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Post-2015 Consensus: Climate Change Assessment, Galiana

Summary Of The Targets From The Paper

Climate Change Targets Benefit for Every Dollar Spent
Invest 0.5% of GDP in energy technology RD&D  $11
Invest 0.05% of GDP in adaptation >$1 but region specific
Global annual carbon emission reduction targets for example, 2°C reduction, 450ppm <$1
Emission intensity targets Uncertain

Summary

It has been argued that climate change is the greatest threat facing humanity and yet is not explicitly targeted in the UN Millennium Development Goals (MDGs). This sub-prioritization recognises an implicit conflict between development, with the energy use (and emissions) it entails, and climate policy. Climate change mitigation in emerging and developing countries could be harmful from a development perspective if it slows economic growth by demanding the use of more costly, low-carbon energy sources.

Despite various emission reduction agreements, globally there has been a steady rise in annual emissions and there is a vital need to pursue policies that address the drivers of emissions and the inevitable effects of rising emissions through adaptation. This paper highlights the potential for the UN post-2015 MDGs to acknowledge current technological limitations and developmental objectives facing policy makers and thus identify policies that are regionally acceptable, appropriate and most importantly, effective in slowing global warming.

International Climate Cooperation

In 1992, the United Nations Framework Convention on Climate Change (UNFCCC) was created to agree binding international treaties to ‘avoid dangerous climate change’. The past 18 years of climate negotiations have shown that establishing such an agreement is a highly challenging task. Since 1990 the globe has witnessed a steady rise in emissions, only halted by the global recession, with carbon dioxide emissions having increased by more than 46%. Since 1990 the world has witnessed a steady rise in emissions, only halted by the global recession, with carbon dioxide emissions having increased by more than 46%.

Given this complete failure of the UNFCCC process, why does the world continue to pursue this framework? The failure of agreements such as the Kyoto Protocol is usually attributed to the lack of good compliance mechanisms and sanctions against countries which free-ride. But this fails to acknowledge that the fundamental problem is one of energy technology. The lack of scalable, reliable and cost-effective low-carbon energy sources is a leading cause of failure of global efforts to curb greenhouse gas emissions.

There has been some recent unilateral and multilateral action. But for ‘fragmented’ action, in which OECD countries join a climate treaty immediately, followed by emerging economies and later by developing nations, the increased cost to first movers are double those of the perfectly cooperative case. This approach also encourages ‘carbon leakage’, whereby carbon emissions are transferred from industrialised countries to emerging economies and the developing world.

The Energy Technology Problem

The UN, via its High-Level Panel of eminent persons on the Post-2015 Development Agenda (the HLP), strongly endorses the call to limit the increase in average temperatures to 2°C above pre-industrial levels. They say that “tools are already available.  We can reach large-scale, transformative solutions worldwide with more investment, collaboration, implementation and political will.” They are not alone: the IPCC has for years asserted the readiness of low carbon alternatives. Such assertions pose the greatest threat to dealing with climate change effectively. In a technology constrained world, estimated mitigation costs can be more than double those in a non-constrained world.

Stabilizing global greenhouse gas concentration (stock) requires stabilizing emissions (flow), followed by deep reductions beyond anything experienced to date.  In practice, there has been greater growth in coal-fired electricity generation than all non-fossil sources combined. It is widely recognised that some kind of backstop technology is needed to offset this use of coal, and the recent IPCC Assessment Report emphasises the importance of carbon capture and storage (CCS) and bio-energy. The International Energy Agency also shows a strong reliance on bio-energy with carbon capture and storage (BECCS).

However, in the IEA’s own words, “The future of CCS is uncertain; at present, the technology is advancing slowly, due to high costs and lack of political and financial commitment.” Biomass and bioenergy also compete for land with food production, and converting pasture or unused land for bioenergy crops may release substantial amounts of carbon from the soil. Potential limits to bioenergy would have implications for scaling up of other, non-storable, intermittent renewable energy sources, particularly wind and solar; without sufficient biomass, they would need to rely on natural gas as the primary source of ‘spinning reserve’ backup.

Most scenarios present modest emission cuts in the near term, followed by deep cuts or even negative emissions in the future. These rely on the timely development of cost-effective low-carbon generating technologies. Actively pursuing the development of such technologies in combination with currently cost-effective mitigation measures appears may be a way forward.

The Post-2015 Process

The HLP puts forward some potential targets for tackling climate change, but sidesteps the issue of how to achieve them. The Open Working Group on Sustainable Development Goals (the OWG) published its own potential goals this year as part of the UN post-2015 process, and this includes Goal 13: Take urgent action to combat climate change and its impacts. Specific targets under this heading focus on adaptation, resilience, planning and the Green Climate Fund. There are also a number of climate-related targets with the energy and innovation goals.

