Climate change: Driving forces

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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
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• Topics
• 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?

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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, 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)

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The temperature will increase long after
emissions are reduced
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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 0.6C. There is new
and stronger evidence that most of the warming
observed over the last 50 years is attributable
to human activities.
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Potential climate changes impact
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What is going on?
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Endringer i maksimal smeltesone på Grønland
1992-2002
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• 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.

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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.
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An illustration of a marginal abatement cost
curve(abatement options listed according to
increasing cost)

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Marginal abatement cost (USD/ton CO2-eq.)
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3
2
1
0
CO2 equivalent reduction (mill. tons)
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• 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

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• Greenhouse gas abatement
• National level
• General taxes, tradable quotas
• Sector-specific direct regulation,
  environmental agreements (voluntary agreements)
• Technology Energy efficiency standards RD
  programs
• International level
• Tradable quotas
• Joint implementation
• Clean Development Mechanism (CDM)

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Policy tools benefits and drawbacks
Policy tool Tax Emissions trading Joint
implementation and CDM
Benefits Cost-effectiveness Well-known policy
tool Replacement of other taxes may give
additional benefits Cost-effectiveness Emission
reduction target achieved with certainty Inexpen
sive projects in other countries
Drawbacks Uncertain emission reduction The state
may have fiscal objectives ? reduced
cost-effectiveness Unilateral use can lead to
migration and carbon leakage Uncertain quota
price Not much experience with use Could conserve
industry structure reduce rate of technological
progress? Unilateral use can lead to carbon
leakage Information and verification problems
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• 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

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• The Kyoto Protocol
• Industrialized countries reduce their aggregate
  GHG emissions by 5.2 in the period 20082012
  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

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The Kyoto Protocol national targets 2008-2012
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Mechanisms for greenhouse gas emissions trading
   
Source CICERO
 
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Illustration of emissions trading between two
countries
Emissions 2010
CO2 equivalents
Quotas purchased
Kyoto target for both countries
Quotas sold
Emissions 2010
Country ALow abatement cost
Country BHigh abatement cost
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• Norwegian emission trading system 2005-2007.
• EU emission trading system I 2005-2007 II
  2008-2012.

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• 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

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How can broad and long-term collaboration be
combined to achieve deep emission cuts?
Deep cuts
Long-term strategy
Broad participation
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Greenhouse gas emissions in 2000 and projected
for 2050 Kyoto countries share of global
emissions is almost halved
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2 C
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• Factors determining countries position
• Expected costs of future climate changes in the
  country
• Expected costs of reducing the GHG emissions in
  the country.
• 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.

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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 short-term 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 RD 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

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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, long-term
  incentives better technology
• Fair distribution of costs across countries
  and sectors
• Convergence with other policy areas energy
  supply/security development

• 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?

Success
Failure
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• Beyond Kyoto
• Architecture
• Close to the Kyoto Protocol or not?
• Coordination at global, regional, or sector
  level?
• Modes of participation equal for all states?

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Illustration of regions/countries choosing
different modes of participation
Russia
Emission cap (Kyoto)
Emissions/GDP
The EU
Developing countries
Technology standards transfer
RD
The USA
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• Beyond Kyoto policies
• More flexibility than in the Kyoto Protocol
  needed each country choose policy and measures
  based on national circumstances.
• Valuable Kyoto Protocol elements flexibility
  mechanisms, GHG basket, reporting and
  verification system, differentiated targets.
• Processes parallel to UN. Coalition of the
  willing. Regional agreements - climate and air
  pollution (climate measures ? less NOx, SO2).
• Bottom up policies technology bilateral
  agreements.
• Sector-based agreements (e.g. aviation and ship
  traffic).

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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

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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 RD 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

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• Differentiation between countries- Fairness
• Need Equal per capita emissions (convergence
  period)
• Ability to pay (capacity) GDP per capita.
• Responsibility past GHG emissions or temperature
  effect of these.
• Multi-stagea. No reductionb. Reduced
  emissions/BNPc. Reduction. Most developed DCs
  get a more active role.

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CO2 emissions by region 1860-2000. Future
emission paths to stabilize concentration at 450
ppmv given per capita convergence by 2050
Source Kolshus (2000)
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Responsibility approach differentiate
commitments based on blame for climate change

• Period
• 1890-2000
• Evaluation year
• 2000
• Gases
• CO2, CH4, N2O

Analysing countries contribution to climate
change Scientific uncertainties and
methodological choices (submitted)den Elzen,
Fuglestvedt, Höhne, Trudinger, Lowe, Matthews,
Romstad, de Campos, Andronova