Climate Change Mitigation

Bruce A. McCarl

Department of Agricultural Economics

Texas A&M University

Discussion Outline

Why Might We Mitigate?

Brief History of the UNFCCC

The KYOTO Protocol and its Mechanisms

U.S. Cost of Compliance with KYOTO protocol

Potential Sectoral GHG Emission Mitigation Strategies

Policies, Measures, and Instruments

Introduction to GHG Mitigation Economics

Mitigation Assessment

Why Might We Mitigate?

Greenhouse gas forcing is causing climate change

International agreements under UNFCCC - Kyoto Protocol

International pressures for emission reduction

Domestic policies at national or state level

Industry planning under uncertainty

Need for cheap emission offsets

Congruence of programs with other agriculturally related

societal desires such as farm income support and water

quality protection

Development of another market for farm products

Greenhouse gas forcing is causing climate change

Basic argument is that GHG emissions are increasing

earth’s heat trapping and climate is warming

See climate change effects notes for discussion

Brief History of the International Agreements on Mitigation

UNFCCC : United Nations Framework Convention on Climate Change

Adopted on May 9, 1992 and ratified by 176 governments

worldwide as of October 1998

Developed plans for responding to climate change

“... to achieve ... stabilization of greenhouse gas

concentrations in the atmosphere at a level that would

prevent dangerous anthropogenic interference with the

climate system” (p.9).

Established to negotiate net GHGE reduction

Under it’s auspices, the KYOTO Protocol was adopted in

1997.

The KYOTO Protocol

The first major international agreement towards GHGE

reduction

Industrialized countries agreed to reduce emissions of six

greenhouse gases baskets [CO2, CH4, N2O, HFCs, CFs, SF6]

to 5-8% below 1990 levels between 2008 - 2012.

GHGs are compared to each other using global warming

potential (GWP) coefficients

Treatment of emissions of GHGs from land-use change

Approval of offsets through enhancement of sinks

Authorization of mechanisms to reduce the cost of meeting

the target

The KYOTO Protocol – Mechanisms

Mechanisms to reduce the cost of meeting the above target

International Emissions Trading (Article 17)

Allows the trading of assigned amounts within or

among industrialized countries to meet quantified emission limitation

or reduction commitments.

Clean Development Mechanism (CDM) (Article 12)

Allows industrialized countries to finance emission

reductions in developing countries to help in sustainable

development and receive emission credits for doing so.

Joint Implementation (JI) (Article 6)

Allows Annex I transferring/acquiring emission

reductions resulting from activities aiming to reduce

anthropogenic emissions by sources or enhance

anthropogenic removals by sinks.

The KYOTO Protocol – Mechanisms

Joint Action or Bubbles (Article 4)

Agreement among regional groups to achieve their reduction

targets jointly provided that their combine aggregated anthropogenic

emissions of GHGs do not exceed their quantified emission limitation

and reduction commitments.

Source: Kyoto Protocol at http://www.sdinfo.gc.ca/docs/en/kyoto/Default.cfm

The KYOTO Protocol – Mechanisms

Joint Action or Bubbles (Article 4)

Agreement among regional groups to achieve their reduction

targets jointly provided that their combine aggregated anthropogenic

emissions of GHGs do not exceed their quantified emission limitation

and reduction commitments.

Source: Kyoto Protocol at http://www.sdinfo.gc.ca/docs/en/kyoto/Default.cfm

GHG Market Equilibrium

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GHG Market Equilibrium with cap

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GHG Market Equilibrium with cap - Why there?

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Multi region GHG Market Equilibrium with cap – Autarkic, no trade

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The KYOTO Protocol – U.S. cost of compliance with the KYOTO

The Kyoto Protocol would have required the US to reduce its emissions

7% from 1990 levels from 2008 to 2012.

To comply US emissions must decline by 30% from projected 2010

levels which results in a GDP loss of about 1-4% annually (Weyant 1999).

Source: Weyant, J. P. (ed.) The Costs of the KYOTO Protocol: A Multi-Model Evaluation, a special issue of The Energy Journal, p. xxxi, and xxxiii, 1999.

Figure 8. Carbon tax under alternative trading regimes

Figure 9. GDP loss under alternative trading regimes

Source EPA Inventory of U.S. GHG Emissions Inventory 2011

Magnitude of U.S. GHGEmissions

GWP and Climate ChangeGWP is used to make comparisons of relative contributions among GHGs to global warming by comparing the ability of each gas to trap radiation in the atmosphere over a chosen time horizon.

