erik berglof · 2011. 4. 7. · economic growth without rise in co 2 emissions 4 index (1990=100) 0...
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Erik BerglofEBRD Chief Economist6 April 2011
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Towards low carbon transition
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• The past - carbon performance over the first twodecades of transition
• The long term impacts and costs of climate change mitigation
• Policies to induce mitigation
• Political barriers to effective domestic climate policy
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Economic growth without rise in CO2 emissions
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Index (1990=100)
0
20
40
60
80
100
120
140
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
GDP (PPP)
CO2 emissions (energy related)
Index (1990=100)
0
20
40
60
80
100
120
140
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
GDP (PPP)
CO2 emissions (energy related)
Index (1990=100)
0
20
40
60
80
100
120
140
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
GDP (PPP)
CO2 emissions (energy related)
Index (1990=100)
0
20
40
60
80
100
120
140
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
GDP (PPP)
CO2 emissions (energy related)
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Substantially reduced carbon intensity
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EBRD region outperformed world average
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EBRDChina
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…due to both lower carbon intensity of energy and improved energy efficiency
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What explains energy/carbon performance?
Firm level:
• Private and foreign-owned firms more efficient than state-owned• Large firms better than small• Energy pricing – a key driver of energy intensity of firms
Country level:
• Market oriented reforms and energy sector reform in particular• EU accession process• Kyoto commitments (smaller effect)
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Carbon intensity remains very high in some countries
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Ambitious climate policy: costs and benefits
Likely costs:
• Direct loss of the oil/carbon economy
• Adjustment costs associated with the shift away from carbon
• Cost of buying/benefits or selling carbon offsets
=> WITCH model to estimate costs of reaching global goal
Potential benefits:
• Accelerated technology spillovers
• Better competitiveness and growth prospects in the long-run
• Avoiding climate impacts and adaptation costs
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High gross costs of mitigation
Notes: all scenarios based on a global stabilisation at 500ppm. Diamonds refer to emissions reduction targets of 30, 40, 50 or 80 per cent for the energy exporters in the EBRD region. Delayed CCS refers to a 15 years delay in deploying CCS technology. Limited trade requires that all regions achieve at least 80 per cent mitigation
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domestically.
Percentage of business as usual GDP in net present value (2010-2050)
-16
-14
-12
-10
-8
-6
-4
-2
0
US WesternEurope
MiddleEast & N
Africa
Sub-Saharan
Africa
South Asia China LatinAmerica &Caribbean
EBRD WORLD
Source: WITCH and EBRD.500-30 500-40 500-50 500-80 500-80 delayed CCS 500-80 limited carbon trade Median cost
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Sources of mitigation costs13
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Costs vary across the sub-regions
Notes: EU-10 - the new EU member states. Energy exporters - Azerbaijan, Kazakhstan, Mongolia, Russia and Turkmenistan. Energy importers – all other transition countries.
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Median costs across all scenarios
-12
-10
-8
-6
-4
-2
0EU-10 Energy exporters Energy importers EBRD
Percentage of business as usual GDP in net present value (2010-2050)
Source: WITCH and EBRD.
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The up-side of mitigationFaster growth: economies that
are not resource-based tend to grow faster
Competitiveness: retaining economic competitiveness in a low-carbon world requires decarbonisation
Faster technological progress: participation in global mitigation efforts is likely to accelerate technological spillovers
EBRD region to be part of green industrial revolution
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Average real growth rate 1981-2000
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
Major oil producers Other countries
per cent
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Analysis of policy impact on the costs of different measures to reduce emissions
• Compare extra cost of each measure with high-emission alternative => marginal abatement cost (MAC)
• Do it from investors’ perspective – privately profitable
• Negative MAC => measure relatively profitable
• Do this for all available abatement measures
• Look how different policy mixes affect MAC => emissions reduction
• Compare: Russia vs. Turkey
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Policy packages can generate profitable abatement opportunities – an example
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On-shore wind
-60
-30
0
30
60
90
120
150
180
210relative abatement cost, €/t CO2
Status quo
Economic policies
+ Transaction costs
+Feed-in tariffs
+Carbon prices
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Russia: Status quo vs. policy mix
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Russia: Carbon pricing very effective
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Turkey: Policies effective but not sufficient
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Political economy interactions
Measuring domestic climate policy - The CLIM Index• Covers 95 countries• Focus on Climate specific Laws, Institutions and Measures• No measurement of implementation and enforcement
Question: what determines domestic climate policy?
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Determinants of domestic climate policy• Political system not in itself a driver of policy
• Knowledge of climate change key driver
• Industrial lobby strong deterrent for policy
• EU membership and commitment under Kyoto Protocol strongly correlated with policies
• EBRD countries not significantly different from rest of the world in adoption of climate policies
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Climate change awareness - better policies
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Rising temperatures result of human activitySource: EBRD, GallupData: 2006-9
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Conclusion: Towards Low Carbon Transition
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• Transition region: enormous achievements in reducing the carbon intensity and improving energy efficiency
• Transition to low carbon economy will be challenging, but makes economic sense
• Transition to market is an important driver of mitigation, but notsufficient
• Reducing the large costs will need policies and institutions tomobilise private sector investment in carbon abatement
• Political resistance can be overcome by raising public awareness