27.05.2008gabriel bachner - thomas kerekes 1 a goal for climate-change policy the stern-review...

27.05.2008 Gabriel Bachner - Thomas Kerekes 1

A Goal for Climate-Change PolicyThe Stern-Review

Chapter 13

Gabriel Bachner - Thomas Kerekes 227.05.2008

„The science and economics both suggest that a shared international understanding of what the objectives of climate-change policy should be would be a valuable foundation for policy.“ (Stern-Review, p. 288)

If policy makers around the world differ: Distribution of efforts inequitable and inefficient


different types of goals are not inconsistent


Any goal should beclosely related to the ultimate impactsable to adjust over timeeasy to monitorclear, simple and specific

A goal for atmospheric concentration would satisfy these requirements!


How to select a stabilisation level?

Marginal Benefits:Reflect expected impact on wellbeing of achieving

a lower temperature change and the reduced risk of extreme events.

Marginal Costs:Reflect the need to accelerate the introduction of

measures against climate change

Uncertainty => only a range is possible


stabilisation level should not be above 550 ppm CO2e

stabilisaton at 450 ppm or below very difficult and costly to reach

The Stabilisation goal should be between 450-550 ppm CO2e


AsymmetryNot possible to reach a lower level, if new

information is collected, that implies that CC is worse than expected

Possible to allow the concentration level to rise, if new information is collected, that implies that CC is less worse than expected


Uncertainty & Asymmetry =>A more demanding (not less) long-term policy

should be set!

Policy debate should seek a level between the lower and upper limit of the range.

It is important that during this process initial actions to reduce emissions are not delayed.


The need for strong and urgent action

Case for strong action determined in 3 ways:1. Bottom-up approachChapters 3,4,5,8,9

2. Model-based approachChapters 6,10

3. Price-based approach


1. Bottom-up

Just comparing damages without mitigation with the costs of mitigation

2. Model-based

Comparison + taking account of interactions in climate system and global economy


Bottom-up and Model-based approach:„The benefits of strong action clearly

outweigh the costs.“ (Stern-Review, p. 285)

Modest net costs today can earn big return later on!

See red line in Fig. 13.1 and 13.2


3. Price-based

Comparing marginal costs of abatement with the social costs of carbon (SCC)

SCC: impact on expected wellbeing by emitting an extra unit of carbon, at any particular time on the present value (at that time).


SCC depends on:

- Size of stock allready in atmosphere- Uncertainties and discount rates- Global Warming Potential (how long in the atmosphere and

when emitted?)

SCC expected to increase over time, because stock is expected to grow!

One extra unit C: more damage at the margin the later it is emitted


Wide range of estimates:

Tol (for DEFRA-Study): $ 29/tCO2 (mean)

PAGE2002 (Stern-Review): $ 85/tCO2


=> Difficult to apply policy, driven by that approach

Possible would be: Pigou-Taxation on GHG-intensive goods and services


DEFRA vs. Stern-Review aspects that tend to push SCC of Stern-Review:

full „expected utility“ and risk aversion greater weight to „non market“ impacts low pure time preference equity weighting uncertainty about climate sensitivity amplifying feedback risks


Costs of mitigation

Extra mitigation costs of choosing a lower goal are small


A reduction from 750ppm to 650ppm is cheaper than from 550ppm to 450ppm


Optimal mitigationTemperature

reduction

Nordhaus and Boyer (1999)

557 ppm to 538 ppm (in 2100)

2.42 °C to 2.33 °C

Tol (1997) - 4 °C to 3.6-3.9 °C

Manne et al. (1995)

800 ppm to 750 ppm (in 2100)

3.85 °C to 3,6 °C


Problems: Uncertanties amplifying feedbacks tipping points

Manne et al. (1995): higher discount rate

Tol (1997): relatively low cost of climate change

Nordhaus and Boyer (1999): low and slow economical growth


EU: temperature change less than 2 °C

reduced risk of climate change impacts and avoid thresholds effects

some critical statements for the 2 °C limithard to reachAmbitious target


„Policy should ensure that abatement efforts intensify over time. Emissions reductions should be driven to the point where their marginal costs keep pace with the rising social cost of carbon.“ (Stern-Review, p. 302)


The social cost of carbon will be lower with a sensible climate change policy than under „business as usual“


H... High BAU trajectoryS... Stabilisation trajectoryE... Emissions/year

Benefits of CC-Policy:

Annual Costs of Abatement (appr.):

Benefits less Costs(Benefits of CC-Policy):

BAU-Emissions

Difference between SCC of the two

trajectoriesx


The Role of adaptation

can reduce the negative impacts of future climate change

no direct prevention

Mitigation prevents climate change and damage costs

Mitigation reducing cost of climate change over the next 30-50 years


„In the longer run, both adaptation and mitigation will be required to reduce climate-change damage in cost-effective and sustainable ways.“ (Stern-

Review, p. 306)


The three approaches can be used to cross-check conclusions from adopting any one of them.

„...spending somewhere in the region of 1% of gross world product on average forever could prevent the world losing the equivalent of 5 - 20% of gross world product for ever.“ (Stern-Review, p. 285)


Thanks for your attention


QUESTIONS

1. What are the three aproaches to „examine strong and urgent action“ and what are their characterstics?


2. Why is it important, that we find a shared international understandig of what the objectives of climate-change-policy should be?


3. What are the advantages of choosing the atmospheric concentration level as a goal?


4. It is only possible to find a range for the target of the atmospheric concentration level and not a specific value . Why?


5. What is the main message of the model based estimates for the increase in mitigation costs from reducing a stabilisation goal?


6. Why is the stabilisation level at 450 ppm CO2e today hardly to reach? Which points are important to get a lower emission level?


7. The EU adopted an objective to limit global average temperature change to less than 2°C. Is that possible and what are the arguments of the critic?


8. What are the differences between mitigation and adaptation?

27.05.2008gabriel bachner - thomas kerekes 1 a goal for climate-change policy the stern-review...

Documents

expected slide

possible slide

inefficient slide

inconsistent slide

pricebased approach

climatechange policy

lower level

costs of mitigation