Creating a global warming implementation regime

This paper proposes a global warming implementation regime which addresses the issues of equity, flexibility, cost minimization, and population growth. Previously proposed international policy instruments, such as country by country targets, carbon taxes, and tradable permits, face major difficulties as stand alone proposals. The key element of the regime proposed here is to combine annual tradable permits which are allocated based on population in a fixed year with a small carbon tax ($5–10/tonne) on emissions in excess of permits. Both permits and carbon taxes are applied to national level governments, which in turn would use whatever mix of policies desired to reduce national emissions. It is suggested that the initial number of permits correspond to total global emissions in the base year; over time, the number of permits could be reduced and the tax rate increased if improved scientific knowledge so dictates. By allocating permits based on population the equity concerns of developing countries are addressed, while taxing emissions in excess of permit holdings removes the rigidity of a quota system and limits resource transfers by effectively capping the permit trading price, which is a major concern of industrialized countries. To accommodate the difficulties of countries which have not yet achieved the demographic transition, the permit allocation scheme could be subject to a one-time adjustment after 10–15 years based on some weighting of the initial and then-current populations. The proposed scheme is based on the premise that there is a large potential for reducing emissions in developed countries or limiting emission increases in developing countries, and the intention is to create competition between national level governments in implementing cost-effective emission reduction.     

On the regional distribution of mitigation costs in a global cap-and-trade regime

This paper analyzes the regional distribution of climate change mitigation costs in a global cap-and-trade regime. Four stylized burden-sharing rules are considered, ranging from GDP-based permit allocations to schemes that foresee a long-term convergence of per-capita emission permits. The comparison of results from three structurally different hybrid, integrated energy-economy models allows us to derive robust insights as well as identify sources of uncertainty with respect to the regional distribution of the costs of climate change mitigation. We find that regional costs of climate change mitigation may deviate substantially from the global mean. For all models, the mitigation cost average of the four scenarios is higher for China than for the other macro-regions considered. Furthermore, China suffers above-world-average mitigation costs for most burden-sharing rules in the long-term. A decomposition of mitigation costs into (a) primary (domestic) abatement costs and (b) permit trade effects, reveals that the large uncertainty about the future development of carbon prices results in substantial uncertainties about the financial transfers associated with carbon trade for a given allocation scheme. This variation also implies large uncertainty about the regional distribution of climate policy costs.     

Time to act now? Assessing the costs of delaying climate measures and benefits of early action

This paper compares the results of the three state of the art climate-energy-economy models IMACLIM-R, ReMIND-R, and WITCH to assess the costs of climate change mitigation in scenarios in which the implementation of a global climate agreement is delayed or major emitters decide to participate in the agreement at a later stage only. We find that for stabilizing atmospheric GHG concentrations at 450?ppm CO₂-only, postponing a global agreement to 2020 raises global mitigation costs by at least about half and a delay to 2030 renders ambitious climate targets infeasible to achieve. In the standard policy scenario??in which allocation of emission permits is aimed at equal per-capita levels in the year 2050??regions with above average emissions (such as the EU and the US alongside the rest of Annex-I countries) incur lower mitigation costs by taking early action, even if mitigation efforts in the rest of the world experience a delay. However, regions with low per-capita emissions which are net exporters of emission permits (such as India) can possibly benefit from higher future carbon prices resulting from a delay. We illustrate the economic mechanism behind these observations and analyze how (1) lock-in of carbon intensive infrastructure, (2) differences in global carbon prices, and (3) changes in reduction commitments resulting from delayed action influence mitigation costs.     

