Transcript Negotiation Indices - oxford climate policy

Not Even Wrong:
The Problem with
Dr Illarionov’s Projections
Benito Müller
presented at
‘Russia and the Kyoto Protocol: Issues and Challenges’
The Royal Institute of International Affairs, London 17 March 2004
Oxford Institute for Energy Studies
University of Oxford (Environmental Change Institute, Philosophy Faculty, Queen Elizabeth House)
Stockholm Environment Institute (Oxford)
Royal Institute of International Affairs (London)
[email protected]
www.OxfordEnergy.org
www.OxfordClimatePolicy.org
For commentary see Notes Pages
Thursday, Dec. 18, 2003. Page 1
Illarionov Makes His Case On Kyoto
.
Illarionov argued that GDP growth and carbon dioxide emissions are
fundamentally linked, and that Moscow's targeted economic expansion will soon
put Russia above the greenhouse emission limits set by Kyoto.
"In those countries we analyzed, each percent of GDP growth is accompanied by
an increase of carbon dioxide emissions by 2 percent," he said.
The Kyoto Protocol incompatible with economic growth. CO2 emissions are associated with
economic growth in the mid-income countries (47 countries),1960-2000
GDP annual growth rates, %
Trend Line: y = 0.44 x + 1.17 R2 = 0.71
Trend Elasticity = 1 : 0.44 = 2.3 (‘2.3% CO2 growth per 1% GDP growth’)
8
Doubling GDP
7.2%
6
4
3.2%
2
Kyoto 2012
0
-2
Kyoto 2050
-4
-6
-8
-15
-3.5
-10
-5
Zero GDP growth = 72% CO2 reduction by 2050!
-2.7%
0
4.5%
5
13.7%
10
15
CO2 emissions annual growth rates, %
Red components based on: A. Illarionov, THE KYOTO PROTOCOL AND RUSSIA: WHAT IS TO BE DONE?
National Press Club, Washington, DC, January 30, 2004, © Institute of Economic Analysis http://www.iea.ru/
Methodological Requirements
There are two fundamental methodological requirements which need to be
satisfied in order to apply the sort of ‘Trend Elasticity’ projection method
used by Dr Illarionov:
I. There has to be a justifiable expectation that the correlation (the ‘trend’)
continues to exist during the projection horizon.
II. There has to be a justifiable expectation of how the correlation will
evolve during the projection horizon.
The Kyoto Protocol is incompatible with wealth accumulation.
GDP annual growth rate, %
СО2 emission are associated with economic growth in developed economies, too
(38 countries), 1991-2000
7
6
5
4
3
y = 0.53x + 2,05
R 2 = 0.71
2
1
Trend Elasticity = 1: 0.53 = 1.89
0
-1
-4
-3.8%
-2
0
Zero GDP growth = 81% CO2 reduction by 2050!
2
4
6
8
CO2 emissions annual growth rate, %
Red components based on: A. Illarionov, THE KYOTO PROTOCOL AND RUSSIA: WHAT IS TO BE DONE?
National Press Club, Washington, DC, January 30, 2004, © Institute of Economic Analysis http://www.iea.ru/
Dr Illarionov’s ‘Developed Country’ Case Revisited
GDP Growth
1990 to 2000
7%
6%
5%
4%
3%
2%
y = 0.46x + 0.0207, R2=0.64
1%
Trend Elasticity = 2.2
0%
-2%
0%
2%
4%
6%
8%
10%
CO2 Growth
Data Sources:
GDP: IMF The World Economic Outlook (WEO) Database April 2003; 1970-2000; Local currency, fixed prices
CO2: CDIAC; Total Emissions (excluding land-use).
Dr Illarionov’s ‘Developed Country’ Case Revisited
GDP Growth
1977 to 1987
10%
8%
6%
4%
2%
0%
y = 0.007x + 0.0207, R2=0.0003
-2%
Trend Elasticity = 143
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
CO2 Growth
Dr Illarionov’s ‘Developed Country’ Case Revisited
Correlation Indices R2
Trend Elasticities
0.8
‘Illarionov Trend Period’
0.7
Moderate Correlation
Elast. = 2.2
R2 = 0.6
2.5
2
0.6
0.5
0.4
0.3
1.5
Low to No
Correlation
1
0.2
0.5
0.1
0
0
70-00
75-00
80-00
85-00
90-00
89-99
88-98
87-97
86-96
85-95
84-94
83-93
82-92
81-91
80-90
79-89
78-88
77-87
76-86
75-85
74-84
73-83
72-82
71-81
70-80
Trend Periods
Correlations: Spurious or Not Spurious?
“Green Trend” Countries? (18)
Trend Elasticity: -0.34
‘–0.34% CO2 growth per 1% GDP growth’
CO2 Growth
5%
3%
0%
Czech R.
Kazakhstan
-3%
Ukraine
-5%
y = –2.91x – 0.095, R2 = 0.71
Russia
-8%
GDP Growth
-10%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
7.2% GDP p.a. growth (i.e. doubling of GDP) over 10 years = 45% reduction of emissions
Conclusions
Dr Illarionov’s arguments are fundamentally flawed.
(I)
They are based on the unjustified assumption that certain current
correlations (‘trends’) will continue to exist during his chosen 10 to 50
year projection horizons.
(II) Even if he were justified in this assumption, his second assumption that
these correlations are constant over time is not justified.
•
His conclusions and projections based on these arguments must
therefore be rejected as ill-founded. They are not a matter of a different
but justifiable opinion that may or may not be wrong. They are ‘not even
wrong’ but simply nonsense.
•
The only reliable way to make projections about GDP or emissions (or
anything else) is by way of dynamic methods such as used in economic
modelling.
Statistical Appendix:
Frequency of CO2 Elasticities: All Countries, 1980-98, GDP growth between 6% and 8% p.a.
Frequency
10%
A Frequency analysis of the
elasticities which have occurred in
the context of economic growth
between 6% and 8% over the last
twenty years reveals that half of
them were below 0.8 (the median
of the distribution)
8%
0.8
5%
3%
3.4%
1.0%
0%
More than 5
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
Less than -5
Elasticities