Rio, Kyoto, Copenhagen, Cancun, Durban ..... what's next?

A skeptical view on climate negotiations.

Carlo CarraroPresident, University of VeniceVice Chair, IPCC WG IIIChairman, Scientific Advisory Board, FEEM

1

Introduction

- Climate change problem is an important but difficul tchallenge for human beings/our societies

- Climate change control is a global public good

- Long term dimension of the problem

- Pervasive uncertainties on the physical and economi c dimensions of the climate change problem

2

International Negotiations

� In 1997 all UNFCCC countries (189) approved the Kyoto Protocolthat entered into force in 2006. The Kyoto Protocol however has a minor impact on GHG concentrations and temperature

� At the G8 meeting in L’Aquila, then in Pittsburgh at MEF, and finally in Copenhagen at COP XV, main countries agreed to stabilise temperature increase at 2°C (no more than 2°C...)

� Same principles have been reaffirmed in Cancun at COP XVI. However, G8/G20 countries failed to deliver an international agreement on policy and measures to achieve such target.

3

3. The arithmetics of climate

The present level of concentrations is about 430 ppm CO2-eqUncertainty of the emissions-temperature nexus is relevant

Concentrations of GHG (ppm CO2-eq) Most Likely

Very Likely Above (>90%)

Likely in the Range (>66%)

350 1.0 0.5 0.6 - 1.4450 2.1 1.0 1.4 - 3.1550 2.9 1.5 1.9 - 4.4650 3.6 1.8 2.4 - 5.5750 4.3 2.1 2.8 - 6.4

1000 5.5 2.8 3.7 - 8.31200 6.3 3.1 4.2 - 9.4

Table 1. Most likely, likely and very likely bounds/ranges of global mean equilibrium surface temperature increase in degrees Celsius above pre-industrial temperature for different levels of CO2 equivalent concentrations (ppm). Source: IPCC Fourth Assessment Report, WG I, Chapter 10, Table 10.8 .

4

2 °C target … some basic numbers

� According to IPCC, in order to keep temperature increase below2°C with good probability, concentrations of GHGs should not exceed 380-390 ppm CO2-eq.

� If we accept the possibility of overshooting the target, the level of concentrations can be higher but not greater than 450 ppm.

� The present level of GHG concentration is 430 ppm CO2-eq (390 CO2 only), well above the 380-390 ppm level necessary to make a temperature increase above 2°C unlikely.

� 450 ppm CO2-eq will be reached within six years, whatever world leaders decided in L’Aquila and in Copenhagen.

� If 550 ppm CO2-eq are reached, there is little chance to stay below 2°C.

5

Reality check….

- If we assume that emissions will halve by 2050, declining at a constant pace from 2010, concentrations of CO2 in the atmosphere will be 40 ppm higher in 2050.

- This implies that all GHG concentrations will reach 470 ppm CO2-eq in 2050, assuming that emissions of non CO2 gases are heroically cut to zero starting from 2010.

- The emissions path envisaged by MEF leaders is thus in line with a 550 ppm target by the end of the century. Hence, more than 2 degrees...

6

Even a 550 ppm target would bevery difficult to achieve…

� Given the projected dynamics of world population and economic growth, the objective of limiting concentrations below 550 ppm CO2-eq implies that average per capita emissions in the second half of this century are to be reduced from about 2 to about 0.3 tC per year.

� In other words, the world will have to emit not more than today’s India’s average – quite a significant reduction for most industrialised countries (US average per capita emissions are about 6 tC) and for countries that aim at similar lifestyle standards.

� Just to provide another benchmark, 0.3 tC is the amount of GHGs emitted by an individual flying – one way – from the EU to the US East coast!

7

Required emission reductions

0

200

400

600

800

1000

1200

emissions since 1751 abatement to 2100

GtC

8

If China and India don’t reduce their own emissions , there is no chance to reach even the 550 ppm target

0

2

4

6

8

10

12

14

16

18

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Gto

n C

Other Non Annex 1

SASIA

China

3.7 Rad Forcing

3.5 Rad Forcing

Total

BaU

China

IndiaOther LDCs

OECD countries

Targets

9

9. The climate equation in brief

Emissions of Greenhouse Gasses (carbon dioxide, methane, ...) remain in the atmosphere for decades or even centuries

Natural absorption is very slow for carbon dioxide

Temperature is a function of concentrations, not of emissions

In order to achieve the most ambitious targets (1.5 - 2.0*C) it is necessary to reduce the stock of GHGs: negative emi ssions

ConcentrationsEmissions Temperature Climate

10

Fonte: IPCC AR4 (2007). Fonte: IPCC AR4 (2007).

10. GHGs emissions

11

We need global action

…strong pressure on energy supplyIncreasing role of renewables … but the energy mix will be dominated by fossil fuels if their negative environmental effects are not internalized through appropriate climate policies

Source: WEO 2009

What’s behind the increase in emissions?