全球长期减排目标与碳排放权分配原则

全球长期减排目标将对世界未来的碳排放形成严重制约,减排义务的分担原则涉及各国的发展空间,事关根本利益。部分发达国家倡导人均排放趋同原则,回避发达国家的历史责任,中国等发展中国家提出人均累积排放趋同原则,强调公平性。按人均累积排放量计算,发达国家自工业革命以来的CO₂排放量已远超出其到2050年前应有的限额,其当前和今后相当长时期的高人均排放都将继续挤占发展中国家的排放空间。因此,发达国家在哥本哈根会议的中近期减排承诺中必须深度减排,以实现全球长期减排目标下的排放轨迹,并为发展中国家留有必要的发展空间。同时必须对发展中国家给予充足的资金和技术支持,作为对其过度挤占发展中国家发展空间的补偿,使发展中国家能够在可持续发展框架下,提高应对气候变化的能力。我国在对外坚持公平原则,努力争取合理的排放空间的同时,对内要加强向低碳经济转型,努力实现保护全球气候和国内可持续发展的双赢。     

Great expectations: can international emissions trading deliver an equitable climate regime?

Abstract

Climate change equity debates tend to focus on achieving a fair and global ‘allocation’ of emission rights among countries. Allocation proposals typically envision, if implicitly, two purposes for international emissions trading. First, trading is expected to serve as a cost-effective means of promoting compliance with emissions targets. Second, trading is posited as a means to generate financial transfers, typically from industrialized to transitioning and developing countries.

This article investigates the common assumption that international emissions trading will effectively serve both of these purposes. We conclude that the two purposes might not be mutually supportive, and that efforts to use international emissions trading as a financial transfer mechanism may potentially undermine cost-effectiveness goals. International emissions trading on a global scale would create new risks in terms of both cost-effectiveness and environmental performance, some of which will be challenging to manage. In particular, uncertainties over market prices and trading eligibility, coupled with the costs of participation, may together be the Achilles heel of some allocation proposals that entail large financial transfers from industrialized to developing countries. Any proposal for an ‘equitable’ allocation of emission allowances, we conclude, must be cognizant of the risks and costs implied by a reliance on international emissions trading. We offer some suggestions to this end.     

A no cap but trade proposal for emission targets

One problem in international climate policy is the refusal of large developing countries to accept emission reduction targets. Brazil, China and India together account for about 20% of today's CO₂ emissions. We analyse the case in which there is no international agreement on emission reduction targets, but countries do have domestic targets, and trade permits across borders. We contrast two scenarios. In one scenario, Brazil, China and India adopt their business as usual emissions as their target. In this scenario, there are substantial exports of emission permits from developing to developed countries, and substantial economic gains for all. In the second scenario, Brazil, China and India reduce their emissions target so that they have no net economic gain from permit trade. Here, developing countries do not accept responsibility for climate change (as they bear no net costs), but they do contribute to an emission reduction policy by refusing to make money out of it. Adopting such break-even targets can be done at minor cost to developed and developing countries (roughly $2 bn/year each in extra costs and forgone benefits), while developing countries are still slightly better off than in the case without international emissions trade. This result is robust to variations in scenarios and parameters. It contrasts with Stewart and Wiener (2003) who propose granting ‘hot air’ to developing countries to seduce them to accept targets. In 2020, China and India could reduce their emissions by some 10% from the baseline without net economic costs.     

Joint Implementation in Ukraine: national benefits and implications for further climate pacts

The contribution that no-lose target schemes for non-Annex I (NAI) countries could make to achieve the 2°C target is explored by accounting for the incentives of 18 NAI countries’ participation in no-lose target schemes. Using various scenarios, it is shown that implementing uniform no-lose targets as part of the burden-sharing will not lead to global emissions levels compatible with the 2°C target, because uniform no-lose targets will only be beneficial to a few NAI countries. Employing more lenient uniform no-lose targets or individual no-lose targets for large emitters could increase participation by NAI countries and decrease global emissions, global compliance costs, rents by NAI countries, and compliance costs for Annex I (AI) countries. However, the resulting global emissions levels will not be compatible with attaining the 2°C target. Achieving this target will require more stringent emissions targets for AI countries and more lenient no-lose targets for NAI countries. As such, no-lose targets should account for 20% to 47% of global emissions reductions, while due to emissions trading around two-thirds of global emissions reductions should be realized in NAI countries. Indeed, an effective solution may only require no-lose targets for five to seven of the largest NAI countries.

