1. Climate Change and Climate Policies Arnaud Broh (CO2logic/ULB) 1

2. Agenda1) Climate Change: greenhouse gas effect, causes and consequences2) Political response3) Zoom on carbon markets4) CO2logic: case studies2 3. What changes climate? Changes in:Changes in: Suns output Suns output Earths orbit Earths orbit Drifting continents Drifting continents Volcanic eruptions Volcanic eruptions Greenhouse gases Greenhouse gases3 The COMET Program 4. Greenhouse effect Changes in: Suns output Earths orbit Drifting continents Volcanic eruptions Greenhouse gases4 The COMET Program 5. Increasing greenhouse gases trap more heat Changes in: Suns output Earths orbit Drifting continents Volcanic eruptions Greenhouse gases5 The COMET Program 6. Greenhouse gasesCarbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 6 The COMET Program 7. Could the warming be natural?Carbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 7 8. Trends in atmospheric CO2 concentration Carbon dioxide Nitrous oxide Methane WaterSulfur hexafluoride8 9. Is it real?Carbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 9 10. Hottest YearsCarbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 10 11. Carbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 11 12. IPCC FAR (2007) Warming of the climate system is unequivocal Very high confidence that global average net effect ofhuman activities since 1750 one of warming Human-caused warming over last 30 years has likely hada visible influence on many dioxide and biological Carbon physical Nitrous oxidesystems Methane Continued GHG emissions at or above current rateswould cause further warming and induce many changesin the global climate system during the 21st century thatwould very likely be larger than those observed duringthe 20th century. Water Sulfur hexafluoride12 13. What the future holds for our climate?Carbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 13 14. What the future holds for our climate?Carbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 14 15. Where do GHGs emissions come from? Carbon dioxide Nitrous oxide Methane WaterSulfur hexafluoride15 16. Another look at GHG emissionsCarbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 16WRI 17. Another look at GHG emissionsCarbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 17WRI 18. CO2 emissions by sourceCarbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 18 19. GHG emissions by sourceCarbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 19IPCC 2007 20. GHG emissions by sourceNitrous oxideMethaneWater20WRI 21. TrendsCarbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 21 22. Energy challengeEcofys, energy scenarion, Dec. 201022 23. Energy challengeEcofys, energy scenarion, Dec. 201023 24. Carbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 24 25. Natural consequences 26. Carbon dioxideNitrous oxideMethaneWater Sulfur hexafluoride 26 27. 27 28. Socio-economic consequences 29. August 3-14 2003 30. Political response 30 31. 31 32. Political Context 1972: Stockholm (first UN conference on the Human Environment).Establishment of UNEPPrinciple 1Man has the fundamental right to freedom, equality and adequate conditions of life, in an environment ofa quality that permits a life of dignity and well-being, and he bears a solemn responsibility to protect andimprove the environment for present and future generations. d.Principle 2The natural resources of the earth, including the air, water, land, flora and fauna and especiallyrepresentative samples of natural ecosystems, must be safeguarded for the benefit of present and futuregenerations through careful planning or management, as appropriate.Principle 3The capacity of the earth to produce vital renewable resources must be maintained and, whereverpracticable, restored or improved.Principle 5The non-renewable resources of the earth must be employed in such a way as to guard against thedanger of their future exhaustion and to ensure that benefits from such employment are shared by allmankind.Principle 8Economic and social development is essential for ensuring a favorable living and working environment forman and for creating conditions on earth that are necessary for the improvement of the quality of life. 32 33. Principle 11The environmental policies of all States should enhance and not adversely affect the present or futuredevelopment potential of developing countries, nor should they hamper the attainmentof better living conditions for all, and appropriate steps should be taken by States and internationalorganizations with a view to reaching agreement on meeting the possible national and internationaleconomic consequences resulting from the application of environmental measures.Principle 14Rational planning constitutes an essential tool for reconciling any conflict between the needs ofdevelopment and the need to protect and improve the environment.Principle 18Science and technology, as part of their contribution to economic and social development, must be appliedto the identification, avoidance and control of environmental risks and the solution of environmentalproblems and for the common good of mankind.Principle 19Education in environmental matters, for the younger generation as well as adults, giving due considerationto the underprivileged, is essential in order to broaden the basis for an enlightened opinion and responsibleconduct by individuals, enterprises and communities in protecting and improving the environment in its fullhuman dimension.Principle 20Scientific research and development in the context of environmental problems, both national andmultinational, must be promoted in all countries, especially the developing countries.Principle 22States shall cooperate to develop further the international law regarding liability and compensation for thevictims of pollution and other environmental damage caused by activities within the jurisdiction or controlof such States to areas beyond their jurisdiction. 