IPCC uses CO2 as a reference gas with a GWP of 1.

HFC-23 260 9400 12000 10000

CF-4 >50,000 3900 5700 8900

SF-6 3200 151000 22200 32400

GWP values and lifetimes from 2007 IPCC(2001 IPCC in parentheses)

Lifetime (years)

GWP time horizon

20 years 100 years 500 years

Carbon dioxide 1 (1) 1 (1) 1 (1)

Methane 12         (12) 72         (62) 25         (23) 7.6       (7)

Nitrous oxide 114       (114) 289       (275) 298       (296) 153       (156)

Source: Climate Change 2001: The Scientific Basis, Table 6.7: Direct GWP at http://www.grida.no/climate/ipcc_tar/wg1/248.htm#tab67

Multigas valueThe EMF did a comparison between mitigating GHGs with CO2-only and multi-gassesThe results examined a scenario that attained a stabilization target that stabilized radiative forcing at 4.5 Wm-2 relative to pre-Industrial times by 2150.

They found show that under multi-gas mitigation versus CO2 only that the reductions are much cheaper if all are managed.

Carbon Permit Price (2000 $US/tCe)

Essentially, less costly reductions in NonCO2 gases are displacing more costly reductions in CO2 from the energy sector.

Source http://emf.stanford.edu/publications/emf_21_multigreenhouse_gas_mitigation_and_climate_policy/

2025 2050 2075 2100

CO2 only $101.3 $314.2 $406.2 $877.0

CO2 plus non-CO2 $57.8 $158.7 $241.8 $480.3

% reduction 48% 41% 23% 39%

Other reasons Why Might We Mitigate?

Domestic policies at national or state level

Clean skies 18% reduction in intensity

4 pollutants NOX,SOX,Mercury,CO2

State initiatives

Voluntary registry

International pressures for emission reduction

European pressure

Other reasons Why Might We Mitigate?

Domestic policies at national or state level

Clean skies 18% reduction in intensity

Source EPA Inventory of U.S. GHG Emissions Inventory 2011

Other reasons Why Might We Mitigate?

Industry planning under uncertainty

Demonstration projects

Interests at risk

Multinationals

Need for cheap emission offsets

Firms investing

CCX

Congruence of programs with other agriculturally related

societal desires such as farm income support and water

quality protection

Development of another market for farm products

Relative size of Agriculture Emissions

Agriculture is largest source (EIA)Emissions rose via EPA estimates from 195 in 1990 to 215 in 2008

IPCC data

Historical Emissions Estimates

Source: Apparently this was drawn from W. F. Ruddiman, 2001. Earth's Climate: Past and Future. W. H. Freeman and Sons, New York

Sequestration may have the potential to alleviate somewhere in the neighborhood of 25% of the historical atmospheric greenhouse gas accumulation.

Why is this happening - Emissions growing

Emissions growing this figure goes to 2006

http://www.epa.gov/climatechange/emissions/globalghg.html

Why is this happening - Energy use growing

Why is this happening - Emissions growing

Rank CountryAnnual CO2 emissions[8][9]

(in thousands of metric tons)Percentage of global total

 World 29,321,302 100%1  China[10] 6,538,367.00 22.30%2  United States 5,830,381.00 19.91%-  European Union (27) 4,177,817.86[11] 14.04%3  India 1,612,362.00 5.50%4  Russia 1,537,357.00 5.24%5  Japan 1,254,543.00 4.28%6  Germany 787,936.00 2.69%7  Canada 557,340.00 1.90%8  United Kingdom 539,617.00 1.84%9  South Korea 503,321.00 1.72%10  Iran 495,987.00 1.69%11  Mexico 471,459.00 1.61%12  Italy[12] 456,428.00 1.56%13  South Africa 433,527.00 1.48%14  Saudi Arabia 402,450.00 1.37%15  Indonesia 397,143.00 1.35%16  Australia 374,045.00 1.28%17  France[13] 371,757.00 1.27%18  Brazil 368,317.00 1.26%19  Spain 359,260.00 1.23%20  Ukraine 317,537.00 1.08%21  Poland 317,379.00 1.08%22  Turkey 288,681.00 0.98%

List of countries by 2007 emissions

http://en.wikipedia.org/wiki/List_of_countries_by_carbon_dioxide_emissions

Source: IEA WEO 2007 and Socolow presentation at Americas Climate Choices

Per-capita fossil-fuel CO2 emissions, 2005

1-

World emissions: 27 billion tons CO2

STABILIZATION

AVERAGE TODAY

“Stabilization”: 1 ton CO2/yr per capita

It is not sufficient to limit emissions in the prosperous parts of the world and allow the less fortunate to catch up. Such an outcome would overwhelm the planet.