Policy relevance

No-lose targets are one of a number of instruments discussed under the United Nations Framework Convention on Climate Change New Market Mechanism to integrate NAI countries in global emissions reduction efforts. In contrast to binding reduction targets, which apply penalties if a target is not met, no-lose targets provide incentives for meeting a target, e.g. in the form of excess emissions certificates that can be sold on the global carbon market. The presented simulations show that no-lose targets can result in contributions from NAI countries to global emissions reduction efforts. However, the simulations also show that the necessary incentives for no-lose targets need to be adjusted. AI countries require more ambitious targets and NAI countries require less ambitious no-lose targets than proposed by the Intergovernmental Panel on Climate Change report. Effective no-lose targets may only be required for five to seven of the largest NAI countries.     

IPCC第五次评估报告历史排放趋势和未来减缓情景相关核心结论解读分析

IPCC历次评估报告是国际社会和各国决策者制定相关政策的重要依据。2014年4月发布的第五次评估报告第三工作组报告中有关排放历史趋势和未来减缓情景的相关内容是历次评估报告的核心内容,对国际谈判中有关各主要缔约方定位、减排责任划分、国别分组以及未来全球和国别中长期减缓目标确定、全球排放空间分配等问题产生重要影响,也是各国确定低碳发展目标和制定相关政策的重要参考依据。在综述分析报告有关排放趋势,驱动因子,2℃温控目标下的排放空间、路径、成本、技术选择和减排责任分摊等关键结论的基础上,探讨了相关结论对国际气候谈判和国内低碳发展的可能影响和启示,以及如何在决策过程中正确、科学地理解和应用这些结论。     

An operational framework for equity in the 2015 Agreement

Equity is a highly contentious but essential area of negotiation, if a stable and effective international climate agreement with broad participation is to be achieved. Three perspectives on the magnitude dimensions of equity are identified that need consideration in the process of formulating an agreement: agreement on a ‘safe’ temperature goal; agreement on the required global effort; and agreement on a fair division of contributions. The opportunities are explored for reconciling these perspectives in an operational framework for equity. Specifically, this means the importance of the adopted a global temperature goal of below 2°C temperature increase by the end of the century. In addition, an initial approach to quantifying adaption costs is suggested, while the importance of arriving at a global mitigation goal is emphasized. It is argued that finance and technology support commensurate with the required global mitigation and adaptation effort is an important element of equity.

Policy relevance

The centrality of equity, in terms of both form and magnitude, will be vital for the design and implementation of a 2015 Agreement that is capable of achieving the objectives of the Convention. Three central areas of debate within global negotiations are identified and discussed: an appropriate temperature goal; global goals for adaptation, mitigation, finance, and technological support; and the division of global effort. The opportunities for reconciling the areas of debate are explored specifically in the context of an Equity Reference Framework, along with suggestions for approaches to quantifying adaptation needs.     

基于聚类分析的碳强度目标分解研究

基于地区聚类分析得到了我国2020年碳强度目标分解方案。根据各地区在经济能力、排放水平和减排潜力上的相似程度,将我国30个省区分成6类。按照公平原则,经济最发达的第1、2类地区减排目标最高,分别为55%和65%,但是其减排潜力较小;按照效率原则,减排潜力较大的第3、5类地区减排目标最高,分别为48%和61%,但是其经济相对落后;综合分解方案显示减排潜力最大的第5类地区,以及属于工业与排放大省的第2、3类地区的减排目标最高,分别为54%、49%和49%。而在这3种分解方案下,经济能力、排放水平与减排潜力都较低的第4类与第6类地区减排指标最高不超过40%。经济能力与减排潜力在空间上存在一定程度的错位,导致仅通过碳强度目标的分解无法较好地兼顾公平与效率,还需要建立配套的市场机制和政策工具。     

Great expectations: can international emissions trading deliver an equitable climate regime?

