ALPS International Symposium
Tokyo, 27 February 2015

Assessing post 2020 climate
policies: emission paths,investments, financing
Carlo Carraro
Vice Chair, IPCC WG III
Co-chair, GGKP Advisory Board
University of Venice, FEEM and CMCC

A global paradox- Global emissions are steadily growing.
- The fossil fuel mix is not improving, with a revival of coalconsumption, particularly in Europe.
- Negotiations on emission control are in a stalemate. Even though
there is hope for a (bottom up) agreement in Paris 2015.
- 2 degree target unlikely to be achieved unless major technology
breakthrough. Indeed, over the years, focus of negotiations moved
from mitigation to adaptation, and now to loss and damages.
- Financial resources for investments in mitigation, adaptation anddamage repair are increasing.

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Likely future scenario- GHG emissions will (slowly) be reduced through:- Energy efficiency gains- Development and diffusion of renewables (power plants andsmart grids)- CO2 capture, removal and storage- Emission reductions will be too slow to prevent climate change toheavily affect our socio economic systems, particularly invulnerable regions (losses and damages). Hence:- Damages to repair- Infrastructures to re-build- Governments are understanding that climate change can hinder
economic development. Hence:- Expected large expenditure in adaptation and partly
mitigation- All this will provide important business opportunities and stimulus
to economic growth3

GHG emissions growth between 2000 and 2010 has been larger
than in the previous three decades.

Since Rio '92±4.5Gt+61%

Source: IPCC AR5 - WG3 "The Mitigation of Climate Change", 20144

The concentrations of CO have increased to levels
2
unprecedented in at least the last 800,000years.

2013

+ 30%

Source: IPCC AR5 - WG3 "The Mitigation of Climate Change", 2014

5Temperatures continue to rise
Each of the past 3 decades has been successively
warmer than the preceding decades since 1850

Year
AR5 WGI SPM

Globally averaged combined land and ocean surface temperatures

IPCC AR5 Synthesis ReportMost of the recent GHG emissions growth has been driven bygrowth in economic activity.

Source: IPCC AR5 - WG3 "The Mitigation of Climate Change", 2014

7

The long-standing trend of gradual decarbonization of energy
has reversed recently.

Source: IPCC AR5 - WG3 "The Mitigation of Climate Change", 20148

About half of the cumulative anthropogenic CO2 emissions
between 1750 and 2010 have occurred in the last 40 years.

Source: IPCC AR5 - WG3 "The Mitigation of Climate Change", 2014

9

The window for action is rapidly closing
65% of our carbon budget compatible with a 2°C goal already used
AmountRemaining:

275

Total Carbon
Budget:

790
GtC

GtC

Amount Used
1870-2011:

515
GtCAR5 WGI SPM

Can 1/3 of known fossil fuel reserves remain unexploited?
IPCC AR5 Synthesis ReportSources of emissions
Energy production remains the primary driver of GHG emissions

35%
Energy Sector

24%

Agriculture,
forests andother land uses

21%
Industry

14%
Transport

6.4%
BuildingSector

2010 GHG emissions
AR5 WGIII SPM

IPCC AR5 Synthesis Report

Regional patterns of GHG emissions are shifting along withchanges in the world economy.

Source: IPCC AR5 - WG3 "The Mitigation of Climate Change", 201412Total annual CO2emissions (GtCO2/yr) fromfossil fuel combustion for
country income groups
attributed on the basis ofterritory (solid line) andfinal consumption (dottedline).

Source: IPCC AR5 - WG3 "TheMitigation of Climate Change" Summaryfor Policy Makers, 2014

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Without additional mitigation, global mean surface temperature
is projected to increase by 3.7 to 4.8°C (2.5 - 7.8°C) until 2100.

Source: IPCC AR5 - WG3 "The Mitigation of Climate Change", 201415

Stabilization of atmospheric GHG concentrations
requires moving away from the baseline,
regardless of the mitigation goal.

Source: IPCC AR5 - WG3 "The Mitigation of Climate Change", 201416

Are ambitious emissions reductions feasible?
• Two degree target (equivalent to GHG concentrations atabout 450 ppmv) can hardly be achieved because:• Concentrations are already above 400 ppmv (515 GtC)
• The remaining carbon budget is therefore about 275 GtC.
• And GHG emissions increase at 10 GtC per year...
• No large scale CO2 absorption technology is currently
available• Capture and storage plants allowing the use of coal andoil not yet operational• Large reserves of fossil fuel sources (at least 1/3) unlikely
to be kept in the soil.
17Aggregate global economic costs of mitigation under different
assumptions about technology and the timing of mitigation.

Source: IPCC AR5 - WG3 "The Mitigation of Climate Change" Summary for Policy Makers, 2014

Limited availability of technologies can greatly increase
mitigation costs.