Increase will be large particularly in developing countries

Source: WITCH model

Energy poverty map

About 1,8 million people without access to electric ity …

Population growth

Three more billion people on Earth….

16

16. Energy and development - 2

0

1000

2000

3000

4000

5000

6000

0 5000 10000 15000 20000 25000 30000

GDP per Capita 1960-2005 (constant 2000 US$)

Ene

rgy

use

per c

apita

(kg

of o

il eq

uiva

lent

)

World High Income Low & Middle Income

1979

Carraro and Massetti (2010)

17

17. CO2 emissions and development

0

2

4

6

8

10

12

14

0 5000 10000 15000 20000 25000 30000

GDP per Capita 1960-2000 (constant 2000 US$)

CO

2 em

issi

ons

per c

apita

(Ton

)

World High Income Low & Middle Income

Carraro and Massetti (2010)

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Why it is hard to build an international agreement?

19

19. Why it is hard to build consensus?

Strong inertia of the climate system requires to take costly measures now, to enjoy benefits one century from now:� intergenerational coordination problem

GHGs emissions get perfectly mixed in the global atmosphere:� international coordination problem

Large uncertainty on cost of mitigation

The most ambitious targets appear highly unrealistic:� we are about to pass the level of concentrations that would

prevent the attainment of the +2ºC target with high probability

20 KAL's cartoon, Jun 17th 2010 | From The Economist print edition

20. Act now or later?

21

21. The importance of participation

NON-OECD Emissions Trajectories

0

2

4

6

8

10

12

14

16

18

2010 2015 2020 2025 2030 2035 2040 2045 2050

GtC

Stabilization at 550 ppm CO2-eq NON-OECD - BaUNON-OECD �10% at 2050 NON-OECD �20% at 2050NON-OECD �30% at 2050 NON-OECD �40% at 2050NON-OECD �50% at 2050

Figure 1. Emissions pathways compatible with a stabilization target at 550 ppm CO2 eq at 2100 and emissions trajectories of Non-OECD countries with various degrees of commitment. Source: WITCH model, FEEM. Carraro and Massetti. www.voxeu.org, 3 September 20 09.

22

22. The cost of mitigation

Fonte: RECIPE Project (2009); Discounted consumptio n loss; 3% discount rate. Concentrations level of o nly CO2.

• Strong increase of costs as the target becomes more stringent

23

23. Delayed action

Source: RECIPE Project (2009); Cost of stabilizing CO2 concentrations at 450 ppm, with different hypothesis of international coo peration.

If there is delay, or non-coordinated action costs increase considerably

Delaying action beyond 2030 makes it impossible to achieve the 450ppm CO2 only target.

24

24. The technology puzzle

Source: RECIPE Project (2009); cost of stabilizing CO2 concentrations at 450 ppm, with different hypothesis on the availability of technologies.

• Problems in the deployment of key carbon-free technologies increase costs

25

The incentives to participate in a global

agreement

26

26. Climate change impacts

� The impacts of climate change are expected to vary widely across regions. � Developing countries would be more affected than their developed counterparts� Uncertainties are large, however, as reflected by the wide variance in damage

estimates across studies

Clim a te change im pa ct

-8.00

-7.00

-6.00

-5.00

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100

Time horizon

Per

cent

age

loss

in G

DP

LAM

SEASIA

CHINA

SASIA

SSA

MENA

TE

JPNKOR

AUCANZ

EEURO

WEURO

USA

27

27. Abatement costs - carbon tax

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

20 40 60 80 100 120 140 160 180 200

Dis

coun

ted

cons

umpt

ion

loss

2

Carbon Tax (2005 $US / t CO 2 eq)

Panel A. Annex I regions 1

United States Western EU countries

Eastern EU countries Aus-Can-Nzl

Japan-Korea Non-EU Eastern Europe

28

28. Abatement costs - carbon tax

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

20 40 60 80 100 120 140 160 180 200

Dis

coun

ted

cons

umpt

ion

loss

2

Carbon Tax (2005 $US / t CO 2 eq)

Panel B. Non-Annex I regions

Middle East and North Africa Africa

South Asia China

South East Asia Latin America

29

29. Free Riding Incentive on the GC

USA

WEURO

EEURO

AUCANZ

JPNKOR

MENA

TE

SSA

SASIA

CHINA

SEASIA

LAM

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

Fre

e r

idin

g in

cen

tive

GDP loss of a 100$/tCO2 tax

30

Towards a bottom -up architecture?

Future challenges:

� More energy, to meet an increasing energy

demand

� A “clean” energy, to control climate change

� A more equally distributed energy to favour

economic development in poorer regionand thus global economic growth

31

Obstacles:

� High financial needs for investments in the energy sector

� Insufficient and weak governance of global

issues implies unavoidable climate change(more than 2 degrees C)

� Resources are also needed for investments in

adaptation to climate change

32

Investments in the energy sector to stabilize GHG concentrations at 450 CO2 eq.

