Australia’s emissions target: what is an adequate commitment,

and how to achieve it?

Frank JotzoPeter J Wood

Centre for Climate Economics & PolicyCrawford School of Economics & Government, ANU

Copenhagen: non-binding commitments to actions and targets

Country Type of emissions target 2020 emissions target Base year / nature of target

United States Absolute reduction -17% 2005

EU Absolute reduction -20% to -30% 1990

Japan Absolute reduction -25% 1990

Russia Absolute reduction -15% to -25% 1990

Canada Absolute reduction -17% 2005

Australia Absolute reduction -5% to -25% 2000

China Intensity reduction -40% to -45% Emissions intensity change 2005-2020

India Intensity reduction -20% to -25% Emissions intensity change 2005-2020

Indonesia Reduction below BAU -26% Reduction below BAU at 2020

Brazil Reduction below BAU -36% to -39% Reduction below BAU at 2020

Mexico Reduction below BAU -30% Reduction below BAU at 2020

Korea Reduction below BAU -30% Reduction below BAU at 2020

South Africa Reduction below BAU -34% Reduction below BAU at 2020

>100 countries, >80% of global emissions

How do the pledges compare?

Putting targets on a common footing, and comparing them across different metrics

1. Absolute emissions 2. Per capita emissions3. Emissions intensity4. Relative to business-as-usual

Absolute emissionsTargeted change, % from 2005 to 2020

For mid-point of target ranges where applicable. Central scenario assumptions.

‐60%‐40%‐20%0%20%40%60%80%100%120%

Unite

d Stat

esEU

‐27Jap

anRu

ssia

Cana

daAu

strali

aCh

ina India

Indon

esia

Brazi

lMe

xico

South

 Korea

South

 Afric

aAn

nex I

Non‐A

nnex

 I

Framing: the base year mattersTargeted absolute emissions change,

from year x to 2020

‐40%0%40%80%120%160%200%240%

US EU Australia China India

2005 base

2000 base1990 base

For mid-point of target ranges where applicable. Central scenario assumptions.

What about a 2010 base year?!

Per-capita changes differ greatly from absolute changes

Targeted change, from 2005 to 2020

‐40%‐20%0%20%40%60%80%100%120%

Unite

d Stat

esEU

‐27Jap

anRu

ssia

Cana

daAu

strali

aCh

ina India

Indon

esia

Brazi

lMe

xico

Korea

South

 Afric

a

Absolute emissions

Per capita emissions

For mid-point of target ranges where applicable. Central scenario assumptions.

Convergence? Per capita targets versus per capita emissions levels

-60%

-40%

-20%

0%

20%

40%

60%

80%

0 5 10 15 20 25 30 35

Per capita emissions level, 2005

Chan

ge in

em

issi

ons

per c

apita

, 20

05-2

020

India China

AustraliaCanadaUSA

Brazil

Russia

Japan

Mexico EU S.Korea

S.Africa, Indo

Logarithmic regression line

Emissions intensityTargeted change, % from 2005 to 2020

For mid-point of target ranges where applicable. Central scenario assumptions.

‐70%

‐60%

‐50%

‐40%

‐30%

‐20%

‐10%

0%

Unite

d Stat

esEU

‐27Jap

anRu

ssia

Cana

daAu

strali

aCh

ina India

Indon

esia

Brazi

lMe

xico

Korea

South

 Afric

aAn

nex I

 avg

Non‐A

nnex

 I avg

Targeted change rel to business-as-usual% difference at 2020

‐40%‐35%‐30%‐25%‐20%‐15%‐10%‐5%0%

Unite

d Stat

es EUJap

anRu

ssia

Cana

daAu

strali

aCh

ina India

Indon

esia

Brazi

lMe

xico

Korea

South

 Afric

aAn

nex I

 avg

Non‐A

nnex

 I avg

BAU assumptions contestable

For mid-point of target ranges where applicable. Central scenario assumptions.

