Category: Policy

What about the price of carbon?

The mysterious emissions trajectories implicit in the various draft COP15 agreements got me thinking about the economic implications of various paths. Suppose the following scenario, consistent with the Beijing draft (Copenhagen Accord) or recent KP draft actually happened:

  • deep 2020 cuts for the developed world
  • no binding commitments for the developing world
  • supported NAMAs in developing countries don’t count as offsets against developed country commitments (i.e. developed commitments are met domestically)
  • border carbon adjustments (tariffs on the greenhouse gases embodied in trade goods) are illegal
  • ongoing globalization

In that case, price of carbon would be very high in the developed world, and very low in the developing world. That creates intense pressure for leakage. Emissions-intensive industries would simply relocate to developing countries. Total emissions wouldn’t necessarily go down, except to the extent that relocated capital was newer and cleaner, and might even go up due to greater transport distance and less stringent environmental regulation.

Another consequence is that investors in the developing world, including governments investing in infrastructure, would proceed to build GHG-intensive capital that would just have to be unbuilt in a decade or two. That’s not development; it’s unsustainable lock-in to a dead-end economic, technical, and lifestyle trajectory.

Probably the first thing to happen would be for workers (aka voters) in the developed world to freak out at the resulting job losses, causing the whole agreement to unravel. So, I think you can scratch this kind of arrangement off the list of possible or attractive agreements. If we want to achieve the underlying development goals that motivate people to ask for such things, we need to find a different path.

You can't fix emissions inequity with more emissions

A lot of the draft agreements floating around reference a principle of equity in cumulative emissions budgets. For example, the latest AWG-LCA draft,

A long-term aspirational and ambitious global goal for emission reductions, as part of the shared vision for long-term cooperative action, should be based on the best available scientific knowledge and supported by medium-term goals for emission reductions, taking into account historical responsibilities and an equitable share in the atmospheric space;

That’s a nice sentiment, but the goals expressed here are not compatible. If you take “aspirational and ambitious” to mean 55oppm – much less stringent then a 1.5 or 2C target – we’re already halfway or more through civilization’s cumulative emissions budget. Most of the historic emissions occurred in the 20th century. The rest will happen this century. The problem is, there are a lot more people around this century than last. Therefore, this century’s remaining emissions budget just isn’t big enough to make up for historic inequity in emissions, even if you allocate it all to the developing world.

For example, here’s a scenario in which the developed world stops emitting almost immediately – essentially abandoning its GHG-intensive capital stock – while the developing world pursues a trajectory consistent with a global 50% cut by 2050. Per capita emissions convergence and reversal happens right away:

per capita emissions

Continue reading “You can't fix emissions inequity with more emissions”

The AWG-KP draft

I’ve added the Dec. 16 Kyoto Protocol working group draft to my summary table.

There’s not much to report with respect to the global outcome. Most of the detail is focused on Annex I (developed) country commitments. There are so many options and brackets in the text that it’s hard to draw any concrete conclusions about the implied emissions trajectory.

There’s possibly an interesting disconnect around characterization of the second round of targets. Currently there are a number of options included in bracketed text. First, the endpoint could be either 2017 or 2020. Second, various options suggest a range of cuts between 15% and 49% below 1990. This range corresponds roughly with the range typically cited as providing a decent chance of hitting a 2C target (see AR4 WG3 Ch. 13 box 13.7, pg. 776, for example).

If you think back to the first Kyoto agreement, countries committed to small cuts relative to 1990 for a commitment period from 2008 to 2012. For the EU, with an 8% cut, that meant averaging 92% of 1990 emissions over the commitment period. If you imagine that emissions fall along a linear path from 1990, that means that emissions at the midpoint (2010) would be 92% of 1990, and emissions would be a little higher prior to that, and lower after. Because the slope from 1990 through 2012 is shallow, a viable trajectory would include a 7% cut in 2008 and 9% in 2012. No big deal.

However, for the next commitment period, the slope is a very big deal. The deepest cut in the AWG-KP draft is 49% for the developed world. I suspect that number is anchored on upper end of the AR4 2C range (25-40%), moved up a bit. 49% still sounds plausible. But there’s a problem: to achieve a 49% average over 2013-2020, starting from a 9% cut in 2012, you’d have to do one of two things: reduce emissions an additional 37% overnight, then keep them there (basically impossible), or reduce emissions by 13 percentage points per year, arriving at a cut of 76% in 2017. That’s a year-on-year reduction rate of 15 to 35% per year. That’s pretty tough going, given that, even if you never build another bit of carbon-emitting capital, natural turnover takes you down at 2 to 5% per year.

