Download Climate change: Driving forces

The Centre for Development and the Environment,
University of Oslo
SUM 3000
International Climate Policy, Economy
and Justice
Dr. Asbjørn Torvanger
CICERO Center for International Climate and Environmental
Research - Oslo
http://www.cicero.uio.no
11 May 2006
Topics
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The challenge of man-made climate change
The aim of climate policy
Greenhouse gas emission scenarios
An efficient climate policy
Climate agreements
Emissions trading
Costs of mitigating emissions
Post 2012 climate policy – fairness?
Why is the handling of man-made global
warming such a big challenge?
 A long-term problem
 A number of important uncertainties: rate of change, scale of changes,
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abrupt changes, impacts on ecosystems, impacts on societies
Long delays in the climate system. Energy system, political and cultural
inertia
It is a global problem that requires global participation to solve;
incentives for countries to shirk from efforts
Fossil fuels vital, but need to de-carbonize our economies
The interests of countries vary substantially according to national
circumstances; anticipated emission mitigation costs and impacts-related
costs
What is a “fair” contribution from a country, e.g. Norway, the USA and
India?
Most costs today and most benefits in the future (next generations)
The temperature will increase long after
emissions are reduced
IPCC Third Assessment Report Summary (2001)
”An increasing body of observations gives a collective
picture of a warming world and other changes in the
climate system.”
”The global average surface temperature has increased over
the 20th century by about 0.6°C.”
”There is new and stronger evidence that most of the
warming observed over the last 50 years is attributable to
human activities.”
Figure 1: Causal chain of climate change from emissions to damages.
Source: Fuglestvedt et al. (2003)
Potential climate changes impact
What is
going on?
Endringer i maksimal smeltesone på Grønland
1992-2002
The aim of climate policy
UNFCCC: ”... Prevent dangerous anthropogenic interference
with the climate system.”
Constraint on temperature increase:
• per decade
• per 2100 (e.g. EU: max 2 °C)
• implications for allowable global emissions
Limit climate impacts:
Choose indicators, e.g.:
• Bleaching of coral reefs
• West Antarctic Ice Shelf collapse
Emission paths:
Reach a target through many different paths. Early or delayed
action.
Annual GHG Emissions (GtCe)
20
Early action
15
Late action (A1B)
Area A
10
Area B
5
0
2000
2050
Year
2100
Efficient global climate policy
The global optimum:
Reduce net emissions of greenhouse gases and invest in
adaptation measures until the cost of the next policy option
and investment option is equal to the benefit in terms of
reduced damage from climate change.
Minimization of global (national) costs:
Implementing policy options and investment options according
to increasing cost per unit greenhouse gas until the target is
met. Options with highest abatement effect and lowest cost
should be implemented first.
An illustration of a marginal abatement
cost curve
(abatement options listed according to increasing
cost)
5
4
3
2
1
0
CO2 equivalent reduction (mill. tons)
Greenhouse gas abatement – options
• Increase energy efficiency - new and more efficient (energy)
technologies
• Substitute high-GHG energy sources for low-GHG energy sources:
coal → oil → gas → heat pumps → hydropower/solar/wind
• Develop renewable energy sources: biomass, solar (heating,
thermal and photovoltaic), wind and wave, geothermal, etc.
• Substitute high-GHG goods and services for low-GHG goods and
services
• Change products and production processes
• Longer-term: reduce transportation needs through area planning
Greenhouse gas abatement
National level:
• General: taxes, tradable quotas
• Sector-specific: direct regulation, environmental
agreements (voluntary agreements)
• Technology: Energy efficiency standards; R&D
programs
International level:
• Tradable quotas
• Joint implementation
• Clean Development Mechanism (CDM)
Policy tools: benefits and drawbacks
Policy tool
Benefits
Drawbacks
Uncertain emission reduction
Tax
Cost-effectiveness
Well-known policy tool
Replacement of other taxes
may give additional benefits
The state may have fiscal objectives
 reduced cost-effectiveness
Unilateral use can lead to migration
and ‘carbon leakage’
Uncertain quota price
Emissions trading
Cost-effectiveness
Emission reduction target
achieved with certainty
Not much experience with use
Could conserve industry structure –
reduce rate of technological
progress?
