the atmosphere as a global common: from a tragedy to a drama · 2017-03-31 · prof. dr. ottmar...
TRANSCRIPT
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Max-Planck Institute of Economics
Jena, 11 January 2012
Prof. Dr. Ottmar Edenhofer
The Atmosphere as a Global Common:From a Tragedy to a Drama
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Economic Growth in Perspective
Maddison (2008) 2
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Growth and Poverty Reduction
• People living in absolute poverty: >1 Billion
• Low economic growth could drastically reduce development in many countries• Zero growth is not sufficient to reach environmental targets
Banning growth does not seem to be a feasible solution to protect the environment
Dollar and Kray (2002)3
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World Map of Wealth
Füssel (2007)4
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World Map of Carbon Debt
Füssel (2007)5
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Carbon Debt and Wealth
103
104
105
101
102
103
104
Brazil
Mexico
Ethiopia
Russia
Egypt
France
Germany United States
India
Bangladesh
China
Japan South Africa
K: Capital stock (US$2000 per person)
P: F
ossi
l CO 2 e
mis
sion
s (k
g C
per
per
son
and
year
)
Fitting line: ln P=0.987 ln K+c
Füssel (2007)
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The impact of economic growth on the environment
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Climate Change: Tipping Points in the Earth System
“Tipping processes of the climate system” show a strong reaction already to small climate changes
Schellnhuber, 1996; Lenton et al., 2008 8
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Cost-benefit Analysis or Risk Management?
• Weitzmann 2009, 2010: The Dismal Theorem
– Due to „fat-tailed“ climate sensitivity and uncertain tipping points there is a non-trivial probability of catastrophic damages
– For CRRA utility functions the expected utility converges to minus infinity
Climate damages
Prob
abili
ty p
dCCpCU
ondistributitailedfataisCpIf
forC
forCCU
)()(
:)(
1ln
)0(11
)(1
9
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T. M. Lenton & H. J. Schellnhuber (Nature Reports Climate Change, 2007)
Prognosis for 2100 (IPCC 2007)
Burning Embers Diagram
2°C abovepre-industriallevel
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Climate Change Mitigation as Insurance
– In this case the cost-benefit calculus breaks down. With risk aversion, basically the entire income is used to avoid the possibility of catastrophic damages.
– Climate policy as insurance against catastrophic climate change!
Stern (2008) 11
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Climate Policy as a Hotelling Problem
Cumulative emissions 2000-2050 (GtCO2)Meinshausen et al (2009) 12
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13Kalkuhl et al. 2009
Under BAU more than 1200 GtCare disposed into the atmosphere
Unlimited Resources – Limited Disposal Space
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Stabilisation of Atmospheric CO2-Concentration
3 stabilisation goals with different probabilities of attaining the 2° goal: 550ppm-eq, 450ppm-eq, 400ppm-eq
550ppm-eq 450ppm-eq 400ppm-eqBaseline
Negative emissions
~75% prob.~50% prob.~15% prob.
CO2 –emissions (energy)
Knopf, Edenhofer et al. (2009)
Year
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Transformation of the Energy SystemP
rimar
y E
nerg
y C
onsu
mpt
ion
[EJ]
CO2emissions
REMIND-R, ADAM 450ppm-eq, 4/6/2009, Steckel/Knopf
Negative CO2emissions
Based on IEA Data (1971-2005) and REMIND-R results for 450ppm-eq (ADAM); Graphic by Steckel/Knopf (PIK)
450ppm-eq.Scenario
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… and What About Energy Efficiency?
Luderer et al. 201116
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The Atmosphere as a Global Common
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Resource Extraction> 12.000 GtC
Atmosphere: Limited Sink~ 230 GtC
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Managing the Atmosphere with a Sky Trust
1) Determine Magnitude of Atmospheric Disposal Space
Balance Costs & Risks of Climate Change with Mitigation
2) Adopt efficient Policy Instruments: Carbon Tax or ETS
3) Distribute the Climate Rent
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From Tragedy to Drama: Strategic Options
Benefits Costs
DomesticAvoided domestic
damages &Co-Benefits
Domestic mitigation costs (energy, growth)
GlobalAvoided damages in
other regions(ethics)
Costs for other regions (ethics);
Access to mitigation in other
regions
Country Calculus for Mitigation Program
Demand forMitigation
Supply of Mitigation
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Living in a Second-Best World: Technology Policies
• Supporting Renewables: Fatal Aberration?
• Subsidizing CCS: Almost First Best?
• Combine both Options: A Bridge towards an International Agreement?
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The current Global Energy System is Dominated by Fossil Fuels
Shares of energy sources in total global primary energy supply in 2008
IPCC SRREN 2011 21
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The Technical Potential of Renewable Energy
IPCC SRREN 2011 22
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The Costs of Renewables are Often Still Higher Than Those of Non-Renewables. But…
IPCC SRREN 2011 23
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...Some RE Technologies Are Already Competitive
Binary cycle plant
Domestic pellet heating system
Palm oil biodiesel
Small scale CHP (steam turbine)
IPCC SRREN 2011 24
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Renewable Energies have a Potential to Lower Costs
IPCC SRREN 2011 25
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Case 1: Carbon Pricing is Necessary and Sufficient
MC BlackElectricity
MC GreenElectricity
Green EnergyBlack Energy
PE1
MC BlackElectricity
MC GreenElectricity
Social Costsof Carbon
Green EnergyBlack Energy
PE2
PE1
Edenhofer et al. 200726
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Case 2: Additional Promotion of Renewables is not Reasonable
► Several stable equilibrium points (PE3 and PE1) are possible if the supply curves show a non-convex behavior(PE2 is not stable).