33 34. Political Context 1980s: several intergovernmental conferences on CC are organized 1987: Brundtland report 1988: IPCC is established (by WMO and UNEP) 1990: First Assessment Report by IPCC 1992: Earth Summit (Rio) Agenda 21 Conventions on Climate, biodiversity and desertification 34 35. UNFCCCIntroduced in 1992 in Rio at the Earth Summit. It commits governmentsto a voluntary non-binding aim to reduce atmospheric concentrationsof greenhouse gases to prevent man-made interference with Earthsclimate system.The Convention entered into force on the 21st of March 1994 and hasbeen ratified by 196 countries.The Convention divides countries (referred to as parties) into three main groupsaccording to differing commitments:Annex I: Include the industrialized countries.Non-Annex I: This group is comprised of mostly developing countries. The 49countries classified as least developed countries (LDCs) by the United Nations aregiven special consideration under the Convention on account of their limitedcapacity to respond to climate change and adapt to its adverse effects. 35 36. Political Context36 37. The Kyoto Protocol Protocol to the UNFCCC Inspired by (US) The Clean Air Act (market based instruments) First Draft of a Global Emissions Trading System Cap and Trade system Target emission level: 5.2% below 1990 emissions on average during First Commitment period 2008 2012 Two categories of countries: Capped countries (developed countries) a/o all EU members, Russia, Ukraine, Japan, Canada, New Zealand, Australia: Targets to reduce emissions Non-capped countries (a/o Brazil, China, India): No obligation to reduce, but incentive to do sothrough the Clean Development Mechanism.... Complex rules to define the baseline 37 38. The Kyoto Protocol 38 39. What is in the Copenhagen Accord?The Copenhagen Accord is a short single document of just over two pages. On the politics: acknowledgement of the seriousness of the problem and need for urgent collective action in line with existing principles On the science: endorsement of the IPCCs recommendation that global temperature increase be kept below 2 deg C On adaptation: agreement that developed countries will provide adequate and predictable financial, technical and capacity-building support to developing countries. On developed country mitigation: agreement that Annex 1 parties will commit to quantified economywide emission reduction by 2020 (although with no individual or aggregate targets given).These targets as well as financing to support developing country climate action, are to be monitored, reported and verified. On finance levels: commitment by developed countries to provide US$30 billion in short- term financing between 2010 and 2012 and to mobilize US$100 billion per annum by 2020. This will be from public, private, multilateral and alternative sources. Funding will be used for mitigation, adaptation, technology transfer and capacity-building in developing countries. 39 40. Durban conference agreement on a second commitment period for the Kyoto Protocol (under which developed countries would take on legally-binding commitments post-2012); progress on a broader, comprehensive agreement that includes all major emitters progress in operationalizing new institutions such as the Technology Mechanism and Green Climate Fund Japan, Canada and the Russian Federation have all recently declared that they will not join in a second commitment period under the Protocol. With the US never ratifying, only a diminished group the EU, Norway, Switzerland and a few others now appear willing to sign on the dotted line40 41. EU Climate Policies 20/20/20In 2007 EU leaders made a unilateral commitment that Europe would cut its emissionsby at least 20% of 1990 levels by 2020. This commitment is being implemented througha package of binding legislation.The EU has also offered to increase its emissions reduction to 30% by 2020, oncondition that other major emitting countries in the developed and developing worldscommit to do their fair share under a future global climate agreement. This agreementshould take effect at the start of 2013 when the Kyoto Protocols first commitmentperiod will have expired.41 42. Zoom on carbon markets 42 43. Internalize externalities3 main approaches- Standards and regulations- Pigouvian Tax/subsidies- Define property rights and establish a market (Coase, 1960)(e.g. SO2 and NOx allowances in the US, CO2 market in the EU)Broh et al., 2009, Carbon Markets 44. Internalize externalitiesPricePigou taxSupply DemandQ optimum Q marketQuantity 45. A new market mechanism ABA+BAbatement Cost Gain AMACAGain BPermit price = MACAB MACBQA QB QA+QB PurchasedSold permits Emission permits reductions 46. Abatement Cost CurveMcKinsey 46 47. Carbon trading in one minuteCompany/country A Company/country B - 10t+ 10t Evolution from a free and universal right to pollute Emissions from every company/country are capped One can reduce further than its cap at a lower cost The other one does not meet its target and pay for the extra reduction made by thefirst Globally GHG emissions are reduced at a lower costs 48. Carbon trading in one minuteBroh et al., 2009, Carbon Markets 49. The Characteristics of Kyotos market Ceiling and Period Allowances and credits(AAU, CER, ERU, RMU) General Principles Allocation (grandfathering) European Bubble Monitoring and reporting Exclusion of Forestry National Registry and ITL