Unilateral use can lead to ‘carbon
leakage’
Joint implementation Inexpensive projects in other
countries
and CDM
Information and verification
problems
The Kyoto Protocol
• The Kyoto Protocol is a historical treaty: first legally
binding climate policy treaty, but only a first small step
in a process towards more ambitious targets later.
• Only a marginal step towards the long-term target of
UNFCCC Art. 2). Effect depends on participation and
reductions after 2012.
• Entered into force 16 February 2005
The Kyoto Protocol
 Industrialized countries reduce their aggregate GHG emissions by
5.2% in the period 2008–2012 compared to the base year 1990. (USA
and Australia declined to join KP).
 Differentiated targets ranging from –8 to +10%. DCs exempted.
 Six gases are included: CO2, CH4, N2O, HFC, PFC, and SF6.
 Sequestration of CO2 in forests and soils.
 Three flexibility mechanisms: International emissions trading (IET),
Joint Implementation (JI), the Clean Development mechanism
(CDM).
 Reporting and verification system. Compliance system
-10
Annex B-land
Tsjekkiske republikk
Sveits
Slovenia
Slovakia
Romania
Monakko
Litauen
Liechtenstein
Latvia
EU
Estland
Bulgaria
USA
Ungarn
Polen
Japan
Canada
Kroatia
Ukraina
Russland
New Zealand
Norge
Australia
Island
Prosent
The Kyoto Protocol – national targets 2008-2012
10
6
2
-2
-6
Mechanisms for greenhouse gas emissions trading
Mechanism
Unit
Participants
Features
Domestic emissions
trading
Quota
Firms and other
national agents
Link to
international
emissions
trading
International
emissions trading
Quota
Assigned amount unit
(AAU)
Annex B countries
(industrialized
countries); private
agents
Supplementarity
Joint
Implementation
Credit
Emission reduction unit
(ERU)
Annex B countries
(industrialized
countries); private
agents
Supplementarity
Monitoring and
verification
Clean Development
Mechanism
Credit
Certified emission
reductions (CER)
Annex B countries
(industrialized
countries) and nonAnnex B countries
(developing countries);
private agents
Supplementarity
Monitoring and
verification
Tax as share of
proceeds
Source: CICERO
Illustration of emissions trading between two
countries
Emissions 2010
Quotas purchased
Kyoto target for
both countries
Quotas sold
Emissions 2010
Country A
Low abatement cost
Country B
High abatement cost
• Norwegian emission trading system; 2005-2007.
• EU emission trading system; I: 2005-2007; II: 2008-2012.
Free or auctioned allowances: Equity vs. efficiency
 Only (mostly) free allowances in EU ETS and Norway: higher
political feasibility – more acceptable to business
 Auctioning of allowances more efficient (but lower feasibility)
 Problems of free allowances:
* Conflict between efficiency and equity
* Disincentive to reduce emissions if tied to activities
(which is difficult to avoid completely)
* Weaker long-term price signal – not consistent with
polluter pays principle
* Possible barrier to new entry
* Exposure to lobbyism (rent-seeking)
* Loss of potential tax income to the state
How can broad and long-term collaboration be
combined to achieve deep emission cuts?
Deep cuts
Broad participation
Long-term strategy
Greenhouse gas emissions in 2000 and projected for 2050:
Kyoto countries’ share of global emissions is almost halved
16 %
28 %
≈ +2 °C
Factors determining countries’ position
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Expected costs of future climate changes in the country
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Expected costs of reducing the GHG emissions in the
country.
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Political conditions and culture/lifestyle in the country. One
example is the US resistance against taxes in
environmental policies and other areas.

Position of other countries. It will be easier to get a country
to stretch further if it expects other countries to do likewise.
However, the benefits of free riding when other countries
implement measures can be large.
A long-term climate strategy
 Agreement on long-term (medium-term) target can provide
important guidance for short-term policies – but difficult to reach
 More emphasis on moving in right direction than on meeting shortterm emission targets
 Establish clear and long-term incentives for countries, industries
and households to reduce emissions (e.g. quota obligation or tax)
 Ascertain flexibility to adjust strategy according to new scientific
knowledge, etc.