Required trajectory of 2nd Kyoto commitment

I’m all for strong targets, but abandoning capital at 10% per year is going to be a tough sell. It’s not clear to me that this is intentional. I think it’s quite possible that misperception of the dynamics of a target accumulated over an interval leads to false conflict, as desire to achieve a point goal (e.g., -40% in 2020) is confused with a much more stringent goal over a long interval.

COP15 Mad Libs

The latest draft says targets are “to be elaborated,” so there’s nothing for us modeling types to chew on. To commemorate the non-agreement, populate this:

The Conference of the ___________ (plural noun)

The Parties underline that ________ (noun) is one of the greatest challenges of our time and commit to a _______ (adjective) response through immediate ambitious _______ (noun) and strengthened international cooperation with a view to limit global average temperature rise to a maximum of ______ (number) degrees above ________ (adjective) levels. The Parties are convinced of the need to ________ (verb) climate change bearing in mind that social and economic development and ______ (noun) eradication are the _________ (adjective) priorities in ________ (adjective) countries. The Parties note that the ______ (adjective) share of historical global emissions of ________ (noun) originates in developed countries, and that _______ (plural noun) in many developing countries are still relatively low. The Parties recognize the urgency of addressing the need for ______ (noun) on adaptation to climate change. They are _________ (adverb) convinced that moving to a _________ (adjective) economy is an opportunity to promote continued economic growth and _________ (adjective) development in all _______ (plural noun) recognizing that ________ (noun) equality is essential in achieving sustainable _________ (noun).

In this regard, the ______ (plural noun):

– Support the goal of a _____ (noun) of global emissions as soon as possible, but no later than ______ (number over 2010), acknowledging that ______ (adjective) countries collectively have ______ (verb, past tense) and that the timeframe for peaking will be longer in ________ (adjective) countries,

– _______ (verb) the goal of a reduction of _______ (noun) in _____ (number over 2020) by at least ______ (fraction).

The _______ (possessive noun) contributions towards the goal should take into account ________ (adjective) responsibility and respective capabilities and a long term convergence of _____ (noun).

Resist the temptation to use only expletives. Thanks to Beth for the idea. I’ll paypal beer money to the best version in comments.

The AWG-LCA draft agreement

Like the AOSIS draft, the LTCA draft is a bit coy about developing country actions, and there are a number of unsettled language variations, indicated by brackets. It sets a global goal of 1.5C to 2C, and emissions cuts of 50 to 95 percent from 1990 levels by 2050. Developed countries commit to between 75 and more than 95 percent by 2050, with interim targets of 25 to 45 percent below 1990 by 2020. The developing countries are not explicitly subject to targets, but the combination of supported and autonomous NAMAs is “aimed at achieving a substantial deviation in emissions [in the order of 15-30 percent by 2020] relative to those emissions that would occur in the absence of enhanced mitigation.” The BAU trajectory against which that might be judged is unspecified.

The bracketed options in the text create many possible permutations of the agreement. One is particularly illuminating: the least stringent global target (peak in 2020, 50% below 1990 in 2050) combined with the most stringent developed target (peak in 2011, 45% below 1990 in 2020, 95% below 1990 in 2050). That yields maximum possible emissions in the developing world, given the global and developed budgets.

In that scenario, developing emissions could look like the following:

AWG-LCA developing emissions

Emissions in the developing countries still must peak before 2030. Note that, as in my AOSIS experiment, the potential emissions budget for developing countries exceeds business-as-usual; if BAU emissions don’t actually rise faster than anticipated, those emissions might be reallocated to delay the peak in emissions a bit, but not more than a few years.

Interestingly, this scenario results in hyper-convergence, with developed emissions per capita falling well below developing emissions per capita.AWGLCApercap

It’s unlikely that this is a physically or politically realizable situation, given that developed countries would have to reduce emissions far faster than the natural rate of capital turnover. The rapid decline would not benefit developing countries either, because buildings and infrastructure cannot be moved elsewhere. If developed countries make less aggressive cuts, to about -30% in 2020 and -85% in 2050, per capita emissions converge between 2030 and 2040. However, in that case, developing country emissions have to peak earlier and fall faster.

