Transcript slides - Harvard Kennedy School

After Durban:
What is the Politically Sustainable Path
of Targets for Greenhouse Gas Emissions?
Jeffrey Frankel
Harpel Professor, Harvard Kennedy School, March 27, 2012
The Question
1. At Durban (Dec. 2012), developing countries essentially
agreed at last to join the same GHG emissions control
regime as industrialized countries:
–
–
A “non-binding agreement to reach an agreement” by 2015
bringing all countries under the same legal regime by 2020,
thus replacing the Berlin Mandate (1995).
2. But they still refuse to sacrifice
their economic development
-- as understandable as ever.
3. The question: how to set emission targets so as to take
proper account of country differences, esp. income.
2
Sustainable cooperation:
Need to bridge
• the gap between rich countries & poor,
• the gap between environmental aspirations
& economic costs that people are willing to pay,
• the gap between what leaders say, &
what commitments are enforceable/credible.
3
There are grounds for hope that the Durban
climate regime will follow Kyoto, but fix it
• Features of the Kyoto Protocol worth building on -– Politics: Quantitative limits maximize national sovereignty
– Economics: Market mechanisms, esp. international permit trading
– Thus (2001) “You’re Getting Warmer: The Most Feasible Path
for Addressing Global Climate Change Does Run Through Kyoto.”
• What was sorely missing from Kyoto:
– Participation by US, China, & other developing countries
– A mechanism for setting targets further into the future, past 2012
– Any reason to expect compliance.
4
Progress
• Most countries (>80) responded to the Copenhagen Accord
in 2010 by submitting plans for reducing emissions.
• By the time of Cancun, 21 countries had
associated themselves with specific quantitative targets
• counting the EU27 as one
• and including 7 big non-Annex-I countries.
• Of course some, like China or US, are vague
• about seriousness of commitment.
• Also India & China’s 2020 target ≈ BAU (Business as Usual).
• But that is not a problem. It is what we have proposed all along.
5
My Proposal:
formulas for pragmatic targets,
based on what emission paths are sustainable 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?
– Countries will not accept burdens they view as unfair.
– Above certain thresholds for economic costs, they will drop out.
6
“An Elaborated Proposal For Global Climate Policy
Architecture: Specific Formulas and Emission
Targets for All Countries in All Decades” (2009)
suggested a framework
of formulas that produce precise
numerical targets for CO2 emissions in
all regions for the rest of the century,
subject to political constraints:
No country suffers loss (PDV) > Y=1% GDP, by signing up ex ante,
nor suffers a loss > X=5% GDP, in any one period, by abiding ex post.
7
Maximizing the credibility of agreement,
for any given environmental goal
Credibility of
an agreement,
Vs. probability
that it will unravel because
(e.g.) some key
players find
that complying
imposes huge
economic costs,
relative to
dropping out.
Frankel (2009)
Bosetti & F (UNDP, 2011)
•
•
•
Bosetti & Frankel (REEP)
Some proposals
500 ppm
|
450 ppm
|
•
350 ppm
|
Aggressiveness of targeted cut in CO2 concentrations by 2100
8
•
Proposal
Stage 1:
• Advanced countries commit to the targets
that their leaders have already announced for 2020.
• Others commit immediately not to exceed BAU.
•
Stage 2:
When the time comes for developing country cuts,
targets are determined by a formula incorporating
3 elements, designed so each is asked only to take actions
analogous to those already taken by others:
– a Progressive Reduction Factor,
– a Latecomer Catch-up Factor, and
– a Gradual Equalization Factor.
9
The three factors in the formulas
• Progressive Reduction Factor:
– For each 1% difference in income/cap =>
target is γ % greater emissions abatement from BAU.
• Latecomer Catch-up Factor:
– Gradually close the gap between the latecomer’s starting point
& its 1990 emission levels at λ per year.
(Goal: avoid rewarding latecomers for ramping up emissions).
– Baseline perhaps now moved from 1990 to 2005.
• Gradual Equalization Factor:
– In the long run, rich & poor countries’ targets converge
in emissions per capita at δ per year. (Goal: equity)
10
Where do the parameters come from?
• They would be negotiated.
• But a good start is to use parameters implicit
in targets that have already been agreed.
• The degree of progressivity in the PRF
can be estimated from observed pattern
– in allocations among countries already agreed (γ=.14).