The Kaya Identity is useful as a framework to understand how each goal can target emissions. This breaks down the growth in emissions into three components: the growth in global GDP, the growth in energy intensity of output and the growth in carbon intensity of energy use. Emission reduction targets is the only policy to focus on the left hand side of the Kaya Identity (growth in emissions), while emission intensity, renewable standards and energy R&D all target the means of reducing emissions without explicitly targeting and emissions level. Adaptation, on the other hand, sidesteps the issue of reducing emissions all together. It is likely that some portfolio of complementary policies will be needed to address the environmental, technological and political limitations of each.

Prominent Targets Under Consideration: Benefit-Cost Analysis

1 Global Annual Carbon Emission Reduction Targets

The target of stabilizing global temperature rise at less than 2°C above pre-industrial levels can be translated into atmospheric GHG concentrations and further into yearly emission allowances. Such targets are the most common metric used in international climate negotiations. Interestingly, many if not all integrated assessment models that successfully achieve the 450, 500 or even 550ppm targets allow for overshooting the target and then rely on negative emissions though either advanced CCS or BECCS. Recent work shows that the 450ppm target provides net benefits only when social costs of carbon are high, low-carbon technological breakthroughs abound, and discount rates are low.

Studies show that there is a reasonable possibility of meeting the 2°C target for average temperature rise, but only under idealised conditions. The probability is much lower by lack of technology availability, strong energy demand (associated with economic development) or delayed and fragmented action. Assuming more realistic conditions, cost-effective emissions reduction would set the world on a path to 625 ppm of CO2 in the atmosphere. Lower stabilisation levels, or a 2° temperature rise limit, would not be supported by benefit-cost analysis.

2 Emission Intensity Targets

Emission intensity targets, based on emissions/GDP, can be reassuring if economic forecast are uncertain.  These allow for continued growth by focusing on the per unit emissions rather that the level.  China has proposed a cut in its carbon intensity of 40-45% relative to 2005 levels by 2020; India’s target is 20-25%. Policies with strong development goals prefer this type of target as it allows flexibility should growth be strong. However, critics say that such targets do not limit CO2 levels; nor do they necessarily incentivise innovation.

Alternative Targets: Benefit-Cost Analysis

3 Invest 0.5% of GDP in Energy Technology RD&D

There is growing awareness of the need for innovation in energy technologies to address the climate change problem. The IEA in its Energy Technology Perspectives presents evidence that an additional global investment of $44 trillion could decarbonise the energy system sufficiently to meet the 2° target by 2050.  Fuel savings would amount to over $115 trillion, a net benefit of $71 trillion.

The Green Investment Report recommends using revenues from carbon pricing measures to support pooled international efforts to develop and deploy low-carbon technologies. We evaluated such a technology-led approach funded by a slowly-rising carbon tax and found BCAs of between 1.3 and 10. Policies that advance low-carbon technologies have substantial value in making future reduction in CO2 cost-effective. Further, CO2 targets and improved low-carbon technologies are probably correlated to some degree, although pricing carbon will primarily drive the initial uptake of more costly innovations.

4 Invest 0.05% of GDP in Adaptation

Climate adaptation includes reducing existing vulnerabilities, building adaptive capacity, current and future risk management, and building long-term resilience to climate change.  Adaptation tends to occur reactively and there is tremendous benefit to taking planned measures. Contrary to most other responses to climate change, adaptation does not suffer from a free-rider problem and consequently there are strong incentives to adapt even unilaterally. There is some concern, however, that effective adaptation could reduce mitigation efforts and lead to higher atmospheric concentrations of carbon dioxide and hence potentially tragic consequences for countries with limited means to adapt.

A study from 2004 shows that a complete adaptation to damage caused by climate change (full coastal protection, space heating and cooling, resettlement and migration costs and health) up to 2050 would cost about 0.15% of global GDP. Other studies find that adaptation covers between 7 and 25% of total damages for a doubling of atmospheric carbon dioxide. Analysis shows that benefit-cost ratios of adaptation expenditure are larger than one (and up to 3) for all considered scenarios, and that cost-effectiveness improves when adaptation is combined with mitigation. Adaptation, as with other climate policies, should be used as part of a portfolio that includes, mitigation policies both in the form of pricing and RD&D.

Target Recommendations for Post-2015 and Conclusion

Current emission reduction targets under consideration are highly unlikely to produce results.  They rely heavily on the assumption that climate policy failures to date are simply a matter of political ill will and that technologies are available. Studies that show strong benefit costs of emission reduction targets rely heavily on negative emissions through CCS and BEECS in future decades.  

By setting goals that target low-carbon energy RD&D and adaptation, the UN post-2015 will be acknowledging current technological limitations and developmental objectives of emerging economies. It is likely that a portfolio of policies including RD&D funding, adaptation and moderate carbon pricing would yield the most significant results; the complementarity of three approaches should not be overlooked.    Lastly, this portfolio of approaches will address both short term and long term needs without burdening economic development and thus would be globally acceptable, realistic and most importantly, effective.

The cost-benefit ratios of existing and preferred targets are summarised in the table.