Transcript Economic Freedom, Economic Growth and Climate Change Policy

Economic Freedom, Economic
Growth and Climate Change Policy
Dr. Margo Thorning
Managing Director,
International Council for Capital
Formation
Prepared for presentation
at COP 10, December 15, 2004
Buenos Aires, Argentina
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CO2 Reductions Required by 2050 Under
550 PPM Scenario
Where Does Europe Stand on
Actually Complying with Kyoto?
 European Union is projected to be 7.5% above the
1990 emission levels by 2010.
 EU leaders realize they cannot reconcile goals of
increased EU industrial competitiveness as well as
tighter future targets for GHG emission reductions.
 Economic research shows Kyoto and tighter targets
could reduce EU GDP by 1.5 to 4% annually.
 EU policy-makers are beginning to worry about the
additional steps required to meet the targets
including the impact of emission trading schemes on
industry.
What Impact Would Emission Targets
Have on Latin America?
MMTC
1200
1079
1000
800
768
600
400
678
617
347
459
Brazil
Other Central
and South
America
200
0
2001
2010
2020
 Latin American emissions are projected to grow by
27% in 2010 and 82% by 2020
 Even holding emissions constant would reduce
GDP levels and employment
Economic Freedom and the Adoption of
New Energy Technologies
 Economic Freedom Promotes Improved Living
Standards: protection of investment, openness of internal
markets, overall share of output absorbed by government,
political freedom
 Faster Economic Growth: associated with adoption of new
energy technologies which reduces energy intensity of
emissions as living standards rise
Barriers to new technology:
 Pricing distortions
 Lack of markets
 Subsidies through State run enterprises
 Lack of protection for property rights including intellectual
property
 Restrictions on foreign direct investment
 Lack of infrastructure, education, skills to handle new
technology
 Import restrictions
Energy Intensity and Economic Freedom in
Developing and Emerging Economies
Energy per Freedom
GDP
Index
Carbon
per GDP
GDP per
capita
(Btu per 1995 $)
(MMTC per
1995 $)
(1995 $)
Country
Russia
75,540
5.04
1.15
$2,500
China
36,578
5.49
0.77
$870
India
27,053
6.12
0.54
$495
South Africa
25,568
6.77
0.58
$3,985
Indonesia
20,373
5.57
0.37
$998
Poland
20,905
6.00
0.46
$4,276
Energy Intensity and Economic
Freedom in Developed Countries
Country
United
States
United
Kingdom
Ireland
Energy per Freedom
GDP
Index
Carbon
per GDP
GDP per
capita
(Btu per 1995 $)
(MMTC per
1995 $)
(1995 $)
10,660
8.29
0.17
$31,695
7,336
8.23
0.12
$22,708
5,859
7.95
0.11
$28,953
Germany
5,366
7.32
0.09
$32,827
Hong Kong
4,658
8.63
0.09
$24,281
Japan
3,858
7.06
0.06
$44,680
Promising Technologies to Reduce GHG Emissions
 Efficiency Improvements:
In current energy sources and in transport
Advanced electrical grids
 Decarbonization and Carbon Sequestration:
Hydrogen production from water rather than natural gas
Biomass and coal gasification
Renwables:
 Biomass
 Photovoltaic
 Wind
 Hydropower
 Geothermal
 Tidal
Space Solar Power
Nuclear Fission and Fusion:
Pebble beds reactors offer more safety
Fusion is promising due since it would not be potentially fuel constrained
Geoengineering: technologies to compensate for warming produced by
GHG’s
Injecting reflective sulfates, sub-micrometer dust in the upper atmosphere,
giant reflecting mirrors based in space
Impact of New Technologies on
Carbon Emissions
Million Metric Tonnes Carbon/Billion $1997
Carbon Emissions Per Dollar/ Output
0.7
0.6
0.5
Installed Plant
and Equipment
0.4
0.3
New Investment
in Plant and
Equipment
0.2
0.1
0
China
India
U.S.
Japan
Practical Strategies to Address
Economic Growth and Climate Change Policy
 Remove barriers to developing world’s access
to more energy and cleaner technology by
promoting economic freedom and market
reforms
 Increase R&D for new technologies to reduce
energy intensity and develop alternatives to
fossil fuels
 Develop sequestration through both natural
and man-made technologies
Promote nuclear power for electricity
 Expand bilateral cooperation with developing
countries
 Promote a truly global solution