• We estimated Latecomer Catch-up parameter from the speed
with which US targets close the gap: current vs. 1990 emission levels
– in Lieberman-Warner (2008) & Waxman-Markey bills (2009) => λ =.3 per 5-yr. period.
• Initially we set speed of Gradual Equalization δ=.1, per 5-yr. budget period
(which comes to dominate per capita targets toward the end of the century).
11
Cuts ↑
Percent reduction from 2010 business-as-usual .
The targeted reductions from BAU agreed to at Kyoto
in 1997 were progressive with respect to income.
50%
40%
30%
20%
10%
γ =.14
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)
50,000
4.699
Incomes →
12
This is how we set the parameter in the Progressive Reductions Factor
The resultant paths for emissions targets,
permit trading, the price of carbon,
GDP costs, & environmental effects
are estimated by means of
the WITCH model of FEEM, Milan,
co-authored & applied by Valentina Bosetti.
13
◙ In 2009 version, CO2 concentrations level off
at 500 ppm in the latter part of the century.
◙ Constraints are satisfied:
-- No country in any one period suffers
a loss as large as 5% of GDP by participating.
-- Present Discounted Value of loss < 1% GDP.
W orld Industrial Carbon Emissions
25
bau
15
10
Sim ulated
Em is s ions
5
0
20
05
20
20
20
35
20
50
20
65
20
80
20
95
GtC
20
Global peak
date ≈ 2035
14
The last published paper (REEP)
co-authored with Valentina Bosetti
was an attempt to see if we could
hit CO2 concentrations = 450 ppm
– by assuming more aggressive parameters in the formulas.
15
Latest Bosetti-Frankel study (2011)
• updates all the estimates
• to reflect recent developments in
the economy, environment, & negotiations,
– particularly the Copenhagen-Cancun country targets,
– and to reflect new technologies, including
• Wind, separate from solar
• Carbon Capture & Storage (CCS) for gas
• Bio-energy (BE) with CCS in most runs .
• and again tries to attain more aggressive targets.
• “A Politically Feasible Architecture
for Global Climate Policy: Specific Formulas and Emission
Targets to Build on Copenhagen & Cancun”
– with Bosetti
– for the UN.
16
EU27 + 20 other countries
Country
Pledge at COP15
Australia 1, 3
Belarus
Canada
Croatia
Euro 27
Iceland
Greenhouse Gases Emissions (GT CO2-eq) 11
Copenhagen Pledges 12
Excluding LULUCF
LULUCF
Total
1990 2005 2020
1990 2005 2020
1990 2005 2020
LC
HC
LC
HC
LC
HC
LC
HC
0.02
0.00
0.02
0.00
0.02
0.00
0.02
0.00
0.00
0.00
0.06
0.00
0.00
0.07
0.89
0.44
0.14
0.62
0.03
5.59
0.00
1.29
0.36
0.06
0.05
3.38
0.05
0.93
6.18
1.61
0.48
0.13
0.65
0.03
4.47
0.00
0.98
0.31
0.06
0.03
2.83
0.04
0.74
5.90
1.68
0.37
0.13
0.65
0.03
3.91
0.00
0.98
0.31
0.05
0.03
2.50
0.04
0.74
5.90
1.61
11%
-6%
6%
-5%
-20%
-30%
-24%
-16%
-9%
-32%
-16%
-23%
-20%
-5%
4%
-15%
-11%
6%
-5%
-30%
-30%
-24%
-16%
-19%
-42%
-26%
-32%
-20%
-5%
0%
-11%
56%
-16%
-2%
-13%
-36%
-29%
29%
-28%
-36%
31%
-22%
75%
-17%
-34%
-32%
48%
-16%
-2%
-24%
-36%
-29%
29%
-36%
-46%
16%
-31%
75%
-17%
-37%
-23%
29%
-26%
-20%
-27%
-44%
-38%
18%
-37%
-44%
22%
-32%
44%
-28%
-37%
-41%