The only way to delay the peak in developing country emissions significantly is to delay the global peak. However, meeting the same global 2050 target with a later start requires faster declines in emissions, which quickly become impractical unless you assume some kind of technical miracle (not a robust strategy). Therefore, the only way for developing countries to avoid a peak in emissions in the next decade or two is to abandon any pretense of preserving a reasonable probability of meeting 2C or similar targets. That seems to be what some of the big emerging emitters are implicitly arguing for, but is it what they really want, or in their best interest?

Afterthought: The big challenge is that the global and developed country targets are explicit, while the developing country trajectory those necessitate is not. The draft recognizes means for reducing developing country emissions (supported and autonomous NAMAs), but there’s no coordinating mechanism that ensures the outcome adds up to the global goal.

The AOSIS draft agreement

Two more draft agreements have been released, from AOSIS and the AWG-LCA headed by Michael Zammit Cutajar. I’ve summarized the mitigation targets in the four drafts floating around as a Google spreadsheet, here.

The AOSIS draft is, understandably, very aggressive in its global vision. It seeks 350ppm or better, to limit temperature rise to 1.5C vs. preindustrial. To get there, it seeks a global emissions peak by 2015 and an 85% cut from 1990 levels by 2050. Developed countries are to cut 45% below 1990 by 2020. Deforestation is to be halved by 2020 and halted by 2030. The document gets wishy washy when it comes to other developing country actions though: it talks about NAMAs and “significant deviations from baselines by 2020,” but no specific commitments. In my mind, if you’ve specified targets for the world and for developed countries, you’ve implicitly specified the developing countries’ trajectory, so you might as well say what it is and create commitments to ensure that it is achieved. The burden of those commitments (to the extent that it is a burden, and not a hidden opportunity) may not rest on the developing countries, but someone has to be responsible, or it may not happen.

I ran some rough simulations of the AOSIS targets to see what they really imply for developing countries. Here’s the global 2015 peak and 85% cut from 1990 in 2050:

AOSIS global emissions

Here’s the developing cut of 45% from 1990 by 2020. The draft doesn’t specify further cuts, but I’ve assumed that the developed countries keep reducing at the same rate (over 7%/yr) afterwards, hitting about -95% from 1990 by 2050:

AOSIS developed emissions

What does that leave for the developing countries?

AOSIS developing emissions

In short, “significant deviations from baselines” has to be the understatement of the century if the AOSIS global target is to be achieved, in spite of the deep cuts in developed country emissions. Developing emissions peak by around 2020 and have fallen by roughly 75% vs 1990 in 2050. This is not a matter of fairness (fairness is about the distribution of costs and benefits). It’s a matter of physics. Global emissions can’t go down rapidly unless both its major components shrink. (Notice also in the graph above that “potential” emissions exceed BAU until 2020; this is because developed country cuts are initially so rapid. Presumably developing country emissions would not actually rise above BAU, which means that the surplus could be used to delay the peak, but only by a year or two.)

Afterthought: as before, this is based on C-ROADS data and projections, with BAU similar to SRES A1FI, though the results are hardly sensitive to the specifics. Thanks to Stephanie & Allison at SI for tracking down the drafts.

The "Copenhagen Accord"

Hard on the heels of the leaked “Danish text” comes the emerging economy response, the “Copenhagen Accord.” Press coverage indicates that it’s a call for -40% of 1990 by 2020 in the developed world, but the actual text (linked at the end of the article at COP15.dk) has no such details.

Mermaid & power plants

The Copenhagen Accord is notable mainly for what it lacks: there are no global goals, and no explicit developing country targets. However, it does affirm the Framework Convention, “to stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” I’m actually not a strong proponent of hard country commitments for 2050, because they are politically so dubious, and will most likely have to be changed anyway. However, I think it’s quite important to at least agree on an objective in general terms. By failing to state a global goal, does this document redefine “dangerous interference” to include whatever emissions trajectory we happen to get, or does it assume that uncoordinated developed country actions (including support of mitigation in the developing world) will be enough to avoid it?

Similarly, page 1 recognizes “that the right to development and equitable opportunity of development are inalienable basic human rights of all nations, and social economic development and poverty eradication are the first and overriding priorities of developing countries.” I think that human rights are for humans, not nations, but apart from that quibble, this is a good principle. However, I fear that the underlying mental model behind this statement is less admirable. Does it mean, for example, that the authors think a 650ppm future is OK, as long as their GDP goes up? To assume that on-market growth can more than compensate for climate impacts is a risky proposition, especially for the poorest countries. Alternately, does it mean that the authors think the supported mitigation actions, financial and technology transfers, and other mechanisms outlined in the text will be enough to permit development without contradiction of the “dangerous interference” objective? If so, the agreement needs to be a lot more specific about how this will work.