Inclusion of all Greenhouse Gases Flexibility in setting the year of Sanctions reference Exclusion of international aerial and maritime transportation49 50. The Kyoto Protocol: ObjectivesCountries (Appendix I)ObjectivesEU-15, New Member States, and Switzerland 8% decreaseCanada, Japan 6% decreaseNew-Zealand, Russia, Ukraine0% constant emissionsUSA 7% decreaseNorway1% increaseAustralia 8% increase50 51. Broh et al., 2009, Carbon Markets 51 52. Clean Development Mechanism (CDM)Broh et al., 2009, Carbon Markets 52 53. Clean Development Mechanism (CDM) Developed by the United Nations under the Kyoto Protocol, completed with the Marrakesh Accords Historical Pollution Responsibility of Developed Countries Developing Countries will be most affected by Climate Change Lower Cost Emission Reductions Advantages from moving quickly Transfer of Technology to LDCs CDM EB, DOE, DNA, etc. PIN, PDD and additionality test53 54. Clean Development Mechanism (CDM) Broh et al., 2009, Carbon Markets 54 55. Issues with the CDM Transaction costs Geographical distribution of projects Industrial projects (HFCs, dam, etc.) Insufficient capital flows Social equity and sustainable development goals are far from achieved Overall climate impact and additionality55 56. Geographical distributionUNEP RIS OCTOBER 2011 56 57. Geographical distributionUNEP RIS OCTOBER 201157 58. Project type (% of expected credits until 2012)UNEP RIS OCTOBER 2011 58 59. Programmatic CDM E.g.: soft loans programs to promote energy efficiency measures or renewable energy (solar cookers, efficient cookstoves, insulation programs, motor replacement, biofuel, etc.) The program is the project Pro: broaden the scope, reach the household, transportation and SME sectors in particular in LDC and poor communities Program can be a private sector initiative or a government measure Program can be voluntary or mandatory Type, size and timing of the actions may not be known at the point of registration59 60. Programmatic CDMUNEP RIS OCTOBER 201160 61. Programmatic CDMUNEP RIS OCTOBER 2011 61 62. EU Emission Trading System political context Kyoto Protocol Ratification Incertitude over the Entry Into Force of the Protocol Failure of a Carbon Tax Development of Different National Initiatives (UK, Denmark)62 63. CharacteristicsThe principal response from the EU to achieve Kyoto targets in EU MS EU has passed through its obligations and imposed limits for greenhouse gasemissions on site level. The EU ETS is therefore a sub-market of the Kyoto market. +10,000 installations in the EU (main emitters) Cap and Trade system: Installations are entitled EU Allowances (EUA) At the end of each year, companies have to surrender an EUA for eachton of emissions (CO2) they emit High penalty for non compliance - EUR 100/ton CO2 3 phases/ periods: 2005 - 2007 / 2008 - 2012 / 2012 2020, more to follow 63 64. Characteristics Directive 2003/87/EC National Allocation Plan (over-allocation, favoritism, complexity) Linking Directive (EUA=CER=ERU) Monitoring and reporting (calculate or measure)Registry and CITL Penalties (no price cap!) 64 65. Company A (in EU)Company B (in EU) Company CAllowance: 100 tCO2Allowance: 100 tCO2 (OUTSIDE ANNEX I)Real Emissions: 110 tCO2 Real Emission: 90 tCO2Allowance: NAShortage: 10 tCO2Surplus: 10 tCO2Emissions before: 100 tCO2 Project reduces emissions:Option 1:-10 tCO2Company A reduces its own emissions by 10 tEmissions after: 90 tCO2 CERs: 10 tonne CO2Option 2:Company A buys 10 tonnes of Allowances from company BOption 3:Company A buys 10 Certified Emission Reductions (CERs) from company C 65 66. Price evolution66 67. Broh et al., 2009, Carbon Markets 67 68. Broh et al., 2009, Carbon Markets 68 69. Impact of CO2 Prices on Energy Influences the order of preference (natural gas precedes coal) Windfall profits (if allowances are allocated at no cost)Clean darkspread and clean sparkspread in the UK in 2005 69 70. Developments of the EU ETS Enlargment to other countries (EEA) Inclusion of the aviation sectorExpansion to other gases (NOx, PFCs)Exclusion for smaller installationsEU wide capNew project mechanismFlexibility with a future international agreement 70 71. Limitation of GHG emissions in non EU ETS sectors in 2020 with regards to 2005(% of emissions with regards to year of reference)Germany86France86Netherlands 84Austria84 Greece 96 Poland 114 Belgium 85Hungary 110Portugal 101 Bulgaria 120 Ireland80Czech Republic 109 Cyprus95 Italia 87 Romania 119Denmark80Latvia 117 United Kingdom 84Spain90Lithuania 115Slovakia 113Estonia 111Luxembourg80 Slovenia 103Finland84Malta 105 Sweden83 71 72. Criticisms of markets: use of discount rates 72Broh et al., 2009, Carbon Markets 73. Criticisms of carbon markets: use of discount rates High uncertainties even in accounting (several gases, uncertain GWP, deforestation and LULUCF accounting rules) High complexity ( not democratic, a few experts and groups with vested interests control the market) + risk of fraud Irrationality Do not work for diffuse sources 73 74. A fragmented carbon world74 75. A fragmented carbon world75 76. CO2logic 76 77. 77 78. Dolfin: LCA of a chocolate bar 79. CO2 reductions strategy 80. Reduce1. Change a light: Change regular light bulbs for compact fluorescent light bulbs.2. Drive less: Walk, bike, carpool, or take public transport more often.3. Recycle more4. Use less hot water: It takes a lot of energy to heat water.5. Avoid products with a lot of packaging6. Adjust your thermostat7. Eat less meat8. Turn off electronic devices9. Flight less 81. CO2 audit of the elections 82. Communication experience 83. Want to know more83 84. Act Now! Contact: Arnaud Broh arnaud@co2logic.com +32 (0)488 58 77 68 84