Australia’s Copenhagen commitment(reduction in national emissions

at 2020 relative to 2000)

25% “if the world agrees to an ambitious global deal capable of stabilising [...] at 450 ppm CO2‐eq or lower”

(but post‐2020 ramp‐up not impossible?)

up to 15%

“if there is a global agreement which falls short of [450] and under which major developing countries commit to substantially restrain emissions and advanced economies take on commitments comparable to Australia’s”

5% Unconditional n/a

-15% justified on basis of other countries’ Copenhagen pledges

The carbon pricing debate, 2010-11

Emitters want predictability (and freebies) Gov’t sees c-pricing as necessary, but has been stung Greens want c-price, but want to leave target open

A fixed price permit scheme• Govt sells unlimited amount of permits at fixed price• Price rises by x% pa• Can convert to market-based system at any time

Price floors and price ceilings under cap-and-trade

Price floor Minimum price, emissions < cap

• All permits are auctioned at a minimum reserve price; or• Emitters required to pay an extra fee/tax

Price ceiling Maximum price, emissions > cap

• govt issues unlimited extra permits at threshold price;• a limited amount of extra permits are auctioned at a higher

reserve price (‘allowance reserve’)

15

0

10

20

30

40

50

60

70

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

price ceiling

price floorfixed price

market price

$/tCO2

Additional slides

Methodology for converting targets

Form of country target:

Metric for comparison:

Absolute emissions target

Emissions intensity target

Target relative to BAU

Absolute change in emissions

(no assumptions needed, as target framed in this

metric – only conversion to common base year

necessary)

Assume GDP growth rate

Assume BAU emissions trajectory

Change in per-capita emissions

Assume population growth rate, apply to absolute change in emissions

Change in emissions intensity

Assume GDP growth rate

(no assumptions needed, as target

framed in this metric)

Assume BAU emissions trajectory

and GDP growth rate Reduction in emissions relative to BAU

Assume BAU emissions trajectory

Assume BAU emissions trajectory

and GDP growth rate

(no assumptions needed, as target

framed in this metric)

Absolute emissions - developedTargeted change, % from 2005 to 2020

‐40%

‐20%

0%

20%

40%

60%

80%

US EU Japan Russia Canada Australia Weightedaverage

Central scenario assumptions.

Emissions intensity targets vs level of emissions intensity

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Emissions intensity level, 2005 (kgCO2-eq/$ppp)

Chan

ge in

em

issi

ons

inte

nsity

, 20

05-2

020

India

ChinaAustralia

CanadaUSA

Brazil

Russia

JapanMexico

S.KoreaS.Africa

Indonesia

EU

Emissions intensity targets vs GDP growth rate

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0%

Projected annual average GDP growth rate, 2005-2020

Targ

eted

cha

nge

in e

mis

sion

s in

tens

ity,

2005

-202

0

India

China

Australia

CanadaUSA

Brazil

Russia

Japan Mexico

S.KoreaS.Africa

Indonesia

EU

Uncertain estimates

Comparability of effort

Complexity and uncertainty of estimates

Absolute targets

Per capita(need population projections)

Emissions intensity(need GDP projections)

Relative to BAU(need assumptions on BAU emissions intensity and GDP projections)

Economic costs(need BAU plus assumptions on abatement options and costs, in CGE modelling framework)

Targeted change relative to BAU% difference at 2020

For mid-point of target ranges where applicable.

‐60%

‐50%

‐40%

‐30%

‐20%

‐10%

0%

10%

US EU Japan Australia China India

This study

McKibbin, Morris & Wilcoxen 2010

Targeted change relative to BAUQuantity difference at 2020

US17%

EU11%

other developed9%

China43%

Brazil10%

Indonesia5%

other developing

5%

For mid-point of target ranges where applicable. BAU assumptions contestable

China: can the big gains in emissions intensity be repeated?

Annual change in emissions intensity

‐7%‐6%‐5%‐4%‐3%‐2%‐1%0%1%2%

1987

‐1992

1992

‐1997

1997

‐2002

2002

‐2007

China

's targ

et 20

05‐20

20BA

U this

 stud

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BAU M

cKibb

in ea

Stern&

Jotzo

IEA re

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EIA re

f case

Definition of BAU critical

Australia’s commitment: the fine print

Press release Minister Wong, 27 Jan 2010:

“The Government will not increase Australia’s emissions reduction target above 5 per cent until:

• the level of global ambition becomes sufficiently clear, including both the specific targets of advanced economies and the verifiable emissions reduction actions of China and India;

• the credibility of those commitments and actions is established, for example, by way of a robust global agreement at the next United Nations Climate Change Conference in Mexico, or commitment to verifiable domestic action on the part of major emitters including the United States, India and China; and

• there is clarity on the assumptions for emissions accounting and access to markets”