Climate change equity debates tend to focus on achieving a fair and global ‘allocation’ of emission rights among countries. Allocation proposals typically envision, if implicitly, two purposes for international emissions trading. First, trading is expected to serve as a cost-effective means of promoting compliance with emissions targets. Second, trading is posited as a means to generate financial transfers, typically from industrialized to transitioning and developing countries.This article investigates the common assumption that international emissions trading will effectively serve both of these purposes. We conclude that the two purposes might not be mutually supportive, and that efforts to use international emissions trading as a financial transfer mechanism may potentially undermine cost-effectiveness goals. International emissions trading on a global scale would create new risks in terms of both cost-effectiveness and environmental performance, some of which will be challenging to manage. In particular, uncertainties over market prices and trading eligibility, coupled with the costs of participation, may together be the Achilles heel of some allocation proposals that entail large financial transfers from industrialized to developing countries. Any proposal for an ‘equitable’ allocation of emission allowances, we conclude, must be cognizant of the risks and costs implied by a reliance on international emissions trading. We offer some suggestions to this end.     

Using the social cost of carbon to value earth observing systems

The goal of this study is to show how to quantify the benefits of accelerated learning about key parameters of the climatic system and use this knowledge to improve decision-making on climate policy. The US social cost of carbon (SCC) methodology is used in innovative ways to value new Earth observing systems (EOSs). The study departs from the strict US SCC methodology, and from previous work, in that net benefits are used instead of only damages to calculate the value of information of the enhanced systems. In other respects the US SCC methodology is followed closely. We compute the surfeit expected net benefits of learning the actionable information earlier, with the enhanced system, versus learning later with existing systems. The enhanced systems are designed to give reliable information about climate sensitivity on accelerated timescales relative to existing systems; therefore, the decision context stipulates that a global reduced emissions path would be deployed upon receiving suitable information on the rate of temperature rise with a suitable level of confidence. By placing the enhanced observing system in a decision context, the SCC enables valuing this system as a real option.

Policy relevance

Uncertainty in key parameters of the climatic system is often cited as a barrier for near-term reductions of carbon emissions. It is a truism among risk managers that uncertainty costs money, and its reduction has economic value. Advancing policy making under uncertainty requires valuing the reduction in uncertainty. Using CLARREO, a new proposed EOS,as an example, this article applies value of information/real option theory to value the reduction of uncertainty in the decadal rate of temperature rise. The US interagency social cost of carbon directive provides the decision context for the valuations. It is shown that the real option value of the uncertainty reduction, relative to existing observing systems, is a very large multiple of the new system's cost.     

Regional GHG reduction targets based on effort sharing: a comparison of studies

Over 40 studies that analyse future GHG emissions allowances or reduction targets for different regions based on a wide range of effort-sharing approaches and long-term concentration stabilization levels are compared. This updates previous work undertaken for the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Regional reduction targets differ significantly for each effort-sharing approach. For example, in the Organisation for Economic Co-operation and Development (OECD) 1990 region, new proposals that emphasize the equity principles of responsibility, capability, and need, and those based on equal cumulative per capita emissions (carbon budgets), lead to relatively stringent emissions reduction targets. In order to reach a low concentration stabilization level of 450?ppm CO₂e, the allowances under all effort sharing approaches in OECD1990 for 2030 would be approximately half of the emissions of 2010 with a large range, roughly two-thirds in the Economies in Transition (EIT), roughly at the 2010 emissions level or slightly below in Asia, slightly above the 2010 level in the Middle East and Africa and well below the 2010 level in Latin America. For 2050, allowances in OECD1990 and EIT would be a fraction of today's emissions, approximately half of 2010 emission levels in Asia, and possibly less than half of the 2010 level in Latin America.

Policy relevance

The concept of equity and the stringency of future national GHG reduction targets are at the heart of the current debate on the new international climate change agreement to be adopted in 2015. Policy insights gained from an analysis of over 40 studies, which have quantitatively analysed the proposed GHG reduction targets, are presented. It is found that the outcome of effort-sharing approaches is often largely determined by the way the equity principle is implemented and that the distributional impacts of such approaches can be significantly different depending on the criteria used, the stabilization level and shape of the global emissions pathway. However, the current literature only covers a small proportion of the possible allocation approaches. There should thus be an in-depth modelling comparison to ensure consistency and comparability of results and inform decision making regarding the reduction of GHG emissions.     