The emissions of the future rich must eventually equal the emissions of today’s poor, …

…not the other way around.

Socolow presentation at Americas Climate Choices

Agricultural and Forestry Sector Contributed 4% of global energy-related CO2 emissions in 1995 but

about 50% of methane and 70% of nitrous oxide Conservation Improvement of agriculture (e.g. conservation tillage,

reduction of land use intensity, etc.) Sequestration management Substitute product production (biofuels) Altered ag management of cattle, rice, fertilization Fuel switching

Waste Management Sector Use of landfill gas for heat and electricity Increase of waste recycling rates Utilize waste paper as a biofuel

Energy Sector Contributed 38 % of global energy-related CO2 emissions in 1995 Improvement in the energy efficiency of power plants Fuel switching Deregulation of the electric power sector to drive technological progress

Potential Sectoral GHG Emission Mitigation Strategies

Buildings Sector Contributed 31% of global energy-related CO2 emissions in 1995 Improvement in the energy efficiency of windows, lighting,

refrigeration, air conditioning, etc. Passive solar design & integrated building Fuel switching

Transportation Sector Contributed 22 % of global energy-related CO2 emissions in 1995 Improvement in the energy efficiency of vehicles Vehicle Fuel switching to natural gas, electricity, biofuels Subsidize mass transit

Industry Sector Contributed 43 % of global energy-related CO2 emissions in 1995 Improvement in the energy efficiency Material efficiency improvement e.g. recycling, material

substitution Fuel switching

Potential Sectoral GHG Emission Mitigation Strategies

Adapted from CC 2001 mitigation p. 29-40

Potential Sectoral GHG Emission Mitigation Strategies

IPCC WGIII 2007

Climate Change Mitigation Challenge

Complex set of sourcesEnergy is keyTie to DevelopmentMultinational needBRIC countriesFutility of unilateral actionLegislationOffset controversy

Here are a set of policies, measures, and instruments to limit GHG

emissions or enhance sequestration by sinks.

Command and control

Taxes on emissions, carbon, and/or energy

Subsidies

Tradable emissions permits (cap-and-trade)

Non-tradable permits

Emission reduction credits

Voluntary agreements

Technology and performance standards

Product bans

Direct government spending and investment (R&D)

Policies, Measures, and Instruments

Adapted from CC 2001 mitigation p. 399-450 http://www.grida.no/climate/ipcc_tar/wg3/224.htm

Policies, Measures, and Instruments

Command and Control

Imposing a specific and inflexible emission standards on sources

Taxes on Emissions, Carbon, and/or Energy

A levy imposed by a government on each unit of emissions or on

carbon content of fossil fuels (carbon tax), or on the energy content

of fuels

Advantage: 1. Yields cost minimizing allocation

2. Promotes technological progress

3. Increases revenues to subsidize R&D

Disadvantage: 1. How to determined an appropriate level of Tax?

Marginal control cost

Cost ($)

Emission Reductions (tons)

Tax

15D

A B

CO

Policies, Measures, and Instruments

Subsidies

A direct payment from the government

Lowers existing subsidies to fossil fuel use, or increasing subsidies

for practices reducing emissions or enhance sinks

Tradable Emissions Permits (Cap-and-Trade)

Puts a cap or limit on aggregate GHG emissions on sources

Requires each source to hold permits equal to its actual emissions

Allows permits to be traded among sources

Advantage: Flexibility

Disadvantage: Need to consider transaction costs

Non-Tradable Permits

Puts a cap or limit on GHG emissions on each regulated source

Requires each source to keep its actual emissions below its own cap

Does not allow trading among sources

Policies, Measures, and Instruments

Emission Reduction Credits

Combination of a deposit or fee (tax) on a emissions with a refund or

rebate (subsidy) for emission reductions

Credits are implemented through

Offset policy

Bubble policy

Netting within the firms

Banking

Advantage: allow growth

Disadvantage: quantifiability, and monitoring and enforcement

Policies, Measures, and Instruments

Voluntary Agreements

An agreement between a government authority and one or more

private parties

A unilateral commitment to achieve environmental objectives or to

improve environmental performance beyond compliance

Technology and Performance Standards

Establishment of minimum requirements for products or processes

to reduce GHG emissions associated with the manufacture or use of

the products or processes

Product Bans

Prohibition on the use of a specified product in a particular

application, such as hydrofluorocarbons (HFCs) in refrigeration

systems

Policies, Measures, and Instruments

Direct Government Spending and Investment (R&D)

Government expenditures on research and development (R&D)

measures to lower GHG emissions or enhance GHG sinks

Remarks:

(1). A group of countries can implement one or a combination of these instruments.