22%
-26%
-20%
-36%
-44%
-38%
18%
-44%
-52%
8%
-40%
44%
-28%
-40%
-26%
-6%
-34%
17
-30%
-41%
-30%
-34%
-30%
Brazil
-0.97 / -1.05 GtCO2-eq wrt BaU
China
2, 6
reduce carbon intensity of output
by 40-45% wrt 2005
3.72 7.61 10.75
0.04 0.03 -0.28
3.76 7.64 10.47
10.47 10.47
179% 179%
37% 37%
2, 8
reduce carbon intensity of output
by 20-25% wrt 2005
1.33 2.05 2.59
0.05 0.04 0.01
1.38 2.09 2.60
2.60 2.60
89% 89%
24% 24%
Indonesia 1
Mexico 1
South Africa 1
South Korea 1
-26% / -41% wrt BaU
0.45
0.45
0.34
0.30
0.41
0.03
0.00
0.00
0.86
0.48
0.35
0.30
1.20
0.82
0.34
0.55
40%
71%
-2%
84%
-24%
26%
-23%
-18%
-17% wrt 2005
-5% wrt 1990
-20% / -30% wrt 1990
-30% wrt 1990
1
-25% wrt 1990
Japan
Kazakhstan 4
New Zealand 1
Norway
Russian Federation
Switzerland
Ukraine
United States
India
-15% wrt 1992
-10% to -20% wrt 1990
-30% / -40% wrt 1990
1
-15% / -25% wrt 1990
-20% / -30% wrt 1990
-20% wrt 1990
-17% wrt 2005
-51 Mt CO2-eq / -30% wrt BaU
-34% wrt BaU
-30% wrt BaU
0.73
0.61
0.44
0.67
1.13
0.84
0.51
0.79
0.02
0.00
0.04
0.00
0.01
0.00
0.02
0.00
0.00
0.00
0.04
0.00
0.00
0.03
1.45
0.84
0.04
0.00
0.00
0.01
0.00
0.04
0.00
0.02
0.00
0.02
0.00
0.00
0.00
0.01
0.00
0.00
0.00
1.13
0.49
0.03
0.00
0.00
0.54
0.09
0.77
0.03
5.13
0.00
1.38
0.24
0.08
0.05
2.16
0.05
0.42
7.13
2.56
1.57
0.65
0.44
0.67
0.63
0.10
0.88
0.04
6.15
0.00
1.57
0.26
0.09
0.06
2.32
0.06
0.52
8.23
2.66
wrt 2005 (%)
1, 7
-5% / '-10% wrt 1990
0.62
0.10
0.83
0.04
6.13
0.00
1.54
0.26
0.09
0.06
2.31
0.06
0.52
8.23
1.53
wrt 1990 (%)
0.42
0.14
0.59
0.03
5.57
0.00
1.27
0.36
0.06
0.05
3.32
0.05
0.93
6.11
0.72
-5%, -15% to -25% wrt 2000
0.53
0.08
0.73
0.03
5.12
0.00
1.35
0.24
0.08
0.05
2.12
0.05
0.42
7.10
1.11
Target
2011
1.62
0.87
0.51
0.79
0.96
0.61
0.34
0.55
12%
27%
-2%
84%
-39%
-6%
-23%
-18%
wrt BaU (%)
Progressivity in the Cancun numbers
2011
setting “hot air” to 0 for 6 FSU countries
% cut wrt baseline
Cuts ↑
The implicit progressivity coefficient is almost exactly
the
same as the one we had been using: .13 ≈ .14 !
60%
=> external validation of the political economy of approach
a
50%
40%
30%
a
γ =.13
t =3.9
20%
Emissions 10%
targets
for 2020
expressed 0%
vs. BAU
500
R2=.44
Regression line
5,000
50,000
(WITCH model)
GDP per capita
18
Our 12 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
• India now treated separately
• SASIA= the rest of South Asia
• CHINA = PRC
• EASIA = Smaller countries
of East Asia
• LAC = Latin America
& the Caribbean
19
Figure 2: Global emission targets
resulting from the formulas & parameters
under the 500 ppm goal
Using Cancun targets, near-term cuts are bigger than in our earlier work.
80.00
70.00
BaU
60.00
50.00
40.00
Proposed
Architecture no
BECCS
30.00
20.00
10.00
0.00
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060
2065
2070
2075
2080
2085
2090
2095
2100
Energy related CO2 Emission (Gton CO2)
90.00
20
Fig.3: Targets & emissions by OECD countries
under the 500 ppm goal
20.00
BaU
Actual Emissions
15.00
Assigned Amount
10.00
5.00
}
Predicted actual
emissions exceed
caps, by permit
purchases.
