Transcript A Proposed Global Climate Policy Architecture: How to Set Comprehensive Emission Targets Jeffrey Frankel Harpel Professor, Harvard Kennedy School Climate Governance Workshop, Oct.

A Proposed Global Climate Policy
Architecture:
How to Set
Comprehensive Emission Targets
Jeffrey Frankel
Harpel Professor, Harvard Kennedy School
Climate Governance Workshop, Oct. 20, 2009
Last Exit Copehagen?
The Goethe-Institut Boston & Center for European Studies
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
3
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
4
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
time-consistent: it is not credible that successor
governments will abide by today’s leaders’ commitments.
J. Frankel, Harvard
5
“An Elaborated Proposal For Global Climate Policy
Architecture: Specific Formulas and Emission
Targets for All Countries in All Decades,”
in 2009 Aldy-Stavins book,
suggests a framework of formulas
that produce precise numerical
targets for CO2 emissions in all
regions for the rest of the century.
J. Frankel, Harvard
6
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 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
7
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 congressional bills
(Lieberman: 67% below 1990; or Waxman-Markey) ,
• 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
8
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.
J. Frankel, Harvard
9
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
11
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
12
Bottom line:
• In one version, 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 < 1% GDP.
J. Frankel, Harvard
13
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
J. Frankel, Harvard
14
Dates at which developing countries are asked
• to limit
emissions
to BAU:
• to cut emissions • to cut emissions
below BAU,
below BAU,
• for 500
• for 460
ppm goal:
ppm goal:
– Lat Am 2010
– MENA 2010
– China 2010
– 2035
– 2025
– 2030
– 2020
– 2025
– 2025
– India
2010
– SEAsia 2010
– Africa
2025
– 2050
– 2050
– 2050
– 2025
– 2025
– 2050
J. Frankel, Harvard
15
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
70
0
2
85
0
2
00
1
2
J. Frankel, Harvard
Predicted actual
emissions exceed
caps, by permit
purchases.
16
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
J. Frankel, Harvard
Predicted actual
emissions fall
below caps, by
permit sales.
17
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
J. Frankel, Harvard
Global peak
date ≈ 2035
18
Price of Carbon Dioxide
Fig. 6b
Price of Carbon Permits
1000
600
rises slowly over 50
years, then rapidly.
FRANKEL
Architecture
400
200
0
2005 2020 2035 2050 2065 2080 2095
Zoom on Price of Carbon Permits
$/tCO2e
$/tCO2e
800
180
160
140
120
100
80
60
40
20
0
FRANKEL
Architecture
2005
J. Frankel, Harvard
2015
2025
2035
2045
19
Concentrations stay below 500 ppm goal
Fig. 7b
Carbon Conce ntrations (CO2 only)
bau
800
750
700
FRANK
EL
Archite
cture
600
550
500
450
400
350
300
20
05
20
15
20
25
20
35
20
45
20
55
20
65
20
75
20
85
20
95
21
05
ppmv
650
J. Frankel, Harvard
20
Temperature rises 3° rather than 4°
Fig. 8b
Temperature increase (above pre-industrial)
4
bau
3.5
3
°C
2.5
FRANKEL
Architecture
2
1.5
1
0.5
0
05 0 15 0 25 0 35 0 45 0 55 0 65 0 75 0 85 0 95 1 05
0
2
2
2
2
2
2
2
2
2
2
2
J. Frankel, Harvard
Yes, I know.
The pay-off is
a let-down.
21
The latest paper
co-authored with Valentina Bosetti
• 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.
– Answer, so far: 460 ppm, but not within the constraints.
• Eventual extension: introduce uncertainty, especially in
the form of stochastic growth processes.
– Robustness will need: updates & within-decade indexation.
J. Frankel, Harvard
22
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
20
95
20
80
20
65
20
50
20
35
FRANKEL
Architecture
20
20
20
05
ppmv
Carbon Conce ntrations (CO2 only)
J. Frankel, Harvard
23
…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%
J. Frankel, Harvard
24
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
25
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.
J. Frankel, Harvard
26
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
J. Frankel, Harvard
90
0
2
00
1
2
CAP
27
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
J. Frankel, Harvard
CAP
28
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
J. Frankel, Harvard
29
Environmental Effectiveness
Concentrations actually level off at 450 ppm by 2050 !
Carbon Concentrations (CO2 only)
bau
700
650
600
FRANK
EL
Architec
ture
550
500
450
400
J. Frankel, Harvard
2105
2095
2085
2075
2065
2055
2045
2035
2025
2015
350
300
2005
ppmv
800
750
30
Environmental Effectiveness
Temperature increase (above pre-industrial)
4
3.5
bau
3
°C
2.5
2
FRANKEL
Architecture
1.5
1
0.5
20
05
20
15
20
25
20
35
20
45
20
55
20
65
20
75
20
85
20
95
21
05
0
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.
J. Frankel, Harvard
31
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);
FRANKEL
Architecture
$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
FRANKEL
Architecture
2005
J. Frankel, Harvard
2015
2025
2035
2045
32
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
J. Frankel, Harvard
33
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%
J. Frankel, Harvard
34
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%
J. Frankel, Harvard
Transtn.
Ec.s
2%
35
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