(2). If we control too much at the present time, the current generation pays high price but the future generation gains benefit, or a vice versa.

Adapted from CC 2001 mitigation p. 399-450 http://www.grida.no/climate/ipcc_tar/wg3/224.htm

Policy Directions Policy toward climate change consists of three elements:

– Let it happen – ignore– Pursue mitigation (reducing the extent of climate

change), – Pursue adaptation (reducing the impact of change),

and

Schematic from Parry, 2009

Policy Sensitivity Let it happen – ignore or only reduce

– Effects on previous page

Pursue mitigation (reducing the extent of climate change) – Energy will be major thrust

• De carbonize• Tax• Pursue renewable

– So may be agricultural activities• Land use change – domestic and ILUC• Sequestration – tree planting, grass, tillage• Emissions, fossil fuel use, enteric, manure, rice• Offsets – biofuel and bio electricity – watch out for LUC

Pursue adaptation (reducing the impact of change)– Maintenance of current productivity– Autonomous – varieties, planting dates, crop mix, enterprise choice– Facilitating adaptation

• R&D on adapted varieties, practices• Extension• Facilities

– Compensation (international)

Resource competition from both

Source : IPCC AR4t

Climate models predict increasing emissions will cause a temp increase

Lag until effectiveness Degree of climate change - What is projected

Where we are

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rice

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Soil carbon sequestration (mmtce)

TechnicalPotential

EconomicPotential

CompetitivePotential

Source: B. McCarl and U. Schneider, presented at 2001 EPA-USDA Forestry and Agriculture Greenhouse Gas Modeling Forum.

Example: U.S. ag soil potential:

Q: Can We Identify the Competitive Potential for U.S. Ag & Forest Options?

ALTERNATIVE OFFSET SCENARIOSEPA ANALYSIS OF THE CLIMATE SECURITY ACT OF 2008: S. 2191 (MARCH 2008)

No offsets

15/15

Unlimitedoffsets

Example of Acid Rain Program

SO2 and NOx are the primary causes.

Acid rain occurs when these gases react in the atmosphere with water,

oxygen, and other chemicals to form various acidic compounds.

This acid rain program is designed to reduce emission of SO2 AND NOx

by 10 million tons below 1980 levels at the lowest cost to society.

How does this program work?

Technology improvement

Fuel switching

Conserves energy

Allows Trading System

Auctions and Direct Sales

Opt-in Program

Etc.

http://www.epa.gov/airmarkets/acidrain/#what

Example of Acid Rain Program – allowance trading system

EPA sets allowances based on historical fuel consumption and

emission rates.

Allowance trading provides incentives for energy conservation

and technology innovation that can both lower the cost of

compliance and yield pollution prevention benefits.

Regulated firms decide the most cost-effective way to use

available resources to comply with the acid rain requirements by

employing energy conservation measures

switching to a lower sulfur fuel

employing pollution control technologies, etc.

Firms that reduce their emissions below their regulated

allowances may trade their allowances, sell them on the open

market or through EPA auctions, or bank them to cover

emissions in future years.

Source: EPA’s Acid Rain Program: Overview at http://www.epa.gov/airmarkets/arp/overview.html

The ozone layer acts as a blanket in the stratosphere that protects us

from harmful UV radiation. CFC-12 destroys this layer of gas which

leads to an increase in cataracts and skin cancer.

The largest uses of CFC-12 is as a refrigerant in motor vehicle air

conditioners

Firms are given funds to switch from ozone pollutable to other sources.

Taxes on ozone

Certification Requirements

Regulation on service shops must certify to EPA that they have

acquired and are properly using approved refrigerant recovery

equipment, and that each person using the equipment has been

properly trained and certified.

