Transcript Slides, RFF - Harvard Kennedy School

A Proposed Global Climate Policy
Architecture: Comprehensive Emission
Targets from Specific Formulas
Jeffrey Frankel
Harpel Professor, Harvard Kennedy School
Academic Seminar Series
Resources for the Future, April 23, 2009
What successor to the 2008-12 regime?
ideally in Copenhagen
in December
• Features of Kyoto worth building on -– Politics: Quantitative limits maximize national sovereignty
– Economics: Market mechanisms
– Thus (2001)
“You’re Getting Warmer: The Most Feasible Path
for Addressing Global Climate Change Does Run Through Kyoto.”
• What is missing:
– Participation by US, China, & other developing countries
– A mechanism for setting targets far into the future
– Any reason to expect compliance.
J. Frankel, Harvard
2
Desiderata for the next stage,
requirements for the next multilateral treaty
• Comprehensive participation
– getting US, China, India, et al, to join
• Efficiency -- esp. trading
• Dynamic consistency – a credible century path
• Equity -- re poor countries
• Compliance -- No country will join if the plan implies, ex
ante, big economic sacrifice overall.
• Robustness -- No country will stay in if compliance
implies, ex post, huge economic cost in any given period.
J. Frankel, Harvard
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Proposed Architecture for
Quantitative Emissions Targets
• Unlike Kyoto, my proposal seeks to bring all
countries in & to look far into the future.
• But we can’t pretend to see with a fine degree
of resolution at a century-long horizon.
• How to set a century of quantitative targets?
– A decade at a time, in a sequence of negotiations;
– but within an overall flexible framework of formulas,
– building confidence as it goes along.
J. Frankel, Harvard
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The formulas are designed pragmatically, based
on what emissions paths are possible politically:
• unlike other approaches based purely on:
– Science
(concentration goals),
– Ethics
(equal emission rights per capita),
– or Economics
(cost-benefit optimization).
• Why the political approach?
The usual proposed paths are not
dynamically consistent: it is not credible that successor
governments will abide by today’s leaders’ commitments.
J. Frankel, Harvard
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“An Elaborated Proposal For Global Climate Policy
Architecture: Specific Formulas and Emission
Targets for All Countries in All Decades,” March 2009
Suggests a
framework of
formulas that
produce precise
numerical targets
for CO2 emissions
in all regions
in all decades.
J. Frankel, Harvard
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The formulas are driven by 6 axioms:
1. The US will not commit to quantitative targets if China &
major developing countries do not commit to quantitative
targets at the same time, due to concerns about
economic “competitiveness” & carbon leakage.
2. China & other developing countries will not make
sacrifices different in character from those made by
richer countries who have gone before them.
3. In the longer run, no country can be rewarded for having
“ramped up” its emissions high above the levels of 1990.
4. No country will agree to join if it costs more than, say,
1% of GDP throughout the century.
5. No country will abide by targets that cost it more than,
say, 5% of GDP in any one period.
6. If one major country drops out, others will become
discouraged and the system may unravel.
J. Frankel, Harvard
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Building on existing commitments
• Between now and 2050, the EU follows the path
laid out in the 2008 EC Directive (50% below 1990),
• US follows the path in the Lieberman bills (67% below 1990) ,
• and Japan, Australia & Korea follow statements that
their own leaders have recently made.
• China, India & others agree immediately to
quantitative targets which at first merely copy their
BAU paths, thereby precluding leakage.
J. Frankel, Harvard
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When the time comes for developing countries’ cuts,
• their emission targets are determined by a
formula that incorporates 3 elements,
designed so they are only asked to take actions
analogous to those already taken by others:
– a Progressive Reduction Factor,
– a Latecomer Catch-up Factor, and
– a Gradual Equalization Factor.
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The targeted reductions from BAU agreed to at Kyoto
Cuts ↑
Percent reduction from 2010 business-as-usual .
in 1997 were progressive with respect to income.
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
500
2.699
1,000
2,000
5,000
10,000
20,000
3.699
1996 GDP per capita (1987 US dollars, ratio scale)
J. Frankel, Harvard
50,000
4.699
Incomes →
10
The three factors in the formulas
• Progressive Reduction Factor:
– For each 1% difference in income/cap =>
target is 0.14% greater emissions abatement from BAU
(as also agreed at Kyoto).
• Latecomer Catch-up Factor:
– Gradually close the gap between the latecomer’s starting
point & its 1990 emission levels, at the same rate as US.
(Goal: avoid rewarding latecomers for ramping up emissions).
• Gradual Equalization Factor:
– In the long run, rich & poor countries’ targets converge
in emissions per capita. (Goal: equity)
J. Frankel, Harvard
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The resultant paths for emissions targets,
permit trading, the price of carbon,
GDP costs, & environmental effects
• estimated by means of the WITCH
model of FEEM, Milan, co-authored
& applied by Valentina Bosetti.
