Role of Integrated Assessment Modelling (IAM) in climate change

policy analysis

Role of Integrated Assessment Modelling (IAM) in climate change

policy analysis

The Global Integrated Assessment Model (GIAM)

An ABARE-CSIRO joint initiative

Don Gunasekera and Melanie Ford

OutlineOutline

• Scene setting / background

• Modelling framework and assumptions

• Preliminary results

• Way forward

Climate change policy – the Government's agendaClimate change policy –

the Government's agenda

• Mitigation – Emissions trading scheme– Complementary programs (to ETS)– Renewable energy targets– Energy efficiency

• Adaptation

• International collaboration

Key climate change related issuesKey climate change related issues

• Impacts of climate change

• By how much and at what speed should we reduce emissions?

• How should we balance the net costs/benefits of mitigation and adaptation against climate change impacts?

• Ability to refine/improve policy responses with improved information over time

• The international context

Features of current modelling frameworks

Features of current modelling frameworks

• Short term focus: climate change impacts can be long term (to 2100 and beyond)

• Climate – economy feedbacks are lacking

• Limited facility to incorporate climate change impacts – Market impacts– Non-market impacts– Catastrophic impacts

Integrated Assessment Modelling: an alternative approach

Integrated Assessment Modelling: an alternative approach

• Integrates climate and economic models

• Multiple equation computer simulated modelling framework

• Allows feedbacks and interactions

• Gives a better indication of physical and economic impacts

Policy questions that IAMs can addressPolicy questions that IAMs can address

• Climate change damage costs

• Benefits of avoided climate change

• Net benefits of adaptation

• Net benefits of mitigation

• Optimal policy to balance mitigation, adaptation and damage costs

• Least cost way to achieve a given emission limit

Climate change policyA benefit cost analysis (the fish diagram)Climate change policyA benefit cost analysis (the fish diagram)

Reference case without impacts

Mitigation scenario

Reference case with impacts

Global economic activity

time

Shaded area is climate change damages associated with the reference case

costs of policy

benefits of policy

Challenges in IAMChallenges in IAM

• Represent complex socio-economic, geophysical and climate systems and their interactions

• Uncertainties remain in climate change cause and effect chain

• Needs sensitivity analysis and model improvements as better information and improved parameter values become available

Global Integrated Assessment Model An ABARE-CSIRO initiative

Global Integrated Assessment Model An ABARE-CSIRO initiative

• Demand driven project – sought by climate change negotiators and policy makers

• There are other IAMs available, but none represent Australia explicitly or appropriately

• Joint work began in October 2007• Current GIAM version is preliminary and

illustrative only:– Consists of an economic and a climate module

• Aim is to develop a ‘proof of concept’ GIAM

Economic module of GIAMEconomic module of GIAM

• Long run version of GTEM

• Multi country, multi commodity and economy wide framework

• 9 regions

• 28 commodities

• 3 greenhouse gases

• Captures production, consumption and trade between and within countries

Climate module of GIAMClimate module of GIAM

• Initial focus: temperature changes only

• 5-Box carbon cycle model converts long run emissions from economic module to atmospheric concentrations

• CSIRO’s Mk3L General Circulation Model– Estimates regional temperature changes using

concentration levels

Converting temperature changes into economic impacts

Converting temperature changes into economic impacts

• Regional climate change related economic damages depend on: – regional change in temperature– vulnerability to climate change impacts

• Uses a ‘damage function’ to estimate economic impacts– Based on MERGE model

Converting temperature changes into economic impacts –

the damage function in GIAM

Converting temperature changes into economic impacts –

the damage function in GIAM• Assumes:

– damages gradually for small changes in temperature,– damages more rapidly for larger changes in temperature

• Damages are implemented through losses in total factor productivity

• Loss in TFP depends on:– Change in temperature relative to reference year– “vulnerability to climate change” – developing countries are more

vulnerable to climate change than developed countries– “Catastrophic” change in temperature (relative to base year) at

which economic activity falls to near zero

The functional form and parameterisation of the damage function drives the results

The functional form and parameterisation of the damage function drives the results

0

20

40

60

80

100

0 5 10 15 20

increase in temperature, degees Celsius

loss

in t

otal

fac

tor

prod

uctiv

ity (

%)

Catastrophic change in temperature = 17

Catastrophic change in temperature = 10

2. Estimate concentration levels

3. Calculate regional temperatures

4. Estimate economic damages

5. Rerun reference case with impacts

1. Estimate long run GHGs levels to 2100

Developing a reference case with impactsDeveloping a reference case with impacts

Key drivers of emissions – Global population

Key drivers of emissions – Global population

0

2

4

6

8

10

12

14

16

2000 2020 2040 2060 2080 2100

billions

A1FI A2

B1 B2

GIAM UN 2006

Key drivers of emissions – economic growth

Key drivers of emissions – economic growth

Average annual growth in GDP, %2001-2050 2050-2100 2001-2100

United States 2.6 1.9 2.3

EU25 1.7 1.5 1.6

China 5.3 3.6 4.5

Russia 3.5 2.3 2.9

Japan 1.5 1.2 1.3

India 5.8 3.9 4.8

South Korea 2.8 1.3 2.0

Australia 2.4 2.0 2.2

Rest of world 3.8 3.3 3.5

World 3.0 2.8 2.9

Key drivers of emissions – Global primary energy consumption

Key drivers of emissions – Global primary energy consumption

0

10

20

30

40

50

60

2000 2020 2040 2060 2080 2100

Gtoe

A1B A1FIA1T A2B1 B2GIAM

Global greenhouse gas emissionsGlobal greenhouse gas emissions

0

20

40

60

80

100

120

140

160

2000 2020 2040 2060 2080 2100Gt CO2-e

A1B A1FIA1T A2B1 B2GIAM

Atmospheric concentration Atmospheric concentration

200

400

600

800

1000

1200

2000 2020 2040 2060 2080 2100

CO2-e ppm

Increase in average surface temperature, relative to 2000 levels Increase in average surface temperature, relative to 2000 levels

1

2

3

4

2000 2020 2040 2060 2080 2100

degrees Celsius

World

Australia

Increase in average temperature, relative to 2000 levels

Increase in average temperature, relative to 2000 levels

0.5

1

1.5

2

2.5

3

3.5

4

2050 2100degrees Celsius

WorldAustraliaChinaEU25IndiaJapanKoreaRussian FederationRest of worldUnited States

Economic growth pathway – world Economic growth pathway – world

4

8

12

16

20

2000 2020 2040 2060 2080 2100

index of economic

growth

reference case without impacts

reference case with impacts

Economic growth pathway – AustraliaEconomic growth pathway – Australia

3

6

9

12

2000 2020 2040 2060 2080 2100

index of economic

growth

reference case without impacts

reference case with impacts

Way forwardWay forward

• Need in-depth work on damage function– Benefits in some regions at small temperature changes– Rainfall and sea level changes– Damages by key sector– Multidisciplinary research into damages

• Social processes (demographic, urbanisation etc)

• Need to develop:– Adaptation module– Policy response module

• Need more resources over several years

Thanks toThanks to

CSIRO

and

The ABARE Climate Change and Modelling Section