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Climate Change Mitigation Bruce A. McCarl Department of Agricultural Economics Texas A&M University Key Concepts “Mitigation” is a human intervention to reduce the sources or enhance the sinks of greenhouse gases. Mitigation, together with adaptation to climate change, contributes to the goal expressed in Article 2 of the United Nations Framework Convention on Climate Change (UNFCCC) to “prevent dangerous anthropogenic interference with the climate system… within a time frame to allow ecosystems to adapt… to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner”. Key Concepts Climate Change is a global commons problem that implies the need for international cooperation in tandem with regional policies. • Because the emissions of any agent affect every other agent, an effective outcome will not be achieved if individual agents advance their interests independently of others. • International cooperation can contribute • Research and development in support of mitigation is a public good, which means that international cooperation can play a constructive role in the coordinated development and diffusion of technologies. • This gives rise to separate needs for cooperation on R&D, opening up of markets, and the creation of incentives to encourage private firms to develop and deploy new technologies and households to adopt them. Why Might We Mitigate? Greenhouse gas forcing is causing climate change International agreements under UNFCCC - Kyoto Protocol International pressures for emission reduction Domestic policies at national or state level Industry planning under uncertainty Need for cheap emission offsets Congruence of programs with other agriculturally related societal desires such as farm income support and water quality protection Development of another market for farm products Greenhouse gas forcing is causing climate change Basic argument is that GHG emissions are increasing earth’s heat trapping and climate is warming See climate change effects notes for discussion Lag until effectiveness Degree of climate change - What is projected Climate models predict increasing emissions will cause a temp increase Source : IPCC AR4t Where we are Climate and Emissions From IPCC WGIII AR5 Per-capita fossil-fuel CO2 emissions, 2005 World emissions: 27 billion tons CO2 AVERAGE TODAY 1- STABILIZATION Source: IEA WEO 2007 and Socolow presentation at Americas Climate Choices “Stabilization”: 1 ton CO2/yr per capita It is not sufficient to limit emissions in the prosperous parts of the world and allow the less fortunate to catch up. Such an outcome would overwhelm the planet. The emissions of the future rich must eventually equal the emissions of today’s poor, … …not the other way around. Socolow presentation at Americas Climate Choices Sources of emissions Greenhouse gas evolution IPCC 2014 WGIII Figure SPM.1. Total annual GHG emissions by groups of gases 1970-2010: CO2 from fossil fuel combustion and industrial processes (yellow); CO2 from Forestry and Other Land Use (FOLU; orange); CH4 (light blue); N2O (blue); fluorinated gases (F-gases, dark blue). All emissions are reported in GtCO2eq per year based on GWP100. The emissions data from FOLU represents land based CO2 emissions from forest and peat fires and decay that approximate to net CO2 flux from the FOLU sub-sector as described in chapter 11 of this report. The uncertainty ranges provided by the whiskers for 2010 are illustrative given the limited literature on GHG emission uncertainties. [Figure 1.3] GWP, GTP and Climate Change GWP is used to make comparisons of relative contributions among GHGs to global warming by comparing the ability of each gas to trap radiation in the atmosphere over a chosen time horizon. Global Temperature change Potential (GTP), which is change in GMST at a chosen point in time relative to CO2 IPCC uses CO2 as a reference gas with a GWP or GTP of 1. CO2 lifetime is complicated by multiple physical and biogeochemical processes in the ocean and the land. For a pulse of about 1000 PgC, about half is removed within a few decades, but the remaining fraction stays in the atmosphere for much longer. About 15 to 40% of the CO2 pulse