J. Frankel, Harvard
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Bottom line:
• Concentrations level off at 500 ppm
in the latter part of the century.
• No country in any one period suffers a loss
as large as 5% of GDP by participating.
• Present Discounted Value of loss < 5% GDP.
J. Frankel, Harvard
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The 11 regions:
• EUROPE =
– Old Europe
– New Europe
+
• US = The United States
• KOSAU = Korea + S. Africa
+ Australia (3 coal-users)
• CAJAZ = Canada, Japan &
New Zealand
• TE = Russia & other
Transition Economies
• MENA = Middle East +
North Africa
• SSA = Sub-Saharan Africa
• SASIA= India &
the rest of South Asia
• CHINA = PRC
• EASIA = Smaller countries
of East Asia
• LACA = Latin America &
the Caribbean
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Two versions
• (I) Cut developing country emissions only after thresholds. 1a:
– China’s target is not cut below BAU until 2040
• => permit sales > 1 gigaton of Carbon in 2040.
– SEAsia does not have to cut below BAU
• => permit sales > 1 gigaton in 2080-2100;
• and it registers big economic gains toward the century end. [1]
– Africa similarly.
• I judge such huge international transfers unsustainable politically.
• (II) Instead, assign developing countries earlier targets.
1b:
– Southeast Asia & Africa get targets below BAU after 2050;
– move forward by 10 years the date China takes on cuts (to 2030),
– and by 5 years the date MENA is asked to do so (to 2040).
•
An additional reason was to reduce the slackening in global targets—observable as a carbon price dip —that would otherwise occur around 2035.
– Version (II) is presented here. Version (I) in Appendix.
–
[1] Figs. 2a-6a & Table 3a; or Fig.s 2-8 and Tables 1 & 2 – especially Fig. 7 -- in HPICA DP 08-08.
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Emissions path for rich countries
Fig. 2b
OECD Emissions
7
6
GtC
5
BAU
Simulated Emissions
4
CAP
3
2
1
0
10
0
2
25
0
2
40
0
2
55
0
2
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0
2
85
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00
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2
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Predicted actual
emissions exceed
caps, by permit
purchases.
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Emissions path for poor countries
Fig. 4b
NON OECD Emissions
20
BAU
13
GtC
Simulated Emissions
CAP
7
21
00
20
85
20
70
20
55
20
40
20
25
20
10
0
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Predicted actual
emissions fall
below caps, by
permit sales.
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Emissions path for the world
Fig. 5b
World Industrial Carbon Emissions
bau
25
15
Sim ulated
Em is s ions
10
5
0
20
05
20
20
20
35
20
50
20
65
20
80
20
95
GtC
20
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Global peak
date ≈ 2035
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Price of Carbon Dioxide
Fig. 6b
Price of Carbon Permits
1000
600
rises slowly over 50
years, then rapidly.
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400
200
0
2005 2020 2035 2050 2065 2080 2095
Zoom on Price of Carbon Permits
$/tCO2e
$/tCO2e
800
180
160
140
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80
60
40
20
0
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Concentrations stay below 500 ppm goal
Fig. 7b
Carbon Conce ntrations (CO2 only)
bau
800
750
700
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550
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450
400
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85
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Temperature rises 3° rather than 4°
Fig. 8b
Temperature increase (above pre-industrial)
4
bau
3.5
3
°C
2.5
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Yes, I know.
The pay-off is
a let-down.
21
The next paper
(co-authored with Valentina Bosetti)…
• (1) See if we can hit concentrations = 450 ppm
– Answer, so far: yes, but not within the constraints.
• (2) See if the emission target trajectories
suggested by others violate our constraints
(e.g., 5% of GDP in some periods), and how badly.
Of the eventual extensions I hope to do,
• the most important will be to introduce uncertainty,
especially in the form of stochastic growth processes.
– Robustness will require:
• Possible decadal updates of BAU & formula parameters;
• within-decade indexation of targets to GDP.
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Preliminary results from target cuts severe
enough to reach a 450 ppm target by 2100...
800
750
700
650
600
550
500
450
400
350
300
bau
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95
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65
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20
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ppmv
Carbon Conce ntrations (CO2 only)
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…show GDP losses of 6-7% for most
countries in the later decades, to hit 450 ppm.
GWP Losses wrt BaU in 450 CO2 only Scenario
USA
OLDEURO
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100
2.00%
NEWEURO
KOSAU
CAJAZ
0.00%
TE
MENA
-2.00%
SSA
SASIA
-4.00%
CHINA
EASIA
-6.00%
LACA
-8.00%
WORLD
-10.00%
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Appendix I: Commitments recently made by country leaders
European Union
• The EU emissions target for 2008–2012 was agreed at Kyoto: 8 % below 1990.