►Without additional policy support, the system will steertowards the neighboring equilibrium point PE3.
►PE3 > PE1: the system is efficient.
Edenhofer et al. (2007)
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Case 3: Additional Promotion of renewables is Reasonable
►The internalization of the social costs of energy supply (e.g. via a cap and trade system) improves the competitiveness of renewable energies
►As long as the cross-over point PE3 does not vanish, this, however, still results in an inefficient state.
Social Costs of Carbon
Edenhofer et al. (2007)
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Robustness of Policy Instruments
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Consumption losses relative to the 1st-best optimum of optimal and “close-to-be-optimal” instruments that deviate by +1% and -1% from the optimal value.
Kalkuhl, Edenhofer, and Lessmann 2012
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2nd Best-Technology Policy
Kalkuhl, Edenhofer & Lessmann 2011
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Carbon Capture and …31
Combustion
Bio+CCS /Air Capture
Atmospherical CO2
Geological C storage
C in FossilResources
+CCS
…Storage (CCS)
Not fully sustainable 31
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The peculiar role of CCS
• Subsidies for CCS create a scarcity rent and an implicit carbon price.
• No leakage and sufficient storage capacities might enable the policy maker to achieve a first-best solution.
• However, these assumptions are highly unrealistic.
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IMF (2011)
Renaissance of Coal?
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Renaissance of Coal?
IPCC SRREN 2011
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Combining CCS and Renewables Policy
Welfare losses (in balanced-growth equivalents) of optimal second-best policies compared to the social optimum ( = 100%) under a carbon budget. The negative welfare losses of the laissez-faire (business-as-usual) economy indicate the mitigation costs due to the carbon budget constraint.
Kalkuhl, Edenhofer, and Lessmann (2012)
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Rent Distribution
Kalkuhl, Edenhofer, and Lessmann (2012)
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…Use (CCU)
Combustion
Atmospherical CO2
Geological C storage
C in FossilResources
+CCSRenewable electricity
Gaseous and liquid fuels, e.g.CH4
Transitional
Carbon Capture and …
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Renewable electricity
Gaseous and liquidfuels, e.g.CH4
Atmospherical CO2
Combustion
Bio+CCS /Air Capture
…Cycling(CCC)
Sustainable
Carbon Capture and …
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Geological or Biological C storage, e.g. charcoal
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Linking Climate Cooperation with Technology Policies
• Combine agreement on emission reductions with agreement on research on
– mitigation technology – general (labor) productivity
• Full cooperation can be reached
Spillover Intensity
Coalition Size
Productivity
MitigationTechnology
Lessmann and Edenhofer (2011)
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4.11.9
0.93.1 (EU‐27)
5.1 (EU‐27)
0.50.4
0.6
0.41.9
CO2-trade balances for different world regions 1990-2008
Peters, Minx, Weber and Edenhofer (2011)
Blue: CO2-ImportingRed: CO2-Exporting
Justification for Trade Sanctions?
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• Moderate tariffs deter free-riding, enable global cooperation and increase global welfare
• Credible, because climate coalition would gain from it• Become obsolete once global cooperation is established • Legitimacy essential: misusage, retaliation, WTO
Trade Sanctions Against Climate Non-Cooperators
Lessmann, Marschinski, and Edenhofer (2009)
Tariff on imports from free-rider countries in percent
Larg
est p
ossi
ble
stab
le c
oalit
ion
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Creation and ‚Linking‘ of Emissons Trading SystemsCanada 0.74Gt
USA6Gt
RGGI0.17Gt
MGGA 0.83Gt
EU ETS2Gt
Australia0.45Gt
New Zealand0.098Gt
Japan 1.4Gt
Switzerland0.003Gt
WCI 1.1Gt
Brazil 1 Gt
Mexico 0.64Gt
Tokio 0.012Gt
S‐Korea0.6Gt
China 6GtCalifornia 0.4Gt
Chile 0.073 Gt
India 1.5 Gt
Flachsland (2011)
Reduction of mitigation costs by establishing access to low-cost abatement options
Potential for strategic incentives 42
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Side Payments: Green Climate Fund
Fast startfinance (FSF)
Long-termclimate finance
2010 2020
10 bn
100 bn
US$
ramp up phase
years
Current standing: For 2010 industrialized countries have earmarked US$ 12 billions 43
Brunner (2011)
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IEA WEO (2011)
No Regret: Reducing Inefficient Fossil Energy Subsidies
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Better REDD than dead?
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Conclusions
• Climate Change is a Global Commons Problem: The atmospheric sink is being overused
• Key Question: Is it possible to transform the „Tragedy of the Commons“ into a „Drama of the Commons“?
• Appears difficult, but there are some promising technological and institutional options
• A world government will not be forthcoming in the next decades: Need to explore options for polycentric governance
www.mcc-berlin.net
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Recommended Reading
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http://srren.ipcc-wg3.de/report http://www.klima-und-gerechtigkeit.de/