 Emphasis on R&D to develop GHG-free/lean technologies
 Gradual involvement of developing countries according to capacity
to participate. Climate-friendly development strategies
 Combine adaptation and mitigation policies
Factors that increase/decrease the probability of climate
policy success (deep cuts)
 Clearer indications of change: large
impacts; costly consequences; extreme
events
 Reduced mitigation costs: clear, longterm incentives; better technology
 “Fair” distribution of costs across
countries and sectors
 Convergence with other policy areas:
energy supply/security; development
Success
 Higher than expected inertia: capital
stock; political; cultural
 High mitigation costs
 Delayed signs of global warming; abrupt
change
 “Unfair” distribution of efforts
 Conflict with other policy areas
 Uncertainty? Emphasis on adaptation?
Failure
Beyond Kyoto
Architecture
• Close to the Kyoto Protocol or not?
• Coordination at global, regional, or sector level?
• Modes of participation – equal for all states?
Illustration of regions/countries choosing different
modes of participation
Russia
The
EU
Emission
cap
(Kyoto)
R&D
Emissions/
GDP
Technology
standards;
transfer
The
USA
Developing
countries
Beyond Kyoto policies
1. More flexibility than in the Kyoto Protocol needed: each country
choose policy and measures based on national circumstances.
2. Valuable Kyoto Protocol elements: flexibility mechanisms, GHG
basket, reporting and verification system, differentiated targets.
3. Processes parallel to UN. Coalition of the willing. Regional
agreements - climate and air pollution (climate measures → less
NOx, SO2).
4. Bottom up policies: technology; bilateral agreements.
5. Sector-based agreements (e.g. aviation and ship traffic).
Broad participation in emission mitigation Developing countries
 Reach compromise on what a “fair” involvement of
developing countries means
 Gradual involvement of developing countries according to
capacity, such as a staged approach
 More emphasis on adaptation as part of a comprehensive
climate policy
 Seek development strategies that are 4 x win:
development, energy supply, local/regional air pollution,
and climate
“Pull and push” policies for deep emission cuts
 Pulling emission reductions:
 A long-term strategy with clear incentives to reduce emissions.
Gradual replacement of capital equipment keeps costs down
 Reduce costs through broad national participation in mitigation
efforts, and through use of market-based policy instruments
(e.g. emissions trading and tax)
 Broad international participation – reduce danger of loss in
competitiveness (and “leakage” of emissions)
 Pushing emission reductions:
 Emphasis on technology development through long-term R&D
programs: renewable energy; more efficient technologies
 International collaboration on technology development and
deployment: public good features; economics of scale; technology
spill-over reduce costs
 Possible benefits of first movers in mitigation and technology
development: new products and industries - future markets
 CO2 capture and geological storage
Differentiation between countries- Fairness:
1. Need: Equal per capita emissions (convergence
period)
2. Ability to pay (capacity): GDP per capita.
3. Responsibility: past GHG emissions or temperature
effect of these.
4. Multi-stage:
a. No reduction;
b. Reduced emissions/BNP;
c. Reduction.
Most developed DCs get a more active role.
10000
Deforestation
9000
Rest of the World
8000
India
7000
China
6000
5000
Annex 1 (excl OECD)
OECD (excl. USA)
USA
4000
3000
2000
1000
0
18
60
18
80
19
00
19
20
19
40
19
60
19
80
20
00
20
20
20
40
20
60
20
80
21
00
21
20
21
40
21
60
21
80
22
00
Historical/allocated CO2 emissions (million tonnes)
CO2 emissions by region 1860-2000. Future emission paths to
stabilize concentration at 450 ppmv given per capita
convergence by 2050
Source: Kolshus (2000)
Responsibility approach: differentiate commitments
based on blame for climate change
Attribution of temperature change in 2000
•
Period:
1890-2000
•
Evaluation
year:
Africa & Latin
America
22 %
OECD90
38 %
2000
•
Gases:
CO2, CH4,
N2 O
ASIA
26 %
EEUR & FSU
14 %
Analysing countries’ contribution to climate change: Scientific uncertainties and
methodological choices (submitted)
den Elzen, Fuglestvedt, Höhne, Trudinger, Lowe, Matthews, Romstad, de Campos, Andronova