• Brussels in 2008:
–
–
In the 2nd 2015–2020 period, target = 20 % below 1990.
For the 3rd period (2022–2027), and thereafter up to the 8th period (2048–2052),
the EU targets progress in equal increments to a 50 % cut below 1990.
Japan
• PM Fukuda in 08: Target = 60 % below 2000 by 2050.
The United States
(Now way above Kyoto targets)
•
(Assume equal increments over 2010- 2050.)
We assume average annual emissions growth rate is cut ½ during 2008–12,
–
to 0.7 % per year, so that emissions in 2012 are 31.5 % above 1990;
•
and flat over 2012–2017.
•
Then we implement the Lieberman–Warner formula
•
emissions in 2050 reach 67 % below 1990 => 98.5 % below 2012. => Reductions of 2.6 % per year.
Australia PM Rudd in 08: plans to cut emissions to 60 % below 2000 by 2050
Korea
(Would be the first non-Annex I country to take a target.)
• Pres. Myung-bak Lee, March 2008: “tabled a plan to cap emissions at current levels over
the first Kyoto period” and “vowed his country would slash emissions in half by 2050,”
–
Emissions have risen 90 % since 1990.
•
It is hard to imagine applying the brakes so sharply as to switch from 5 % annual growth to 0.
• My interpretation: emissions flatten between 2007 and 2022
China
• Reportedly announced plans to start cutting emissions in 2030, presumably vs. BAU
(ahead of the 2007 G8 summit, according to Germany’s environment minister -- FT 3/12/07.)
J. Frankel, Harvard
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Appendix II: More on hitting 450 ppm
• Our 1st pass at attaining 450 ppm
concentrations entailed:
– negative emissions allocated to W. Europe by
2065 !
– Very big purchases of permits from developing
countries. Seems unlikely.
– And even then does not quite hit 450 ppm.
• At a 2nd pass, we tightened parameters &
moved up further the dates at which
developing countries start cutting below BAU.
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Next step
• EU:
– in 2015-2020, EU target is 30 % below
1990 levels, rather than 20 %.
• Developing countries start cutting
below BAU still earlier than before:
–
–
–
–
–
MENA starts making cuts in 2020
LACA starts in 2020
China starts in 2020
South Asia in 2030.
East Asia in 2035
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450 ppm goal
with even earlier starting dates
for developing countries, so they peak ≈ 2030
NON OECD Emissions
{
20
GtC
13
7
0
10
0
2
20
0
2
30
0
2
BAU
40
0
2
50
0
2
60
0
2
70
0
2
80
0
2
Simulated Emissions
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90
0
2
00
1
2
CAP
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450 ppm goal
with even earlier starting dates for developing countries
OECD Emissions
6
5
4
3
2
{
1
0
20
10
20
20
20
30
20
40
20
50
20
60
20
70
20
80
20
90
21
00
GtC
=> permit
purchases
by rich
countries
are
smaller.
7
BAU
Simulated Emissions
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CAP
29
450 ppm goal
with even earlier starting dates for developing countries
Global emissions peak ≈ 2025
World Industrial Carbon Emissions
25
GtC
20
15
10
5
0
05 015
0
2
2
25 035
0
2
2
bau
45 055 065
0
2
2
2
75 085
0
2
2
95 105
0
2
2
Simulated Emissions
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Environmental Effectiveness
Concentrations actually level off at 450 ppm by 2050 !
Carbon Concentrations (CO2 only)
bau
700
650
600
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ture
550
500
450
400
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2105
2095
2085
2075
2065
2055
2045
2035
2025
2015
350
300
2005
ppmv
800
750
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Environmental Effectiveness
Temperature increase (above pre-industrial)
4
3.5
bau
3
°C
2.5
2
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Even though the 450 ppm target is achieved by mid-century, the pay-off in further
temperature moderation, relative to 500 ppm, is not large. There are diminishing
returns to CO2 abatement in two senses: The marginal cost of abatement rises in
dollar terms, and the marginal cost of temperature moderation rises in terms of CO2.
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Price of Carbon for 450 ppm case
Price of Carbon Permits
Reaches $100 / ton
already by 2010
2000
1000
(=> ≈ 25¢/gal. of gasoline or heating oil);
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$1,800 / ton by 2100.
500
0
2005 2020 2035 2050 2065 2080 2095
Zoom on Price of Carbon Permits
$/tCO2e
$/tCO2e
1500
800
700
600
500
400
300
200
100
0
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Resulting Per Capita Emissions
Thanks to the beyond-2050 convergence rule, emissions/capita again nicely converge.