is still in the atmosphere after 1000 years. Source: Climate Change 2014: The Scientific Basis, Table 8.7 Why is this happening - Emissions growing Why is this Happening - Emissions growing Figure TS.2. Historical anthropogenic CO2 emissions from fossil fuel combustion, flaring, cement, Forestry and Other Land Use (FOLU) in five major world regions: OECD1990 (blue); Economies in Transition (yellow); Asia (green); Latin America (red); Middle East and Africa (brown). Panels show regional CO2 emission trends 17506 2010 from: (a) all sources (c+e); (c) fossil fuel combustion, flaring and cement; (e) FOLU. Global Greenhouse Gas Data http://www.epa.gov/climatechange/emissions/globalghg.html 35000 30000 Non-OECD Europe and Eurasia Africa 25000 Other Americas Other Asia 20000 Middle East 15000 China OECD Asia Oceania 10000 OECD Europe 5000 United States Canada http://cdiac.ornl.gov/trends/emis/overview_2009.html 2009 2007 2005 2003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 1975 1973 1971 0 Forces in scenarios Include at least two scenarios "baseline" or "reference" scenario and "mitigation scenario" Assumptions e.g. economic growth, technology, etc. Figure TS.1: Qualitative directions of SRES scenarios for different indicators Source: CC 2001 mitigation p. 24 at http://www.grida.no/climate/ipcc_tar/wg3/015.htm#24 Drivers IPCC WGIII AR5 Figure SPM.3 | Decomposition of the change in total annual CO2 emissions from fossil fuel combustion by decade and four driving factors: population, income (GDP) per capita, energy intensity of GDP and carbon intensity of energy. The bar segments show the changes associated with each factor alone, holding the respective other factors constant. Total emissions changes are indicated by a triangle. The change in emissions over each decade is measured in gigatonnes of CO2 per year [GtCO2 / yr]; income is converted into common units using purchasing power parities. [Figure 1.7] World GHG emissions - by country http://www.climatechangeconnection.org/emissions/Globalchangesin GHG.htm Why is this happening - Energy emissions growing IPCC 2014 WGIII Figure 7.3. Energy supply sector GHG emissions by Subsectors. Table shows average annual growth rates of emissions over decades and the shares Plus drivers (POP – population, FEC- final energy consumption) Why is this happening - Energy use growing UNFCCC and Kyoto Protocol Brief History of the International Agreements on Mitigation UNFCCC : United Nations Framework Convention on Climate Change Adopted on May 9, 1992 and ratified by 176 governments worldwide as of October 1998 Developed plans for responding to climate change “... to achieve ... stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system” (p.9). Established to negotiate net GHGE reduction Under it’s auspices, the KYOTO Protocol was adopted in 1997. The KYOTO Protocol The first major international agreement towards GHGE reduction Industrialized countries agreed to reduce emissions of six greenhouse gases baskets [CO2, CH4, N2O, HFCs, CFs, SF6] to 5-8% below 1990 levels between 2008 - 2012. GHGs are compared to each other using global warming potential (GWP) coefficients Treatment of emissions of GHGs from land-use change Approval of offsets through enhancement of sinks Authorization of mechanisms to reduce the cost of meeting the target The KYOTO Protocol – Mechanisms Mechanisms to reduce the cost of meeting the above target International Emissions Trading (Article 17) Allows the trading of assigned amounts within or among industrialized countries to meet quantified emission limitation or reduction commitments. Clean Development Mechanism (CDM) (Article 12) Allows industrialized countries to finance emission reductions in developing countries to help in sustainable development and receive emission credits for doing so. Joint Implementation (JI) (Article 6) Allows Annex I transferring/acquiring emission reductions resulting from activities aiming to reduce anthropogenic emissions by sources or enhance anthropogenic removals by sinks. The KYOTO Protocol – Mechanisms Joint Action or Bubbles (Article 4) Agreement among regional groups to achieve their reduction targets jointly provided that their combine aggregated