0.00
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060
2065
2070
2075
2080
2085
2090
2095
2100
Energy related CO2 Emission (Gton CO2)
25.00
21
Fig.4: Targets & emissions, developing countries
under the 500 ppm goal
60.00
50.00
BaU
Actual Emissions
40.00
Assigned Amount
30.00
20.00
}
Predicted actual
emissions fall
short of caps,
by permit sales.
10.00
0.00
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060
2065
2070
2075
2080
2085
2090
2095
2100
Energy related CO2 Emission (Gton CO2)
70.00
22
Figure 8: Effect on energy prices,
under 500 ppm goal
400
350
300
250
200
Carbon price climbs steeply in 2nd half of century,
but < earlier estimates, presumably due to new technologies.
Carbon Price per ton CO2
(LHS axis)
3
2.5
$ per gallon motor
gasoline (RHS axis)
2
1.5
150
1
100
0.5
50
0
2000
3.5
0
2020
2040
2060
2080
2100
23
Figure 5: Global economic costs (% of income)
500 ppm goal (without BE-CCS)
2100
2095
2090
2085
2080
2075
2070
2065
2060
2055
2050
2045
2040
2035
2030
2025
2020
2015
2010
2005
Global cost < 1% of income
0.5%
0.0%
GWP Losses
-0.5%
-1.0%
-1.5%
Economic losses
Contemporaneous
Series1 value
Discounted at 5%
Series2
-2.0%
-2.5%
-3.0%
-3.5%
24
Economic cost to each country/region
(Net Present Value of income losses)
• Regional Cost
measured with respect to baseline (no global climate policy)
USA EU KoSAu CaJaZ TE MENA SSA SAsia China EAsia LAm India
0.7% 0.3% 0.7% 0.9% 1.6% 3.1% -0.2% -0.3% 1.2% 0.5% 0.8% 0.2%
• Regional Cost measured with respect to case where
individual country free rides, but coalition continues.
USA EU KoSAu CaJaZ TE MENA SSA SAsia China EAsia LAm India
0.8% 0.4% 0.9% 0.7% 1.2% 1.2% -0.2% 0.1% 1.2% 0.9% 0.7% 0.5%
Cost is particularly high to oil producers – even if they drop out.
But it is almost down to 1% even for them.
25
Figure 7a: Economic losses of each region,
relative to dropping out alone
(% of income) under 500 ppm goal, 2010-2045
0.40%
0.20%
USA
0.00%
EU
-0.20%
2005 2010 2015 2020 2025 2030 2035 2040 2045
KOSAU
-0.40%
CAJAZ
-0.60%
TE
-0.80%
MENA
-1.00%
SSA
-1.20%
-1.40%
Costs stay under 2% of income
during the 1st half of the century.
SASIA
CHINA
-1.60%
EASIA
-1.80%
26
Figure 7b: Economic losses of each region,
relative to dropping out alone
(% of income) under 500 ppm goal, 2050-2090
3.00%
USA
2.00%
EU
1.00%
KOSAU
0.00%
-1.00%
CAJAZ
2050 2055 2060 2065 2070 2075 2080 2085 2090
MENA
-2.00%
SSA
-3.00%
SASIA
-4.00%
-5.00%
-6.00%
TE
CHINA
For every country in every year,
costs stay under 5% of income.
EASIA
27
Figure 11: Path of concentrations
hits the 500 ppm CO2 goal
800
600
500
400
300
200
BaU
Proposed Architecture
with BECCS
100
0
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060
2065
2070
2075
2080
2085
2090
2095
2100
CO2 concentrations (ppm)
700
First environmental goal is achieved
28
Figure 12: Rise in Temperature
under the 500 ppm CO2 goal
4.00
3°C vs. 4° C under BAU
3.50
3.00
2.50
BaU
2.00
1.50
Proposed Architecture
with BECCS
1.00
0.50
0.00
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060
2065
2070
2075
2080
2085
2090
2095
2100
Temperature increase above preindustrial levels (°C)
4.50
29
Summary
• Our framework allocates emission targets across countries
in such a way that every country feels it is doing its fair share:
– corresponding to what others have done before it,
• taking due account of differences in income,
– and avoiding that any country will bear a cost above threshold.
• Specifically, every country expects cost < 5% GDP in every year,
– and PDV of costs of participating (almost) < 1% of GDP.