Level

additional annual investment needs in low-

carbon technologies and energy efficiency

relative to Reference Scenario to meet 450

Scenario in 2020

total investment in the 450 scenario in low-

carbon power generation over 2010-2030

incremental investment cost in

GDP terms

almost $ 6600 bln 2020: 0.5% of GDP

(72% renewable, 19% nuclear, 9% CCS) 2030: 1.1% of GDP

almost $ 3100 bln 2020: 0.4% of GDP

(65% renewable, 20% nuclear, 15% CCS) 2030: 0.8% of GDP

almost $ 1100 bln 2020: 0.5% of GDP

(53% renewable, 27% CCS, 19% nuclear) 2030: 1% of GDP

almost $ 1300 bln 2020: 0.3% of GDP

(77% renewable, 7% CCS, 16% nuclear) 2030: 0.6% of GDP

almost $ 200 bln 2020: 0.3% of GDP

(50% renewable, 4% CCS, 46% nuclear) 2030: 0.6% of GDP

almost $ 1500 bln 2020: 0.8% of GDP

(73% renewable, 5% CCS, 22% nuclear) 2030: 1.5% of GDP

almost $ 550 bln 2020: 0.9% of GDP

(83% renewable, 2% CCS, 16% nuclear) 2030: 1.4% of GDP

almost $ 220 bln 2020: 0.3% of GDP

(58% renewable, 12% CCS, 30% nuclear) 2030: 1% of GDP

India $ 25 bln

Russia $ 8 bln

Japan $ 17 bln

China $ 80 bln

US $ 90 bln

EU $ 70 bln

World $430 bln

OECD+ $220 bln

33

34

Investments to adapt to climate change Source IIED (2009)

SECTORS UNFCCC

ESTIMATES SOURCES OF UNDERESTIMATIONS NEW IIED COST ESTIMATES

Agriculture $11.3-12.6

billions/year

Adaptation deficit � recovering it could

cost up to $40-60 billions $11.3-12.6 + $40-60 billions

Water $11 billions/year Transfer of water across countries, no

adaptation to altered flood risk

Significant underestimation, more

studies needed

Human health $4-12 billions/year Population grows but share of illness-

related deaths remains constant 30-50% increase in costs

Coasts $11 billions/year

Sea level rise (SLR) faster than foreseen,

residual damage estimation ($1 billion/year)

too optimistic

Overall costs could double

depending on speed of SLR, residual

damage costs t $2-3 billions/year

Infrastructures $8-130 billions/year Infrastructural deficit � removing could

cost up $315 billions/year Besides deficit, $16-63 billions/year

Ecosystems $65-80 billions/year

for protected areas

Exclusion of adaptation costs for non-

protected areas ($290 billions/year) $65-80 + $290 billions/year

About 175 billions per year

35

R&D investments

0 .0 0 %

0 .0 2 %

0 .0 4 %

0 .0 6 %

0 .0 8 %

0 .1 0 %

0 .1 2 %

1 9 7 0 1 9 8 0 1 9 9 0 2 0 0 0 2 0 1 0 2 0 2 0 2 0 3 0 2 0 4 0 2 0 5 0

H is t o r ic a l B A U

T o t E ne r g y R & D A 1 C C E ne r g y In te ns it y R & D A 1 C C

D e c a r b o n iz a t io n

E f f ic ie n c y

Roughly 50 Blns a year of energy innovation investments in the next two decades

� for a total of about 650 billions/year…

Source: WITCH model

36

Investments: some conclusions

Climate policy will induce higher investments in the energy sector (with respect to the BaU scenario)

Low-carbon world requires a new energy mix: conventional fossil fuels power plants are substituted by nuclear, coal power plants with CCS and renewable sources

Large investments have to be diverted – in a relatively short time frame –towards complex and risky technologies

Significant innovative efforts are required especially outside the power sector

37

Green stimulus of national recovery package

Ratio of green stimulus of national recovery packages, absolute volumes in bn€

The green share of the European recovery plan (58.7% ) is high wrt other countries’ package

Source: GEF 2009, based on Bernard et al. 2009; data from HSBC 2009

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Both the increased energy demand and the climate challenge require additional investments in the energy sector

At the same time, policy signals are necessary to divert investments that would be undertaken anyway

The development and application of green technologies can be an opportunity for Europe: it does not require additional investments but a reshuffle of their mix

Net positive effect on employment

Investments in energy innovation and in climate adaptation are also necessary

Carbon markets can be an important source of revenue to finance part of these investments

Conclusions

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Thank you!

40

40. Title

� The realism of negotiations’ objectives. Can the 2 degree targets actually be achieved? Is the focus on a global agreement meaningful?

� The incentives for different countries or regions to participate in a climate agreement

� The financial resources needed to stabilize GHG concentrations

� The time horizon of climate negotiations and the likelihood of aclimate agreement in the next decade

� The possibility to move away from traditional global negotiations, by focusing on a bottom-up domestic policy-driven approach

� The necessity to invest more resources on adaptation to climate change