anthropogenic emissions of GHGs do not exceed their quantified emission limitation and reduction commitments. Source: Kyoto Protocol at http://www.sdinfo.gc.ca/docs/en/kyoto/Default.cfm The KYOTO Protocol – U.S. cost of compliance with the KYOTO The Kyoto Protocol would have required the US to reduce its emissions 7% from 1990 levels from 2008 to 2012. To comply US emissions must decline by 30% from projected 2010 levels which results in a GDP loss of about 1-4% annually (Weyant 1999). Figure 8. Carbon tax under alternative trading regimes Figure 9. GDP loss under alternative trading regimes Source: Weyant, J. P. (ed.) The Costs of the KYOTO Protocol: A Multi-Model Evaluation, a special issue of The Energy Journal, p. xxxi, and xxxiii, 1999. The KYOTO Protocol – Global Cost of Meeting Scenarios Economics of Annex I and Annex II etc Countries Price of GHG net emission reduction GHG Market Equilibrium D S P* Q* Quantity of net emission reduction Price of GHG net emission reduction GHG Market Equilibrium with cap - Why there? D S P P* Q* Cap Quantity of net emission reduction Price of GHG net emission reduction Multi region GHG Market Equilibrium with cap – Autarkic, no trade D D S S P P* Q* Capped region Quantity Quantity Q* Uncapped Region Quantity Price of GHG net emission reduction Multi region GHG Market Equilibrium with cap – with trade D D S S ES ED P P P* Q* Capped region Quantity Quantity Q* Uncapped Region Quantity Multi region GHG Market Equilibrium with cap – with trade and transactions costs Price D D S S ES ED P P Transactions Costs Q* Capped region Quantity P* Quantity Q* Uncapped Region Quantity Other motivations to Mitigate Other reasons Why Might We Mitigate? Domestic policies at national or state level Clean skies 18% reduction in intensity 4 pollutants NOX,SOX,Mercury,CO2 State initiatives Voluntary registry International pressures for emission reduction European pressure Other reasons Why Might We Mitigate? Domestic policies at national or state level Clean skies 18% reduction in intensity Source EPA Inventory of U.S. GHG Emissions Inventory 2011 Other reasons Why Might We Mitigate? Industry planning under uncertainty Demonstration projects Interests at risk Multinationals Need for cheap emission offsets Firms investing CCX Congruence of programs with other agriculturally related societal desires such as farm income support and water quality protection Development of another market for farm products Mitigation and Sectors With some ag emphasis Magnitude of U.S. GHG Emissions Source EPA Inventory of U.S. GHG Emissions Inventory 2011 Historical Emissions Estimates Sequestration may have the potential to alleviate somewhere in the neighborhood of 25% of the historical atmospheric greenhouse gas accumulation. Source: Apparently this was drawn from W. F. Ruddiman, 2001. Earth's Climate: Past and Future. W. H. Freeman and Sons, New York Relative size of Agriculture Emissions Agriculture is largest source (EIA) Emissions rose via EPA estimates from 195 in 1990 to 215 in 2008 IPCC data Potential Sectoral GHG Emission Mitigation Strategies Agricultural and Forestry Sector Waste Management Sector Contributed 4% of global energy-related CO2 emissions in 1995 but about 50% of methane and 70% of nitrous oxide Conservation Improvement of agriculture (e.g. conservation tillage, reduction of land use intensity, etc.) Sequestration management Substitute product production (biofuels) Altered ag management of cattle, rice, fertilization Fuel switching Use of landfill gas for heat and electricity Increase of waste recycling rates Utilize waste paper as a biofuel Energy Sector Contributed 38 % of global energy-related CO2 emissions in 1995 Improvement in the energy efficiency of power plants Fuel switching Deregulation of the electric power sector to drive technological progress Potential Sectoral GHG Emission Mitigation Strategies Buildings Sector Contributed 31% of global energy-related CO2 emissions in 1995 Improvement in the energy efficiency of windows, lighting, refrigeration, air conditioning, etc. Passive solar design & integrated building Fuel switching Transportation Sector Contributed 22 % of global energy-related CO2 emissions in 1995 