Transcript ppt

Nov 2014: China-US agreement on carbon emissions
-President Obama pledges to reduce GHG emissions by -26 to 28%
of 2005 levels by 2025
-president Xi Jinping pledges that China’s GHG emissions will peak
by ~2030, if not sooner, and move to 20% no-carbon energy by 2030
NOTE: US + China = 30% of global GHG emissions
California and the Carbon
Relevant carbon prices as
of Jan 15, 2015
World
relative to Nov 15, 2014
DASHBOARD
California
$12.85
(+$0.71)
EU ETS
€7.14
(+€0.36)
RGGI
$5.44
(+$0.27)
Shenzhen
¥39.17
(-¥2.53)
Beijing
¥55.00
(¥2.05)
Shanghai
¥21.00
(-¥14.10)
Tianjin
¥25.05
http://californiacarbon.info/wpcontent/uploads/2015/01/California-andHubei
Guangdong
the-Carbon-World-Jan-2015.pdf
¥24.11
¥21.46
PRICE COMPARISON
Spot price (or equivalent)
Floor price (primary, if applicable)
Last auction price
Fixed Price
$24.23
carbon “taxes”
$25.00
cap and trade
$10.52
$4.23
$4.58
$4.82
$4.82
$3.87
$3.37
$3.37
$4.02
$7.71
$8.84
$6.29
$5.69
$5.69
$3.37
$5.00
$5.44
$2.00
$5.21
$10.00
$7.65
& S. Korea effective 1/1/15
$8.15
$15.00
$12.12
$20.00
$12.85
$12.10
$12.10
Notes:
California: Averaged broker CCA spot delivery bid-ask medians
EU ETS: (ICE Daily Future + EEX Spot) / 2
RGGI: Aggregated broker spot/same-month OTC prices; short ton
Chinese ETS’: Regulated spot exchanges, September 15. Note
Guangdong trading under the primary floor.
Auction Dates:
South Africa
Alberta
BC
New Zealand
Guangdong
Hubei
Tianjin
Shanghai
Beijing
Shenzhen
RGGI
EU ETS
$0.00
California
ALLOWANCE PRICE (IN USD, JANUARY 15, 2015)
$30.00
New Zealand: 1 NZU covers 2 MtCO2e, and can be bought spot from the
market or at fixed price from the regulators. Kyoto credits also recognised.
Canada: BC and Alberta have fixed carbon taxes
South Africa: Tax implementation delayed by a year, to 2016
http://californiacarbon.info/wpcontent/uploads/2015/01/California-and-the-Carbon-
http://ec.europa.eu/clima/policies/g-gas/documentation_en.htm#Reports
http://theenergycollective.com/trevorhouser/245991/
neck-and-neck-us-and-european-ghg-emissions-trends
http://theenergycollective.com/trevorhouser/245991/
neck-and-neck-us-and-european-ghg-emissions-trends
regate decomposition of the change in total CO2 emissions from fossil fuel combustion in th
d 2008-2012 periods.
Contributions to emissions changes in the EU
8,0%
6,0%
http://ec.europa.eu/clima/policies/g-gas/
documentation_en.htm#Reports
4,0%
2,0%
renewables
0,0%
-2,0%
Carbon intensity of energy
energy efficiency
Energy intensity of GDP
-3,3%
economic growth
GDP per capita
-4,0%
Population
-6,0%
Total change
8.3%
-8,0%
-9,2%
-10,0%
-12,0%
2005–2008
2008–2012
End use of proceeds ($) from carbon allowances across EU
Figure 9: Reported revenues from the auctioning of EU ETS allowances (millions of euros) in 2013 and share of
these revenues or the equivalent in financial value used or planned to be used for climate and energy related
purposes
800,0
Auctioning Revenues (million €)
700,0
600,0
Use of auctioning revenues not reported*
500,0
Not used for climate & energy related purposes
400,0
300,0
200,0
100,0
0,0
Used for international climate & energy related purposes
Used for domestic climate & energy related purposes
http://riskybusiness.org
Risk = probability of outcome x severity of its consequences
Costs of carbon mitigation?
vs
Costs of adaptation?