This document, and to a lesser extent the Danish text, really reinforces my perception that modelers and other quantitative folks are living on a different planet from those who craft these drafts. The Copenhagen Accord buries a short page worth of principles in 11 pages of obscure jargon. I had to read it several times to even determine whether it suggested concrete targets. Why not just get to the point? The legalese can come later. Sure, some details are important, like who has jurisdiction over financial flows, but list those as principles rather than enumerating every minor point. Needless detail is more than a time-waster; it actually gets in the way of identifying creative solutions by imposing spurious constraints.

Mercifully, the official draft just released by Michael Zammit Cutajar is reportedly only 6 pages.

Danish text – emissions trajectories

Surfing a bit, it looks like the furor over the leaked Danish text actually has at least four major components:

  1. Lack of per capita convergence in 2050.
  2. Requirement that the upper tier of developing countries set targets.
  3. Institutional arrangements that determine control of funds and activity.
  4. The global peak in 2020 and decline to 2050.

These are evident in coverage in Politico and COP15.dk, for example.

I’ve already tackled #1, which is an illusion based on flawed analysis. I also commented on #2 – whether you set formal targets or not, absolute emissions need to fall in every major region if atmospheric GHG concentrations and radiative imbalance are to stabilize or decline. I don’t have an opinion on #3. #4 is what I’d like to talk about here.

There seem to be two responses to #4: dissatisfaction with the very idea of peaking and declining on anything like that schedule, and dissatisfaction with the burden sharing at the peak.

First, the global trajectory. There are a variety of possible emissions paths that satisfy the criteria in the Danish text. Here’s one (again relying on C-ROADS data and projections, close to A1FI in the future):

Global maximum emissions trajectory

Here, emissions grow along Business-As-Usual (BAU), peak in 2020, then decline at 3.75%/year to hit the 2050 target. This is, of course, a silly trajectory, because its basically impossible to turn the economy on a dime like this, transitioning overnight from growth to decline. More plausible trajectories have to be smooth, like this:

Global practical trajectory

One consequence of the smoothness constraint is that emissions reductions have to be faster later, to make up for the growth that occurs during a gradual transition from growing to declining emissions. Here, they approach -5%/year, vs. -3.5% in the “pointy” trajectory. A similar constraint arises from the need to maintain the area under the emissions curve if you want to achieve similar climate outcomes.

So, anyone who argues for a later peak is in effect arguing for (a) faster reductions later, or (b) weaker ambitions for the climate outcome. I don’t see how either of these is in the best interest of developing countries (or developed, for that matter). (A) means spending at most an extra decade building carbon-intensive capital, only to abandon it at a rapid rate a decade or two later. That’s not development. (B) means more climate damages and other negative externalities, for which growth is unlikely to compensate, and to which the developing countries are probably most vulnerable.

If, for sake of argument, we take my smooth version of the Danish text target as a given, there’s still the question of how emissions between now and 2050 are partitioned. If the developed world shoots for 20% below 1990 by 2020, the trajectory might look like this:

Developed -20% below 1990 in 2020

That’s a target that most would consider to be modest, yet to hit it, emissions have to peak by 2012, and decline at up to 8% per year through 2020. It would be easier to achieve in some regions, like the EU, that are already not far from Kyoto levels, but tough for the developed world as a whole. The natural turnover of buildings, infrastructure and power plants is 2 to 4%/year, so emissions declining at 8% per year means some combination of massive retrofits, where possible, and abandonment of carbon-emitting assets. If that were happening in the developed world, in tandem with free trade, rapid growth and no targets in the developing world, it would surely mean massive job dislocations. I expect that would cause the emission control regime in the developed world to crumble.

The -20% in 2020 trajectory creates surprisingly little headroom for growth in the developing world. Emissions can grow only until 2025 (vs. 2020 globally, and 2012 in the developing countries). Thereafter they have to fall at roughly the global rate.

Developing with global and developed targets

What if the developed world manages to go even faster, achieving -40% from 1990 by 2020, and -90% by 2050? Surprisingly, that buys the developing countries almost nothing. Emissions can rise a little higher, but must peak around the same time, and decline at the same rate. Some of the rise is potentially inaccessible, because it exceeds BAU, and no one really knows how to control economic growth.