• Otherwise, announcements of distant future goals
would not be credible, will not have the desired effects.
– This framework—in providing for a decade-by-decade sequence of emission
targets, each determined on the basis of a few principles and formulas—
– is flexible enough to accommodate changes in circumstances
during the century, by changes in the formula parameters
• as more is learned about climate, economic growth, & technology.
30
Most relevant references by the author
• "Sustainable Cooperation in Global Climate Policy: Specific Formulas and Emission
Targets to Build on Copenhagen and Cancun," 2011, with Valentina Bosetti. HPICA
Discussion Paper No.46; FEEM Working Paper 66. Background study for Human Development Report 2011, UNDP.
• "How to Agree Emission Targets at Durban," with Bosetti, VoxEU, Nov.28, 2011.
• "Politically Feasible Emission Target Formulas to Attain 460 ppm CO2
Concentrations," with V.Bosetti; Review of Environmental Economics and Policy ,
Winter 2011-12; HKS RWP 11-016. From HPICA Disc.Paper 09-30.
•
"An Elaborated Proposal for Global Climate Policy Architecture: Specific Formulas and
Emission Targets for All Countries in All Decades,” 2009, in Post-Kyoto International
Climate Policy, edited by Joe Aldy & Rob Stavins, Chapter 2, (Cambridge U. Press).
•
“Formulas for Quantitative Emission Targets,” in Architectures for Agreement: Addressing Global Climate
Change in the Post Kyoto World, Joe Aldy & Rob Stavins, eds., Cambridge University Press, 2007.
•
"You're Getting Warmer: The Most Feasible Path for Addressing Global Climate Change
Does Run Through Kyoto," FEEM, Milan, 2001. In Trade and Environment: Theory and Policy in the
Context of EU Enlargement and Transition Economies, J.Maxwell & R.Reuveny, eds. (Edward Elgar , UK), 2005.
•
"Greenhouse Gas Emissions," Policy Brief no. 52, The Brookings Institution,1999.
31
Appendices
• 1) Trying to hit more aggressive targets
• 2) Is it economics?
• 3) Extensions for future work: Uncertainty
32
1) Bosetti-Frankel in REEP
• See if we can hit concentrations = 450 ppm
– Assumes EU target in 2015-2020 is 30 % below
1990 levels, rather than 20 %.
– Developing country starting dates moved up.
– Parameters in LCF & GEF tightened.
33
Bottom line
• The best we can do is attain 460 ppm
• Even then, we had to loosen our
political/economic constraints:
– We had to raise the threshold of costs
above which a country drops out,
as high as Y =3.4% of income in PDV terms,
– and X =12 % in the worst budget period.
34
Target allocations to hit goal of 460 ppm
source: Bosetti & Frankel (Nov. 2009)
6
Figure
2: Actual Emission per capita throughout the century, for 11 regions
5
USA
EURO
tonC/cap per year
4
KOSAU
CAJAZ
TE
3
MENA
SSA
SASIA
CHINA
2
EASIA
LACA
World
1
0
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100
35
Figure 3:
Assigned targets & actual emissions for industrialized countries, aggregate
460 ppm (Note: Predicted actual emissions exceed caps by permit purchase amounts.)