The importance of health co-benefits in macroeconomic assessments of UK Greenhouse Gas emission reduction strategies

We employ a single-country dynamically-recursive Computable General Equilibrium model to make health-focussed macroeconomic assessments of three contingent UK Greenhouse Gas (GHG) mitigation strategies, designed to achieve 2030 emission targets as suggested by the UK Committee on Climate Change. In contrast to previous assessment studies, our main focus is on health co-benefits additional to those from reduced local air pollution. We employ a conservative cost-effectiveness methodology with a zero net cost threshold. Our urban transport strategy (with cleaner vehicles and increased active travel) brings important health co-benefits and is likely to be strongly cost-effective; our food and agriculture strategy (based on abatement technologies and reduction in livestock production) brings worthwhile health co-benefits, but is unlikely to eliminate net costs unless new technological measures are included; our household energy efficiency strategy is likely to breakeven only over the long term after the investment programme has ceased (beyond our 20 year time horizon). We conclude that UK policy makers will, most likely, have to adopt elements which involve initial net societal costs in order to achieve future emission targets and longer-term benefits from GHG reduction. Cost-effectiveness of GHG strategies is likely to require technological mitigation interventions and/or demand-constraining interventions with important health co-benefits and other efficiency-enhancing policies that promote internalization of externalities. Health co-benefits can play a crucial role in bringing down net costs, but our results also suggest the need for adopting holistic assessment methodologies which give proper consideration to welfare-improving health co-benefits with potentially negative economic repercussions (such as increased longevity).     

A new look at climate equity in the UNFCCC

Equity has been at the core of the global climate debate since its inception over two decades ago, yet the current negotiations toward an international climate agreement in 2015 provide a new and critical opportunity to make forward progress on the difficult web of equity issues. These negotiations and the discussions about equity are taking place in a context that has shifted: all countries will be covered under a new agreement; growing climate impacts are being felt, especially by the most vulnerable; and there is an emergence of new institutions and increasing complexity in the international climate regime. Innovative thinking on equity, including which countries should take action and how, is therefore essential to finalizing an agreement by 2015. A broader, deeper, and more holistic view of equity is necessary, one that sees equity as a multi-dimensional challenge to be solved across all the facets of the international climate process.

Policy relevance

This article is relevant to policy makers following the development of the United Nations Framework Convention on Climate Change (UNFCCC) Ad Hoc Working Group on the Durban Platform as it prepares the way for a new agreement in 2015. The article focuses specifically on the issues most relevant to the debate around equity in the negotiations and how that debate is evolving with the expansion of the UNFCCC. It explains the current state of the negotiations and what issues are on the negotiating table, including the fact that negotiations on equity are now much broader than the mitigation commitments, to include the possible ‘equity reference framework’, concerns relating to adaptation and loss and damage, and the need for ambition in terms of mitigation and finance support.     

Will the Clean Development Mechanism be effectively implemented in China?

Abstract

The purpose of this article is to analyse whether the presence of surplus emission allowance trading jeopardizes the environmental target of an international environmental agreement. We argue that surplus emission allowance trading can be used as an implicit side-payment mechanism to actually bring about higher environmental protection compared with the situation without the trade option. We point to the existence of a fundamental trade-off between costs of compliance and the creation of dynamic incentives to develop cheaper reduction technologies. Implicit side payments, in terms of surplus emission allocations, may be needed in order to establish a compromise between these opposing demands. We identify the shortcomings and benefits of allowing fully flexible permit trading, including the allocation rule of grandfathering.     

Evaluating the Bonn—Marrakesh agreement

Abstract

This article evaluates the environmental effectiveness and economic efficiency of the Kyoto Protocol after the Bonn Agreement and the Marrakesh Accords. The US withdrawal has by far the greatest impact in reducing the environmental effectiveness, lowering the price of traded emission permits and reducing Annex I abatement costs. The decisions on sinks imply that the Annex I CO₂-equivalent emissions without the US will come out at about 1/2% below base-year level, instead of over 4% below base-year level. Without US participation, the emission permit price is estimated to be low. Therefore, banking hot air by Russia and the Ukraine is of absolute importance for the development of a viable emissions trading market, and would also enhance the environmental effectiveness of the Kyoto Protocol.     

