Download Low-carbon Economy

Implementing the Paris Agreement:
The transition towards a low-carbon economy.
Strategies, implications and an effective
policy mix
Council Meeting on the transition to a »green economy«
under the President of the Republic of Kazakhstan
and chairmanship of Mr. Karim Massimov,
Prime Minister of the Republic of Kazakhstan
Dr. Felix Chr. Matthes
Astana, 4th July 2016
After the Paris Agreement
Where do we (all) stand? (1)
•
With the landmark Paris Agreement (PA) coordinated efforts to avoid
dangerous climate change have broadened significantly
 Kyoto Protocol to the UNCCC covers 12% of global emissions

•
submitted INDCs cover more than 95% of global emissions
With the mechanisms of the PA the perspective of internationally
coordinated climate policy has been significantly expanded

holding the increase of global average temperature to well below 2°C
above pre-industrial levels and pursuing efforts to limit the
temperature increase to 1.5°C above pre-industrial levels (Art. 2.1a)

global peaking of greenhouse gas emissions as soon as possible and
rapid reductions thereafter (Art. 4.1)

balance between anthropogenic emissions by sources and removals
by sinks of greenhouse gas emissions (= carbon neutrality ≈ decarbonisation) in the second half of this century (Art. 4.1)
After the Paris Agreement
Where do we (all) stand? (2)
•
The PA establishes a long-lasting & dynamic bottom-up process


•
nationally determined contributions (NDCs) are key instruments,
reflecting the highest possible ambitions and communicating all
information necessary for clarity, transparency and understanding
(Art. 4.2, 4.3, 4.8)
technical reviews of the NDCs, their implementation and
achievements will be carried out, also identification of areas of
improvement (Art. 4.12)

updates of NDC every 5 years (Art. 4.8)

each successive NDC will represent a progression (Art. 4.9)

every 5 years there will be a global stocktake (for the first time in
2023) to assess the collective progress towards the purpose of the
PA and the long-term goals (Art. 14)

NB: recent (I)NDCs represent emission reduction efforts that are not
sufficient to meet the long-term goals (1.CP21 para 17)
The Paris Agreement goes beyond mitigation (these issues are
outside the scope of this presentation)
Medium- and long-term climate policy pathways
What do we know (on an aggregate level)? (1)
•
•
The Paris Agreement requires the parties

to build a strong analytical capital for developing strategies and
implementation measures

to ensure consistency between short-/medium-term implementation
measures and medium-/long-term strategies and goals
The national circumstances differ widely between the parties but
some key strategic lessons can be drawn from the existing body of
modelling and empirical evidence

all sectors need to contribute to greenhouse gas emission mitigation

5 strategic pillars are essential
•
•
energy & resource efficiency needs to be enhanced significantly
decarbonisation of the power sector is a key enabling option
•
electrification of the transport sector and heat markets is crucial
•
timely infrastructure upgrades and roll-outs are important
•
triggering innovation and its timely diffusion is key for the longerterm perspective
Medium- and long-term climate policy pathways
What do we know (on an aggregate level)? (2)
•
•
We don’t know the details of a decarbonised economy in the longer
term but we can describe its structural characteristics even in the
long term
 (much) more capital-intensive: strong investment (signal) needed
 (much) more coordination-intensive: more decentral elements
 (much) more infrastructure-dependent: robust strategies, goals (and
longer-term visions) needed
 not necessarily much more expensive: macroeconomic costs typically
<<5% GDP over the coming decades, if more expensive at all
 structurally different: in technical, economic (macroeconomic
structures, distributional aspects!) and participatory terms – requiring
clear and smart adjustment and transition strategies
Timing issues are crucial – three areas are of special relevance for
strategies, policies and measures
 long-lived capital stocks (investments/disinvestment cycles)
 infrastructures
 innovation
A comprehensive and well-designed policy mix
needs comprehensive and well-designed analysis
Abatement costs [€/t CO2e]
Pricing policies will be
complementary:
Locked (and homogeneous)
potentials: regulations,
targeted incentive programs
etc. as primary mechanisms
Pricing policies will be
Pricing
policies will be
complementary:
complementary:
Pricing
policies will be
Innovation-intensive
Potentials
related
to longcomplementary:
potentials:
regulations,
lived
capital
stocks
and
Potentials
creating
high
infratargeted
incentive
programs
respective
windows
of
marginal
rents
and significant
etc. as
primary
mechanisms
opportunities:
regulations,
distributional
effects
targeted
incentive
programs
(NB:
market
design failures):
etc. as primary
mechanisms
regulations,
targeted
incentive
programs etc. as primary
mechanisms
Pricing policies will/can work
and be effective & efficient:
Matured/competitive (and
heterogeneous) potentials,
incremental innovation:
ETS, tax or other mechanisms
NB: pricing policies
for heavily infrastructurerelated potentials?!
Abatement potential [mln t]
Öko-Institut 2010. IEA 2011+2015
Medium- and long-term climate policy pathways Key elements of smart & robust policy mixes
•
Carbon pricing is an absolutely fundamental element

building business cases for matured, low- and medium-price options

preferably responsive to increasingly volatile (energy) market
environments (controlling quantities)
providing certainty to investors (long-term cap trajectories and/or price
control or at least elements of price control)


•
depending on national circumstances and potentially on sectors:
carbon pricing as primary or complementary policy mechanism (e.g.
depending on effective price sensitivities)
Complementary policies will be needed

to remove barriers to locked potentials

to consistently use the windows of investment/disinvestment
opportunities (especially for long-lived capital stocks)

to overcome market design failures & ensure infrastructure compatibility

to drive innovation and foster a strong modernisation approach for a
future-proof economy in climate policy
Thank you
for your attention!
Dr. Felix Chr. Matthes
Energy & Climate Division
Berlin Office
Schicklerstraße 5-7
D-10179 Berlin
[email protected]
www.oeko.de
twitter.com/FelixMatthes