Global Action to Protect the Ozone Layer

Montreal protocol => agreement to phase out production

of most ozone-depleting substances

Example of Ozone Depletion Program

Source: EPA Regulatory Requirements at http://www.epa.gov/ozone/title6/609/justfax.html

Introduction to GHG Mitigation Economics – Emissions Tax

Marginalcost/Price S

D

MCCarbonTax ($/ton)

Emission Reduction (tons)

Quantity of Emissions (tons)

Tax

Source: Weyant, J. P. (ed.) The Costs of the KYOTO Protocol: A Multi-Model Evaluation, a special issue of The Energy Journal, p. xxxi, and xxxiii, 1999.

Figure 1. Supply and DemandFor Energy/Carbon

Figure 2. Marginal Cost Curvefor Carbon Emission Reductions

Introduction to GHG Mitigation Economics – Emissions Trading

A1 A2

B1 B2

Ta’

Ta

Tb

Tb’

MCa

MCb

Ra’ Ra Rb Rb’

Emission Reductions (tons)

Country A Country B

No trade: Cost of emission reductions to A is A1+A2, to B is B1.With trade: Cost of emission reductions to A is A1, to B is B1+B2.Total global cost is reduced by A2 – B2Total emission reductions = Ra’ + Rb’ = Ra + Rb

Source: Weyant, J. P. (ed.) The Costs of the KYOTO Protocol: A Multi-Model Evaluation, a special issue of The Energy Journal, p. xxxi, and xxxiii, 1999.

Figure 3. Two Country Example of International Emissions

Mitigation Assessment

Include at least two scenarios "baseline" or "reference" scenario

and "mitigation scenario" Assumptions e.g. economic growth, technology, etc.

Source: CC 2001 mitigation p. 24 at http://www.grida.no/climate/ipcc_tar/wg3/015.htm#24

Figure TS.1: Qualitative directions of SRES scenarios for different indicators

Mitigation Assessment

Assessment criterion

GHG reduction potential (Tons of carbon equivalent)

Other environmental considerations

soil conservation, watershed management, etc.

Economic and Social Considerations

Cost-effectiveness

GDP, jobs created or lost, implications for long-

term development, etc.

Differential impacts on countries, income groups

or future generations

Issues on Mitigation Assessment

Assessment criterion (continued)

Institutional and Political Considerations Monitoring, enforcement issues Capacity to pass through political and bureaucratic

processes and sustain political support Consistency with other public policies

Uncertainty

Ranking mitigation strategies accordingly to criterion

NAS Mitigation reccomendations

• Adopt a mechanism for setting an economy-wide carbon pricing system .

• Complement the carbon price with a portfolio of policies to:• realize the practical potential for near term emissions reductions

through energy efficiency and low emission energy sources in the electric and transportation sectors;

• establish the technical and economic feasibility of carbon capture and storage and evolutionary nuclear technologies;

• accelerate the retirement, retrofitting or replacement of GHG emission-intensive infrastructure.

• Create new technology choices by investing heavily in research and crafting policies to stimulate innovation.

• Design and implement climate change limiting policies to promote equitable outcomes, with special attention to disadvantaged populations.

• Establish the United States as a leader to stimulate other countries to adopt GHG reduction targets.

• Enable flexibility and experimentation with policies to reduce GHG emissions at regional, state and local levels.

• Design policies that balance durability and consistency with flexibility and capacity for modification as we learn from experience.

http://dels.nas.edu/Report/Limiting-Magnitude-Climate-Change/12785 

References

Climate Change 2001: The Scientific Basis, Contribution of Working Group I to the

Third Assessment Report of the Intergovernment Panel on Climate Change at

http://www.grida.no/climate/ipcc_tar/wg1/index.htm

Climate Change 2001: Mitigation, Contribution of Working Group III to the Third

Assessment Report of the Intergovernment Panel on Climate Change at

http://www.grida.no/climate/ipcc_tar/wg3/224.htm

EPA’s Clean Air Markets – Acid Rain Programs and Regulations at

http://www.epa.gov/airmarkets/arp/overview.html

EPA Regulatory Requirements for Servicing of Motor Vehicle Air Conditioners at

http://www.epa.gov/ozone/title6/609/justfax.html

EPA Inventory of U.S. GHG Emissions Inventory 2003 (Draft)

KYOTO Protocol at http://www.sdinfo.gc.ca/docs/en/kyoto/Default.cfm

McCarl, B. A., and J. Antle, Agricultural Soil Carbon Sequestration – Economic Issues

and Research Needs, Working Paper #0875, Department of Agricultural Economic,

Texas A&M University, College Station, TX

Weyant, J. P. (ed.) The Costs of the KYOTO Protocol: A Multi-Model Evaluation, a

special issue of The Energy Journal, 1999.