Improvement in the energy efficiency of vehicles Vehicle Fuel switching to natural gas, electricity, biofuels Subsidize mass transit Industry Sector Contributed 43 % of global energy-related CO2 emissions in 1995 Improvement in the energy efficiency Material efficiency improvement e.g. recycling, material substitution Fuel switching Adapted from CC 2001 mitigation p. 29-40 Potential Sectoral GHG Emission Mitigation Strategies IPCC WGIII 2007 Climate Change Mitigation Challenge Complex set of sources Energy is key Tie to Development Multinational need BRIC countries Futility of unilateral action Legislation Offset controversy Mitigative Actions Reduce emissions Capture and destroy Switch fuel, Nat. Gas, Biofuel, Nuclear, Hydrogen Alter consumption Increase energy efficiency Change production Increase sequestration Capture/store- Oceans, Mines, Aquifers Biological - Forest, Soils Geoengineer Solar rad. mgt –deflect sunlight, increase reflectivity CO2 removal, biochar, Air capture, Ocean nourishment including iron Sectoral Mitigation IPCC WGIII AR5 Table TS.3 | Main sectoral mitigation measures categorized by key mitigation strategies (in bold) and associated sectoral indicators (highlighted in yellow) as discussed in Chapters 7 – 12. Ag Sector Mitigation IPCC WGIII AR5 Table TS.3 | Main sectoral mitigation measures categorized by key mitigation strategies (in bold) and associated sectoral indicators (highlighted in yellow) as discussed in Chapters 7 – 12. Comments on strategies Sequestration saturation permanence storage cost Bioenergy life cycle accounting cost algae $20 land competition indirect land use Co-Benefits and costs Policies, Measures, and Instruments Here are a set of policies, measures, and instruments to limit GHG emissions or enhance sequestration by sinks. Command and control Taxes on emissions, carbon, and/or energy Subsidies Tradable emissions permits (cap-and-trade) Non-tradable permits Emission reduction credits Voluntary agreements Technology and performance standards Product bans Direct government spending and investment (R&D) Adapted from CC 2001 mitigation p. 399-450 http://www.grida.no/climate/ipcc_tar/wg3/224.htm Policies, Measures, and Instruments Here are a set of policies, measures, and instruments to limit GHG emissions or enhance sequestration by sinks. Command and control Taxes on emissions, carbon, and/or energy Subsidies Tradable emissions permits (cap-and-trade) Non-tradable permits Emission reduction credits Voluntary agreements Technology and performance standards Product bans Direct government spending and investment (R&D) Adapted from CC 2001 mitigation p. 399-450 http://www.grida.no/climate/ipcc_tar/wg3/224.htm Policies, Measures, and Instruments Command and Control Imposing a specific and inflexible emission standards on sources Taxes on Emissions, Carbon, and/or Energy A levy imposed by a government on each unit of emissions or on carbon content of fossil fuels (carbon tax), or on the energy content of fuels Advantage: 1. Yields cost minimizing allocation 2. Promotes technological progress Cost ($) Tax O 3. Increases revenues to subsidize R&D A Marginal control cost B C D 15 Emission Reductions (tons) Disadvantage: 1. How to determined an appropriate level of Tax? Policies, Measures, and Instruments Subsidies A direct payment from the government Lowers existing subsidies to fossil fuel use, or increasing subsidies for practices reducing emissions or enhance sinks Tradable Emissions Permits (Cap-and-Trade) Puts a cap or limit on aggregate GHG emissions on sources Requires each source to hold permits equal to its actual emissions Allows permits to be traded among sources Advantage: Flexibility Disadvantage: Need to consider transaction costs Non-Tradable Permits Puts a cap or limit on GHG emissions on each regulated source Requires each source to keep its actual emissions below its own cap Does not allow trading among sources Policies, Measures, and Instruments Emission Reduction Credits Combination of a deposit or fee (tax) on a emissions with a refund or rebate (subsidy) for emission reductions Credits are implemented through Offset policy Bubble policy Netting within the firms Banking Advantage: allow growth