HOW DO WE MINIMIZE RISK?
Risk = probability of outcome x severity of its consequences
Temperature increase PDF for
targets
“tail” riskdifferent
= low-probabilitystabilization
event w/ potentially catastrophic
impacts
Climate
Risks are
Regional
3 areas of action to minimize climate risk:
1)change business practice to become
more resilient
2) investor adaptation (SEC issued guidance
on climate disclosure; only 40% of S&P
companies voluntarily participate)
3) public sector response – investments and
policies that can reduce GHG emissions
When combine high-tail risks w/ catastrophic costs,
any cost-benefit analysis (CBA) of climate change
mitigation vs. adaptation is dominated by so-called
“fat tail” risk.
e.g. Weitzman, Martin L. 2009. On modeling and interpreting
the economics of catastrophic climate change. Review of
Economics and Statistics 91(1): 1-19.
The Stern Review: The Economics of Climate Change
commissioned by UK Prime Minister & Chancellor in 2006
Some Stern numbers:
2050
the timeframe for most of their economic analyses
550ppm
the CO2 target level of stabilization
5-20%
range of costs to world output associated with climate change
comment: relatively pessimistic view of consequences
-1 to 5%
range of costs associated with stabilizing CO2 at 550ppm
comment: relatively optimistic view of mitigation
$85
cost of one ton of CO2 in Business as Usual (BAU)
$25-35
cost of one ton of CO2 for 550ppm stabilization
Stern, 2008
Tail risk of temperature response to CO2
Total cost of climate change in BAU scenario over next two centuries:
-5% of global per capita consumption
however, this 5% number does not take into account:
1) “non-market” impacts (how do you value human health and environmental
impacts?)
2) positive feedbacks in the climate system (such as???)
3) disproportionate impact of climate change on world’s poor (equity)
Including these factors could bring the cost of climate change to -20%!
What action is needed, according to Stern:
Mitigation:
1. Carbon pricing (tax or trading)
2. Technology policy (spur development of low-C energy)
3. Remove barriers to behavioral change (enforce changes where
economic incentives are not strong enough)
Adaptation:
1. Improve climate information; esp. regional climate forecasts
2. Land-use and building planning (infrastructure decisions)
3. Natural resource protection, coastal protection, etc
4. Financial safety net for poorest members of society
The Stern Report urgently calls for coordinated, international action,
justified by cost-benefit analysis of climate risks (costs of -5 to -20%)
balanced against mitigation (costs of -1 to -5%).
2. What is the range of model estimates of the costs of global climate change polic
Economic models give a range of cost estimates due to the number of key variables that
emission reduction goal similar to the Kyoto Protocol:
www.c2es.org
CGE or top-down models generally give marginal costs of $25-200/ton of carbon. T
GDP.
Technology-rich
or bottom-up
models generally
marginal costs of $0-50/ton ca
- run a “top-down”
climate
policy – economic
impactgive
model
of
U.S. GDP. assumptions,
Top [21]
(limitations,
inputs?)
3. Would particular sectors or industries be more affected?
-for a doubling of GHG (to 560ppm), benefits of
Sectors
responsible
for a predominant
share of greenhouse gas emissions would b
mitigation
$55-140billion
(0.5-2% GDP)
includes coal mines, oil refineries, natural gas importers, electricity producers, ceme
pulp mills, 0.2-1.5%
steel and other
companiesofand
glass manufacturers. However me
-cost of mitigation
GDPmetal
($25-200/ton
carbon)
sectors; these include recycling of revenues from emission permits or taxes, and to
communities and workers. Top [21]
4. How do costs per ton of carbon translate into costs of fuels?
How do we interpret a “price on carbon”?
A carbon price of $50/tC is equivalent to:
12¢/gallon of gasoline: from a base price of $1.50/gallon this is an 8% rise
75¢/mcf of natural gas: from a base price of $3/mcf this is an 25% rise
$25/ton of coal: from a base price of $30/ton this is an 83% rise. Top [21]
5. What economic instruments can be used to control emissions?
McKinsey 2008 report on cost of US GHG reductions
McKINSEY
GLOBAL
ABATEMENT
CURVE