7
6
GtC
5
4
3
BaU
Actual Emissions
Assigned Amount
2
1
0
2005 2015 2025 2035 2045 2055 2065 2075 2085 2095
36
Figure 4:
Assigned targets & actual emissions for poor countries, aggregate
GtC
460 ppm (Note: Predicted actual emissions fall below caps by permit sales amounts)
18
16
14
12
10
8
6
4
2
0
BaU
Actual Emissions
Assigned Amount
2005 2015 2025 2035 2045 2055 2065 2075 2085 2095
37
Figure 5:
Assigned targets & actual emissions for all countries, aggregate
Goal: 460 ppm concentration of CO2 in year 2100
25
GtC
20
15
BaU
Assigned Amount
10
5
0
2005 2015 2025 2035 2045 2055 2065 2075 2085 2095
38
2.00%
7 a) 2010- 2045
1.00%
USA
Figure 7:
Income
Losses by
Region and
Period over
the Century
(460 ppm)
EU
0.00%
KOSAU
CAJAZ
TE
-1.00%
MENA
SSA
SASIA
-2.00%
CHINA
EASIA
LAM
-3.00%
-4.00%
2010
2015
2020
2025
2030
2035
2040
2045
25.00%
20.00%
7 b) 2050- 2100
USA
15.00%
EU
KOSAU
10.00%
CAJAZ
TE
5.00%
MENA
SSA
0.00%
SASIA
CHINA
-5.00%
EASIA
LAM
-10.00%
-15.00%
2050
2055
2060
2065
2070
2075
2080
2085
2090
2095
2100
39
Figure 8: Global Income Loss
-- by Budget Period, 2010-2100, and PDV (discounted to 2005)
2005
2015
2025
2035
2045
2055
2065
2075
2085
2095
0.0%
-0.5%
GWP % Change wrt BAU
-1.0%
-1.5%
-2.0%
-2.5%
-3.0%
-3.5%
-4.0%
-4.5%
Global Losses
Discounted Global Losses (5%)
40
Figure 9:Losses by Region
-- PDV (discounted to 2005 at 5% discount rate), 2010-2100
4.0%
Net Present Value Income Losses wrt BAU
3.0%
2.0%
1.0%
0.0%
USA
EU
KOSAU CAJAZ
TE
MENA
SSA
SASIA CHINA EASIA
LAM
-1.0%
-2.0%
-3.0%
-4.0%
41
Figure 10: CO2 concentrations
to achieve year-2100 goal of 460 ppm
800
750
700
ppmv
650
600
550
500
450
bau
Frankel Architecture
400
350
300
42
Figure 11: Rise in temperature
under proposed targets (460ppm) vs. BAU
4
3.5
3
2.5
2
bau
Frankel Architecture
1.5
1
0.5
2105
2095
2085
2075
2065
2055
2045
2035
2025
2015
2005
0
Even though the 460 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
43
dollar terms, and the marginal cost of temperature moderation rises in terms of CO2.
Figure A1. Choosing country targets
to minimize threshold for PDV country costs
loses the simplicity of a common formula for all,
(green triangles)
without much gain in reducing PDV of global losses
Present Value GWP Loss
1.60%
1.40%
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
450
460
470
480
ppm CO2 only
490
500
510
44
Figure A2. Varying the developing country start dates
tightens or loosens the CO2 concentration objective
Maximum National Income Loss in any
Period
(blue diamonds)
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
450
460
470
480
490
500
510
ppm CO2 only
45
Conclusions
• Some may conclude that the goals of 380
or 450 ppm in CO2 concentrations are not
attainable in practice,
– and that our earlier proposal for 500 ppm
is the better plan (Frankel, 2009).
– We take no position on the best environmental goal.
– Rather, we submit that, whatever the goal,
our formulas will give targets that are more
practical economically and politically than
approaches that have been proposed by others.
46
Appendix 2:“Is it economics?”
• Define economics as maximization
of objectives subject to constraints.
• That applies not just to private agents maximizing
expected utility subject to budget constraints,
• but also to how policy-makers can maximize
objectives subject to political constraints.
• Not the same as what other climate modelers do:
– cost-benefit analysis (Integrated Assessment models),
– or minimizing economic costs subject to
the constraint of attaining a given environmental goal.
47
Appendix 3: Uncertainty
• The next phase of our research
allows for uncertainty
– in baseline economic growth
– In carbon-saving technological progress
– In environmental goals that the politics support
48
Two separate motivations to allow for uncertainty
• (1) Some readers don’t believe cost estimates
– from WITCH or other models
• saying they are too high
• or too low.
– Allowing for true year-2050 parameters
that differ from current assumptions
• readers can see how much difference it makes.
• Lesson: Just get started !
– Decade-by-decade political sustainability constrains numerical
target choices far more than discount rate calculations
49
Two separate motivations to allow for uncertainty, continued
• (2) The political sustainability constraint
that requires loss X < 5% GDP, for every country
in every period, becomes harder to satisfy.
• Requires using the flexibility that is built in
to our target-formulas framework:
– Negotiators update parameters periodically,
• in line with developments
– Express within-decade targets as indexed to GDP
– perhaps proportionately (“intensity targets”)
– Perhaps allow “escape clauses” if cost of carbon too high or low
50
Papers available at: http://ksghome.harvard.edu/~jfrankel/currentpubsspeeches.htm On Climate Change