Disadvantage: quantifiability, and monitoring and enforcement Policies, Measures, and Instruments Voluntary Agreements An agreement between a government authority and one or more private parties A unilateral commitment to achieve environmental objectives or to improve environmental performance beyond compliance Technology and Performance Standards Establishment of minimum requirements for products or processes to reduce GHG emissions associated with the manufacture or use of the products or processes Product Bans Prohibition on the use of a specified product in a particular application, such as hydrofluorocarbons (HFCs) in refrigeration systems Policies, Measures, and Instruments Direct Government Spending and Investment (R&D) Government expenditures on research and development (R&D) measures to lower GHG emissions or enhance GHG sinks Remarks: (1). A group of countries can implement one or a combination of these instruments. (2). If we control too much at the present time, the current generation pays high price but the future generation gains benefit, or a vice versa. Adapted from CC 2001 mitigation p. 399-450 http://www.grida.no/climate/ipcc_tar/wg3/224.htm Example of Acid Rain Program SO2 and NOx are the primary causes. Acid rain occurs when these gases react in the atmosphere with water, oxygen, and other chemicals to form various acidic compounds. This acid rain program is designed to reduce emission of SO2 AND NOx by 10 million tons below 1980 levels at the lowest cost to society. How does this program work? Technology improvement Fuel switching Conserves energy Allows Trading System Auctions and Direct Sales Opt-in Program Etc. http://www.epa.gov/airmarkets/acidrain/#what Example of Acid Rain Program – allowance trading system EPA sets allowances based on historical fuel consumption and emission rates. Allowance trading provides incentives for energy conservation and technology innovation that can both lower the cost of compliance and yield pollution prevention benefits. Regulated firms decide the most cost-effective way to use available resources to comply with the acid rain requirements by employing energy conservation measures switching to a lower sulfur fuel employing pollution control technologies, etc. Firms that reduce their emissions below their regulated allowances may trade their allowances, sell them on the open market or through EPA auctions, or bank them to cover emissions in future years. Source: EPA’s Acid Rain Program: Overview at http://www.epa.gov/airmarkets/arp/overview.html Example of Ozone Depletion Program The ozone layer acts as a blanket in the stratosphere that protects us from harmful UV radiation. CFC-12 destroys this layer of gas which leads to an increase in cataracts and skin cancer. The largest uses of CFC-12 is as a refrigerant in motor vehicle air conditioners Firms are given funds to switch from ozone pollutable to other sources. Taxes on ozone Certification Requirements Regulation on service shops must certify to EPA that they have acquired and are properly using approved refrigerant recovery equipment, and that each person using the equipment has been properly trained and certified. Global Action to Protect the Ozone Layer Montreal protocol => agreement to phase out production of most ozone-depleting substances Source: EPA Regulatory Requirements at http://www.epa.gov/ozone/title6/609/justfax.html Introduction to GHG Mitigation Economics – Emissions Tax Marginal cost/Price D S Tax Figure 1. Supply and Demand For Energy/Carbon Quantity of Emissions (tons) Carbon Tax ($/ton) MC Figure 2. Marginal Cost Curve for Carbon Emission Reductions Emission Reduction (tons) Source: Weyant, J. P. (ed.) The Costs of the KYOTO Protocol: A Multi-Model Evaluation, a special issue of The Energy Journal, p. xxxi, and xxxiii, 1999. Introduction to GHG Mitigation Economics – Emissions Trading Country A Country B MCa MCb Ta Tb’ Ta’ A1 Tb A2 B1 Ra’ Ra Rb B2 Rb’ Emission Reductions (tons) Figure 3. Two Country Example of International Emissions No trade: Cost of emission reductions to A is A1+A2, to B is B1. With trade: Cost of emission reductions to A is A1, to B is B1+B2. Total global cost is reduced by A2 – B2 Total emission reductions = Ra’ + Rb’ = Ra + Rb Source: Weyant, J. P. (ed.) The Costs of the KYOTO Protocol: A Multi-Model Evaluation, a special issue of The Energy Journal, p. xxxi, and xxxiii, 1999. Mitigation Assessment Assessment criterion GHG reduction potential (Tons of carbon equivalent) Other environmental considerations soil conservation, watershed management, etc. Economic and Social Considerations Cost-effectiveness GDP, jobs created or lost, implications for longterm development, etc. Differential impacts on countries, income groups or future generations Issues on Mitigation Assessment Assessment criterion (continued) Institutional and Political Considerations Monitoring, enforcement issues Capacity to pass through political and bureaucratic processes and sustain political support Consistency with other public policies Uncertainty Ranking mitigation strategies accordingly to criterion NAS Mitigation reccomendations • Adopt a mechanism for setting an economy-wide carbon pricing system . • Complement the carbon price with a portfolio of policies to: • realize the practical potential for near term emissions reductions through energy efficiency and low emission energy sources in the electric and transportation sectors; • establish the technical and economic feasibility of carbon capture and storage and evolutionary nuclear technologies; • accelerate the retirement, retrofitting or replacement of GHG emission-intensive infrastructure. • Create new technology choices by investing heavily in research and crafting policies to stimulate innovation. • Design and implement climate change limiting policies to promote equitable outcomes, with special attention to disadvantaged populations. • Establish the United States as a leader to stimulate other countries to adopt GHG reduction targets. • Enable flexibility and experimentation with policies to reduce GHG emissions at regional, state and local levels. • Design policies that balance durability and consistency with flexibility and capacity for modification as we learn from experience. http://dels.nas.edu/Report/Limiting-Magnitude-Climate-Change/12785 Policy Directions Policy toward climate change consists of three elements: – Let it happen – ignore – Pursue mitigation (reducing the extent of climate change), – Pursue adaptation (reducing the impact of change), and Schematic from Parry, 2009 Policy Sensitivity Let it happen – ignore or only reduce – Effects on previous page Pursue mitigation (reducing the extent of climate change) – Energy will be major thrust • De carbonize • Tax • Pursue renewable – So may be agricultural activities • • • • Land use change – domestic and ILUC Sequestration – tree planting, grass, tillage Emissions, fossil fuel use, enteric, manure, rice Offsets – biofuel and bio electricity – watch out for LUC Pursue adaptation (reducing the impact of change) – Maintenance of current productivity – Autonomous – varieties, planting dates, crop mix, enterprise choice – Facilitating adaptation • R&D on adapted varieties, practices • Extension • Facilities – Compensation (international) Resource competition from both References Climate Change 2001: The Scientific Basis, Contribution of Working Group I to the Third Assessment Report of the Intergovernment Panel on Climate Change at http://www.grida.no/climate/ipcc_tar/wg1/index.htm Climate Change 2001: Mitigation, Contribution of Working Group III to the Third Assessment Report of the Intergovernment Panel on Climate Change at http://www.grida.no/climate/ipcc_tar/wg3/224.htm EPA’s Clean Air Markets – Acid Rain Programs and Regulations at http://www.epa.gov/airmarkets/arp/overview.html EPA Regulatory Requirements for Servicing of Motor Vehicle Air Conditioners at http://www.epa.gov/ozone/title6/609/justfax.html EPA Inventory of U.S. GHG Emissions Inventory 2003 (Draft) KYOTO Protocol at http://www.sdinfo.gc.ca/docs/en/kyoto/Default.cfm McCarl, B. A., and J. Antle, Agricultural Soil Carbon Sequestration – Economic Issues and Research Needs, Working Paper #0875, Department of Agricultural Economic, Texas A&M University, College Station, TX Weyant, J. P. (ed.) The Costs of the KYOTO Protocol: A Multi-Model Evaluation, a special issue of The Energy Journal, 1999.