From quantification to implementation Is There a Role for Consumption-Based Policy Instruments in...
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From quantification to implementation
Is There a Role for Consumption-Based Policy Instruments in Climate Policy?
Glen PetersCenter for International Climate and Environmental Research – Oslo (CICERO)
[email protected] twitter.com/Peters_Glen
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We are experts at accounting, ...
...but are weak at designing, assessing, and implementing policies?
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What are the big research questions in the next 5-10 years?
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THE POLICY PROBLEM
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Carbon Dioxide: Fossil and Cement EmissionsGlobal fossil and cement emissions: 9.5±0.5PgC in 2011, 54% over 1990
Projection for 2012: 9.7±0.5PgC, 58% over 1990
Uncertainty is ±5% for one standard deviation (IPCC “likely” range)
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Territorial emissions as per the Kyoto ProtocolThe Kyoto Protocol is based on the global distribution of emissions in 1990
The global distribution of emissions is now starkly different
Source: CDIAC Data; Le Quéré et al. 2012; Global Carbon Project 2012
Share of global emissions in 2010
In 2011:• Annex B 60%• Non-Annex B 40%
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The policy problem• Differential carbon pricing
Countries unwilling to deepen and broaden climate policies unilaterally
• Two main issues• Competitiveness concerns (economic)• Carbon leakage (environmental)
• International trade is a key factor
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THE EVIDENCE
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Carbon leakage• Policy-induced carbon leakage
• Caused by climate policy• Small at today’s carbon prices
• Consumption-induced carbon leakage • Caused by a changing division of labour• Increased consumption, met by imports• Large, but not related to carbon prices
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Policy-induced: Negligible effect0.3% of territorial
Consumption-induced: The increase in net import into Annex B countries 1990-2008 was five times greater than the achieved emission reduction
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DPolicyDTerritorial DConsumption
Change 1990-2008
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The dilemma Consumption-induced leakage• Changing global division of labour• Facilitates increased consumption
Consequence is• Increased emissions offset any reductions• Competitiveness concerns
No progress in climate policy
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THE SOLUTION
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The solution• Introduce complementary measures
• Keep the territorial/production system • Broaden with additional measures
• More inclusive treatment of • International trade • Consumption
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Consumption-based approaches are complementary
to production-based approaches
Quantify consumption-based emissions
Track ProgressIdentify problem areas
Design and implement politically feasible policy instruments
Track ProgressDid the policies work?
Implementation timeline
12
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QUANTIFICATION
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Key Findings (2004):• 6.2 GtCO2 (23%) embodied in trade• Annex B Consumption 1.6 GtCO2 higher than Production (12%)• OECD Consumption 2.1 GtCO2 higher than Production (16%)
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Production still important!To reduce consumption-based emissions requires helping
developing countries mitigate
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Large share of consumer emissions are territorial
“Imported” emissions
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“Rich” countries are generally net imports
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Equity: Allocating emissions
Alternative views of Burden Sharing
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Consumption by sectors
A consumption view shows
different mitigation options
Food
Manufacture
ServicesElectricity
En Intensive
Agriculture
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“Regulating consumption”Supply chain of clothing consumed in the UK
For clothing consumed in the UK, most emissions occur in electricity production in China
ConsumerProducers (supply chain)
UK17887
China WAP277 / 6835
China TEX172 / 4414
China TEX69 / 1765
China ELY697 / 847
China CRP67 / 375
China ELY433 / 526
China LEA3 / 304
UK WAP335 / 3526
UK TEX77 / 498
UK ELY80 / 93
UK OTP207 / 397
UK ELY321 / 375
India WAP27 / 1077
India TEX20 / 382
India CRP41 / 158
India TRD25 / 106
China WOL287 / 339
1
2
3
4
5
Andrew et al (in prep)
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GBR
FRA
NOR
0 10 20 30 40 50 60 70 80 90 100
Who gets the emissions? Who gets the income? Wearing Apparel
CHNINDGBRMARFRAUSARUSDEUTURITANORBGDDNKSWERoEU27ROW
For clothing consumed in the UK: Most emissions in China, most value added in the UK
GHG emissions
Value added
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0 10 20 30 40 50 60 70 80 90 100
AgricultureMiningFoodEI MfgNonEI MfgTransportServicesElectricity
Who gets the emissions? Who gets the income? Wearing Apparel
GBR
FRA
NOR
For clothing consumed in the UK: Most emissions in electricity, most value added in clothing
GHG emissions
Value added
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Quantification summary• IO community has had a dominant role
• Plays a role in motivating further analysis
• Quantification is insufficient to design and implement policies
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Sessions: Global Environment
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Sessions: Global Value Chains
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UNCERTAINTY
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Drivers of uncertainty• Variations in territorial emissions
• Controllable
• Variations in definitions• Controllable
• Variations in MRIO datasets• How important is this?
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“Naïve” comparisons
• Peters et al 2011, PNAS• Peters et al 2012, Nature Climate Change• Peters et al 2013, Earth Systems Science Data• Lenzen et al 2012, ES&T• Wiebe et al 2012, ESR• Boitier 2012, Final WIOD Conference
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United Kingdom Territorial
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United Kingdom Consumption
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United Kingdom Net Transfer
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UncertaintyCurrent uncertainty limits policy applications
Uncertainty must go down......if we want to stay relevant
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WHAT NEXT
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Reduce uncertainties• IO community driven
• Diversity in MRIO is important
• However, must ensure consistency• C.f., climate model intercomparisons• Harmonise definitions, standard sectoral
emission data sets, etc.
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Analyse policy instruments• The IO community generally gives naïve
policy suggestions, but no policy analysis• Economically efficiency?• Environmentally effective?• Politically feasible?
• Combine our ideas, tools, and knowledge with others (e.g., CGE)
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Alternative Carbon Pricing (1) • Can implement consumption with a Border
Carbon Adjustment (BCA)• Subsidise Exporters• Include Importers
• Cross cutting issues• Consumption- or policy-induced leakage• Strategic or environmental implementation• Legal and technical issues
Production
Exp Imp
Consumption
Domestic
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Alternative Carbon Pricing (2)
• Carbon Added Taxation– Carbon price at the consumer (not producer)– Value Added Tax (VAT)
• Includes imports, removes exports– Base carbon pricing on VAT systems
• Opportunity for the IO community?
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Extraction to
Production
Production to
Consumption
Extraction to
Consumption
Supply Side Policies
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Scenarios• “Imported” emissions may dominate• We are good at the past, the future?• Alternative approaches to scenarios?
Domestic
Import
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Sessions: Scenarios
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International trade• Modelling consumption-based emissions
1. Consumption2. Production systems (technologies)3. International trade
• We really struggle with historical trade• Can “the rock stars” contribute to modelling
future trade?
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Other policy applications• Understanding economics
• Reconciling different world views• Sustainable consumption
• What is the macro-effect• Political sciences
• Consumption could lead to a global regime• Equity and fairness
• Consumption could equalise disparities• ...
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CONCLUSION
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I believe the IO community can make many great contributions
...but can it have a policy impact?
Need to focus on • Critical policy questions• Partner with alternative disciplines