Delayed action and uncertain stabilisation targets. How much will the delay cost?

Despite the growing concern about actual on-going climate change, there is little consensus on the scale and timing of actions needed to stabilise the concentrations of greenhouse gases. Many countries are unwilling to implement mitigation strategies, at least in the short term, and no agreement on an ambitious global stabilisation target has yet been reached. It is thus likely that international climate policies will be characterized by a high degree of uncertainty over the stringency of the climate objective, and that some countries might delay their participation to global action. What additional economic costs will this delay in the adoption of mitigation measures imply? What would the optimal short-term strategy be given the uncertainty surrounding the climate policy to come? Is there a hedging strategy that decision makers can adopt to cope with delayed action and uncertain targets? This paper addresses these questions by quantifying the economic implications of delaying mitigation action, and by computing the optimal abatement strategy in the presence of uncertainty about a global stabilisation target (which will be agreed upon in future climate negotiations). Results point to short-term inaction as the key determinant for the economic costs of ambitious climate policies. They also indicate that there is an effective hedging strategy that could minimise the cost of climate policy uncertainty over the global stabilisation target: a short-term moderate climate policy would be a good strategy to reduce the costs of delayed action and to cope with uncertainty about the outcome of future climate negotiations. By contrast, failing to curb emissions in the short term imposes rapidly increasing additional costs of compliance.     

Climate change adaptation cost in the US: what do we know?

Researchers and policy makers increasingly recognize the need to adapt to future changes in climate, given that past emissions of greenhouse gases have already committed the world to some level of climate change. However, the current understanding of the costs and benefits of adaptation measures is still fairly rudimentary, and far from comprehensive. An assessment is presented of the current state of knowledge on the magnitude of adaptation costs in the United States. While incomplete, the studies suggest that adaptation cost could be as high as tens or hundreds of billions of dollars per year by the middle of this century. Key studies are identified in each sector, and the cost estimates and approaches to cost estimation are surveyed. Methodological issues are highlighted in interpreting, comparing, and aggregating adaptation cost estimates. Policy recommendations are made along with appropriate steps to make future adaptation cost studies more comparable within and across sectors and more accessible and relevant to policy and decision makers.

Policy relevance

Designing and implementing climate change adaptation policy requires good information about the effectiveness and cost of available adaptive options. The current state of knowledge on adaptation costs in the United States is assessed and significant gaps in the literature are highlighted – particularly in terms of sectoral and geographic coverage – as well as inconsistencies in methodologies and assumptions that hamper comparison across studies. Critical steps are identified that can be taken to make adaptation cost studies more accessible and useful to decision makers. The findings and recommendations are relevant to adaptation cost studies globally, not just in the United States.     

Estimating the CDM market under the Marrakech Accords

Abstract

The agreement on implementation of the Kyoto Protocol achieved at COP7 in Marrakech has important implications for investment in greenhouse gas emission reduction projects in developing countries through the Clean Development Mechanism (CDM). The required actual emission reductions for participating Annex B countries overall will be relatively small, as the United States do not intend to ratify the protocol and significant amounts of carbon sequestered in domestic sinks can be credited. In addition, the potential supply of surplus emission permits (hot air) from Russia and other economies in transition may be as high as total demand in the first commitment period. Thus, even under restraint of hot air sellers, CDM demand will be limited, and a low demand, low price carbon market scenario appears likely.

The magnitude of the CDM will be influenced by a host of factors both on the demand and the supply-side. We analyse these using a quantitative model of the global carbon market, based on marginal abatement cost curves. Implementation and transaction costs, as well as baseline and additionality rules affect the CDM's share in the carbon market. Demand for the CDM is sensitive to changes in business-as-usual emissions growth in participating Annex B countries, and also to crediting for additional sinks. Permit supply from Russia and other economies in transition is possibly the most crucial factor in the carbon market.