Developing with developed -20% vs -40%

The reason for this behavior is fairly simple: as soon as developed countries make substantial cuts of any size, they become bit players in the global emissions game. Further reductions, acting on a small basis, are very tiny compared to the large basis of developing country emissions. Thus the past is a story of high developed country cumulative emissions, but the future is really about the developing countries’ path. If developing countries want to push the emissions envelope, they have to accept that they are taking a riskier climate future, no matter what the developed world does. In addition, deeper cuts on the part of the developed world become very expensive, because marginal costs grow with the depth of the cut. On the whole everyone would be better off if the developing countries asked for more money rather than deeper emissions cuts in the developed world.

There’s a deeper reason to think that calls for deeper cuts in the developed world, to provide headroom for greater emissions growth in developing countries, are counterproductive. I think the mental model behind such calls is a mixture of the following:

  1. carbon fuels GDP, and GDP equals happiness
  2. developing countries have an urgent need to build certain critical infrastructure, after which they can reduce emissions
  3. slow growth fuels discontent, leading to revolution
  4. growth pays for pollution reductions (the Kuznets curve)

Certainly each of these ideas contains some truth, and each has played a role in the phenomenal growth of the developed world. However, each is also fallacious in important ways. The elements in (1) are certainly correlated, but the relationship between carbon and happiness is mediated by all kinds of institutional and social factors. The key question for  (2) is, what kind of infrastructure? Cheap carbon invites building exactly the kind of infrastructure that the developed world is now locked into, and struggling to dismantle. (3) might be true, but I suspect that it has as more to do with inequitable distribution of wealth and power than it does with absolute wealth. Rapid growth can easily increase inequity. The empirical basis of the Kuznets curve in (4) is rather shaky. Attempts to grow out of the negative side effects of growth are essentially a pyramid scheme. Moreover, to the extent that growth is successful, preferences shift to nonmarket amenities like health and clean air, so the cost of the negatives of growth grows.

Rather than following the developed countries down a blind alley, the developing countries could take this opportunity to bypass our unsustainable development path. By implementing emissions controls now, they could start building a low-carbon-friendly infrastructure, and get locked into sustainable technologies, that won’t have to be dismantled or abandoned in a few decades. This would mean developing institutions that internalize environmental externalities and allocate property rights sensibly. As a byproduct, that would help the poorest within their countries avoid the consequences of the new wealth of their elites. Preferences would evolve toward low-carbon lifestyles, rather than shopping, driving, and conspicuous consumption. Now, if we could just figure out how to implement the same insights here in the developed world …

Danish text analysis

In response to a couple of requests for details, I’ve attached a spreadsheet containing my numbers from the last post on the Danish text: Danish text analysis v3 (updated).

Here it is in words, with a little rounding to simplify:

In 1990, global emissions were about 40 GtCO2eq/year, split equally between developed and developing countries. Due to population disparities, developed emissions per capita were 3.5 times bigger than developing at that point.

The Danish text sets a global target of 50% of 1990 emissions in 2050, which means that the global target is 20 GtCO2eq/year. It also sets a target of 80% (or more) below 1990 for the developed countries, which means their target is 4 GtCO2eq/year. That leaves 16 GtCO2eq/year for the developing world.

According to the “confidential analysis of the text by developing countries” cited in the Guardian, developed countries are emitting 2.7 tonsCO2eq/person/year in 2050, while developing countries emit about half as much: 1.4 tonsCO2eq/person/year. For the developed countries, that’s in line with what I calculate using C-ROADS data and projections. For the developing countries, to get 16 gigatons per year emissions at 1.4 tons per cap, you need 11 billion people emitting. That’s an addition of 6 billion people between 2005 and 2050, implying a growth rate above recent history and way above UN projections.

If you redo the analysis with a more plausible population forecast, per capita emissions convergence is nearly achieved, with developing country emissions per capita within about 25% of developed.

Danish text chart

Note log scale to emphasize proportional differences.

Tracking climate initiatives

The launch of Climate Interactive’s scoreboard widget has been a hit – 10,500 views and 259 installs on the first day. Be sure to check out the video.

It’s a lot of work to get your arms around the diverse data on country targets that lies beneath the widget. Sometimes commitments are hard to translate into hard numbers because they’re just vague, omit key data like reference years, or are expressed in terms (like a carbon price) that can’t be translated into quantities with certainty. CI’s data is here.

There are some other noteworthy efforts:

Update: one more from WRI

Update II: another from the UN