A TRADITION OF

INDEPENDENT

THINKINGEfficient and Equitable Burden Sharing for the 2°CMacroeconomic impacts, net of Global and Local Benefits, in a Carbon Constrained World Evaluated with the TIAM-MACRO

Socrates Kypreos, James Glynn, Evangelos Panos, George Giannakidis.

and Brian Ó Gallachóir

IEW-2016, Cork, IRELAND, June 2016

Scope of the study and the presentaion

• We search the ideal case of an efficient 2 °C scenario by imposing global CO2 budgets while the BASE case respects the INDCs for up 2030 but then departs

• It is a SBA not a CBA, but we evaluate benefits in a POA simulation like e.g.,• Reduction of expected Climate Damages of the 2°C policy case versus the BASE case

• Expected benefits of the improved LAP of the 2°C case versus the BASE case

• Then, we apply burden sharing rules and capital transfers to convincedLDCs to perticipate into a global commitment (potential extension of thepresent INDCs pledges).

Future Emissions Pathways1150 emission scenarios from the IPCC Fifth Assessment Report

Data Source: AR5 Emissions Database

https://secure.iiasa.ac.at/web-apps/ene/AR5DB/

Best Estimate INDC (PBL)

2DS Energy System in 2100

Net CO2 Emissions & CO2 Price

-10

0

10

20

30

40

50

60

70

BASE 2DS BASE 2DS BASE 2DS BASE 2DS BASE 2DS BASE 2DS BASE 2DS BASE 2DS BASE 2DS BASE 2DS

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Gt

CO

2WEU

USA

SKO

ODA

MEX

MEA

JPN

IND

FSU

EEU

CSA

CHI

CAN

AUS

AFR

CSA

AFR

USA

CHI

INDMEA

WEU

FSU

$66 $108 $175 $286 $465 $758

$1,235

$2,012

$3,277

$-

$1,000

$2,000

$3,000

$4,000

2020 2030 2040 2050 2060 2070 2080 2090 2100

$/t

Co

2

GDP Impacts

-5% -5%

-7% -6

%

-12%

-4%

-7%

-3%

-5%

-9%

-10%

-3%

-3%

-3%

-3%

-5%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

AFR IND ODA CHI FSU CSA MEA MEX EEU SKO AUS WEU CAN JPN USA World

% G

DP

Cha

nge

2DS Contract & Converge Past and Future Equity Future Equity

35% 82%

West Europe

• Europe’s cumulative GDP loss in the least cost 2DS solution is 3.3%. Europe has already emitted it’s equitable share of emissions and so trades accordingly causing GDP losses of 4% - 10% GDP depending upon the share of future emissions allowed to be emitted

• Capital Transfer range: -$1.2 Tn to -$14.2Tn (discounted at 5%)

-3%-4%

-10%

-4%

-12%

-10%

-8%

-6%

-4%

-2%

0%

WEU

% G

DP

Cha

nge

2DS Contract & Converge Past and Future Equity Future Equity

Africa

• Africa’s cumulative GDP loss in in the least cost 2DS solution is 5.4%. The “Equity” effort sharing rule (2) causes relative GDP growth of 34% given the continents lack of responsibility and population growth.

• Capital Transfer range: +$5.6 Tn to +$30.6Tn (discounted at 5%)

-5%-1%

35%

-1%-10%

0%

10%

20%

30%

40%

AFR

% G

DP

Cha

nge

2DS Contract & Converge Past and Future Equity Future Equity

• Efficient solution Global GDP losses of 5.14% with strong regional differences

• Eqalitarian rule I: Picture good for LDcs in the first half, bad in the second one

• Equal relative GDP losses II: balanced but not quite fine for LDCs

• Full GDP compensation for LDCs III: balanced but industrialised countries pay high costs

• Full EC compensation for LDCs IV: industrialised countries pay less LDCs have energy investments covered

Burden Sharing Rules in perfect markets(positive bars are GDP losses in % of BAU; Global losses 5.14% GDP of BASE)

-20

-15

-10

-5

0

5

10

15

20

AFR AUS CAN CHI CSA EEU FSU IND JPN MEA MEX ODA SKO USA WEU World

eff rule I Rule II Rule III RuleIV

LAP Global Emission Balances for BASE and 2DS; Accounting, based on evaluations of the EU-NEEDs

0

50

100

150

200

250

300

2020 2020 2050 2050 2080 2080 2100 2100

BASE 2DS BASE 2DS BASE 2DS BASE 2DS

Millio

n T

on

nes/yr

NH3 NOX PM10 PM25 SO2 VOX

Relative Co-Benefits in % of GDP related to improved LAP Control induced by the 2DS cumulative CO2 constraint

0

0.5

1

1.5

2

2.5

3

3.5

AFR AUS CAN CHI CSA EEU FSU IND JPN MEA MEX ODA SKO USA WEU

Mean global benefits are 1.05 % of GDP

2020 2030 2040 2050 2060 2070 2080 2090 2100

Climate Damages and LAP ExternalitiesVs Net Benefits per scenario in % of BASE

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2020 2030 2040 2050 2060 2070 2080 2090 2100

percen

t

BASE 2DS NETBenefit

Burden sharing for 2°C net of Benefits (1.76% of BASE)

-20

-15

-10

-5

0

5

10

15

20

AFR AUS CAN CHI CSA EEU FSU IND JPN MEA MEX ODA SKO USA WEU World

GDP Losses and Gains (negative) per rule in %

eff rule I Rule II Rule III Rule IV

Even at zero discount rate GDP losses of GCC policies are reduced from 5.14% to3.4%; that means the costs of GCC control remains higher than benefits.

Conclusions

• The 2oC is technically feasible and with burden sharing can also be equitable.

• The mitigation costs can be reduced if avoided damages (0.71%) and the co-benefits of LAP control

(1.05%) are considered in BS. All together about 1.76% of the GDP of BASE case.

• But control costs are not fully balanced and remain higher than benefits even at zero discount rate.

• Equal relative GDP losses is a balanced burden sharing allocation but not perfect for LDCs

while the full compensation of the energy system cost for the LDCs needs the lowest capital transfers.

• Equitable burden sharing rules based on past and future per capita emission budgets (a kind of Brazilian approach) require the highest capital transfers

• Key technologies for power generation and LAP reduction are wind, solar PV, Nuclear, Coal/Gas with CCS

• BECCS based on biomass while good for CO2 reduction generate PM.

Environmental Research Institute

Instiúd Taighde Comshaoil

Energy Policy and Modelling Groupwww.ucc.ie/energypolicy

SUPPORTED BY:

COLLABORATION WITH: