world
average. Many developing countries would have to cut strongly too if
world average of 2-3 T/capita is to be achieved
• Requires close to zero carbon electricity and surface transport
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The GHG ‘reservoir’
• Long-term stabilisation at 550ppm CO2e implies that only a further
120ppm CO2e can be ‘allocated’ for emission, given that we start at
430ppm CO2e (or further 70ppm if targeting 500ppm)
• Can view the issue as the use of a “collective reservoir” of 270ppm
(i.e. 550 minus the 280ppm of 1850) over 200 years. Over half of
reservoir already used mainly by rich countries. Or could “start the
clock” at XT, the stock when problem was first recognised at T (e.g.
around 20 years ago)
• Equity requires a discussion of the appropriate use of this reservoir
given past history
• Thus convergence of flows does not fully capture the equity story,
from emissions perspective
• Equity issues arise also in adaptation, given responsibilities for past
increases
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Key elements of a global
deal / framework (I)
Targets and Trade
• Confirm Heiligendamm 50% cuts in world emissions by
2050 with rich country cuts at least 80%
• Rich country reductions and trading schemes designed to be
open to trade with other countries, including developing
countries
• Supply side from developing countries simplified to allow
much bigger markets for emissions reductions: ‘carbon
flows’ to rise to $50-$100bn p.a. by 2030. Role of sectoral or
technological benchmarking in ‘one-sided’ trading to give
reformed and much bigger CDM market
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Key elements of a global
deal / framework (II)
Funding Issues
• Strong initiatives, with public funding, on deforestation to
prepare for inclusion in trading. For $10-15 bn p.a. could
have a programme which might halve deforestation.
Importance of global action and involvement of IFIs
• Demonstration and sharing of technologies: e.g. $5 bn
p.a. commitment to feed-in tariffs for CCS coal would lead
to 30+ new commercial size plants in the next 7-8 years
• Rich countries to deliver on Monterrey and Gleneagles
commitments on ODA in context of extra costs of
development arising from climate change: potential extra
cost of development with climate change upwards of
$80bn p.a.
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Nature of deal / framework
• Combination of the above can, with appropriate market
institutions, help overcome the inequities of climate
change and provide incentives for developing
countries to play strong role in global deal, eventually
taking on their own targets.
• Within such a framework each country can advance with
some understanding of global picture.
• Individual country action must not be delayed (as e.g.
WTO) until full deal is in place.
• Main enforcement mechanism, country-by-country, is
domestic pressure.
• If we argue that, “it is all too difficult” and the world lets
stocks of GHGs rise to 650, 700 ppm or more must be
clear and transparent about the great magnitude of
these risks
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