Per Capita Emissions
6
USA
OLDEURO
NEWEURO
5
KOSAU
CAJAZ
4
TE
MENA
3
SSA
SASIA
CHINA
2
EASIA
LACA
1
World
0
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100 2105
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But again the 5% of GDP loss constraint is
violated during the latter decades, for at least 3 regions
GWP Losses wrt BaU in Stricter Beyond 2050 Scenario
USA
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100
8.00%
OLDEURO
NEWEURO
6.00%
KOSAU
4.00%
CAJAZ
2.00%
TE
0.00%
MENA
SSA
-2.00%
SASIA
-4.00%
CHINA
-6.00%
EASIA
-8.00%
LACA
-10.00%
WORLD
-12.00%
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The PDV of cost, as share of GDP,
also exceeds the 1% threshold
(discount rate = 5%)
• The global cost is 1.8% of GWP.
PDV of cost as share of GDP to attain 450 ppm concentrations target
(discount rate = 5%)
USA
W.
Europe
1%
C&E
Europe
2%
ME&NAfr S-S Afr.
S.Asia
China
SE Asia
Lat.Amer.
0%
4%
1%
2%
2%
3%
-1%
Kor.SAfr.A Can.Jpn.
ustra.
NZ
1%
1%
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Transtn.
Ec.s
2%
36
Appendix III
• Version (a), where developing countries are
not asked to cut emissions below BAU
until they cross certain thresholds.
– MENA 2030
– China 2040
– SEAsia 2100
– Africa never
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Targets for emission per capita, by region
Fig. 2, HPICA DP 08-08
7
USA
6
OLDEURO
NEWEURO
KOSAU
5
CAJAZ
TE
4
MENA
SSA
3
SASIA
CHINA
EASIA
2
LACA
World
1
0
2005 2010
2015 2020 2025 2030
2035 2040 2045 2050
2055 2060 2065 2070 2075
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2080 2085 2090 2095
2100 2105
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Emissions path for industrialized countries
Fig. 2a
OECD Emissions
7
6
5
4
Simulated Emissions
3
CAP
2
1
0
20
10
20
20
20
30
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40
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50
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60
20
70
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80
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90
21
00
GtC
BAU
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Predicted actual
emissions exceed
caps, by permit
purchases.
39
Emissions path for poor countries
Fig. 3a
NON OECD Emissions
20
BAU
13
GtC
Simulated Emissions
CAP
7
21
00
20
85
20
70
20
55
20
40
20
25
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10
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Predicted actual
emissions fall
below caps, by
permit sales.
40
Fig. T1: Permit Trade 2010-2035 (late LDC targets)
Net Import of Permits
0.8
0.6
0.4
GtonC
0.2
0
---
2010
2015
2020
2025
2030
2035
-0.2
-0.4
-0.6
-0.8
USA
OLDEURO
NEWEURO
KOSAU
CAJAZ
TE
MENA
SSA
SASIA
CHINA
EASIA
LACA
-1
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Fig. T2: Permit Trade 2040-2090 (late LDC targets)
Net Import of Permits
1
0.5
0
Gton C
2040
2045
2050
2055
2060
2065
2070
2075
2080
2085
2090
-0.5
-1
USA
OLDEURO
NEWEURO
KOSAU
CAJAZ
TE
MENA
SSA
SASIA
CHINA
EASIA
LACA
-1.5
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Emissions path for the world, in the aggregate
Fig. 4a
World Industrial Carbon Emissions
25
bau
15
10
Simulated
Emissions
5
20
95
20
80
20
65
20
50
20
35
20
20
0
20
05
GtC
20
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Price of Carbon Dioxide Rises Slowly
Over 50 Years, then Rapidly
Fig. 5a
800
700
600
500
400
300
200
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0
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Price of Carbon Permits
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Loss of Aggregate Gross World Product
by budget period, 2015-2100
with later targets for developing countries
Fig. 6
GWP loss
20
95
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65
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55
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45
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35
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25
-0.1%
20
15
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0.0%
-0.2%
-0.3%
-0.4%
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-0.5%
-0.6%
-0.7%
-0.8%
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Concentrations almost hit the 500 ppm goal
Fig. 7a (Fig. 9, HPICA DP 08-08)
Carbon Concentrations (CO2 only)
800
750
bau
700
600
550
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450
400
350
300
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20
85
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ppmv
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Temperature rises 3° rather than 4°
Fig. 8a (Fig. 10, HPICA DP 08-08
)
Temperature increase (above pre-industrial)
4
3.5
3
bau
°C
2.5
2
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Harvard Project on
International
Climate
Agreements;
Thanks to
Valentina
Bosetti
directed by
J.Aldy & R.Stavins.
Paper: http://ksghome.harvard.edu/~jfrankel/SpecificTargetsHPICA2009.doc
Available at: http://ksghome.harvard.edu/~jfrankel/currentpubsspeeches.htm#On%20Climate%20Change