Source: IPCC AR5 - WG3 "The Mitigation of Climate Change" Summary for Policy Makers, 201419

Different estimates of costs of climate change
but all agree on heterogenity of costs
Even studies predicting a small costs (or even a positive aggregatebenefit) from climate change….
-4.7 %(CHINA)-1.4 %(Fankhauser1995)-0.5%(Bosello etal. 2013)-0.4%(Rehdanz2005)-0.1 %(Maddison2003)+0.1%(Mendelsohn 2000)+0.9%(Hope 2006)…. Outline that costare likely to be very
high in some regions(developingcountries) …
…as a combinationof higher vulnerability
and lower adaptive
capacity…

-3.2 %(SUD ASIA)-23%(SUBSAHARAN
AFRICA-14.6 %(SUDAMERICA)-3.6%(AFRICA)-2.6%(ASIA)
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Predicted Annual Expenditure in Adaptation(2010-2050)
It concerns developing countries above all, and it is
crucial for their economic development

Total: 68-84 billions per year

Source: World Bank (2010)

Post 2020 climate scenarios assessedin the LIMITS project• No Policies: baseline• Fragmented: national pledges extrapolated
beyond 2020/2030 at two levels of ambition(‘reference’ and ‘strengthened’, with nointernational coordination)• 2°C: full cooperation post 2020/2030 towards
450ppm and 500 ppm, with equal carbon pricing
internationally and different burden sharing
schemes22

Global emission pathways and carbon budgets
Cumulative CO2 emissions 2011-2100

Warming since preindustrial
Probability of staying below
2°C

5220-6250 GtCO2

2.9-5.9°C
0%3630-4970 GtCO2

2.4-4.7°C
0-4%

1000-1570 GtCO2

670-1100 GtCO2

1.5-2.7°C
41-64%
1.4-2.4°C
59-76%

2C requires early peaking of emissions and small CO2 budgets
Kriegler et al. (2013) Climate Change Economics

The 4 phases of 2oC pathways

Peakin 2020
Steepemissions
reduction

Kriegler et al. (2013) Climate Change EconomicsCarbonneutrality

Carbondioxide
removalTrend break in decarbonization rates
Rate of reduction in carbon intensity of GDP (2010-2040)
Kriegler et al. (2013) Climate Change Economics 4(4), 1340008.

2020-30
decarbonization rate:
450 ppm immediate action
500 ppm immediate action

2°C 550 ppm

2°C 450 ppm

Trend break in 2020 - 450 ppm: ca. 2-3 percentage points
500 ppm: ca. 1-2 percentage points

2005-2010
decarbonization rate

Delay until 2030 will put 2°C out of reach

Steeper decline
after 2030

Kriegler et al. (2013) Climate Change Economics

More carbondioxide removal

Implications for the major economies:- Time of peaking of emissions- Carbon budgets- Speed of mitigation- Costs- Development of CO2 removal technologies

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Peaking time of emissions
450 ppm-eq

EUROPE

500 ppm-eq
Pledges

NORTH AMNo Policies

PAC OECDLATIN AMREST ASIA
CHINA
INDIA
AFRICAEITMIDDLE EAST
2000

2020

2040

2060

2080

2100

Medians and 90 percentile ranges. Source: Tavoni et. al, 2014, Nature Climate Change

Pledges lead to earlier emission peaking in many major economies, but 2C
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would require peaking in all regions in the next 10-15 years

Regional carbon budgets (2010-2100)

Medians and 90
percentile ranges.
Source: Tavoni et. al,2014, Nature Climate
ChangeWithout climate policies, the carbon budgets of major regions like China or
the OECD would by themselves exceed the budget compatible with 2C
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Regional carbon budgets (2010-2100)

Medians and 90
percentile ranges.
Source: Tavoni et. Al,
2014, Nature Climate
ChangePledges would roughly reduce carbon budgets by half, but not enough tomeet 2C. Under 2C, no major region would have a carbon budget exceeding30few hundreds GtCO2

Regional sectoral mitigation
EUROPE31%

NORTH AM42%

PAC OECD

35%

LATIN AM

42%

REST ASIA

41%

CHINA

35%

INDIA

43%

AFRICA

36%

EIT

Energy supply
Energy demand

MIDDLE EAST

Land Use37%

Non CO2-20

020

40%

60

37%

80

Medians and 90
percentile ranges.
Source: Tavoni et. al,2014, Nature Climate
Change

The energy supply sector hosts the largest abatement potential in mostregions, but demand and land use are also important
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The distribution of mitigation costs

Source: Tavoni et. al,2014, Nature Climate
ChangeWith uniform carbon pricing and no transfers, climate policies are likely to beregressive across regions due to developing countries higher carbon intensity
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Burden sharing schemes
Models maximize policy efficiency (equal marginalabatement costs) but mitigation doesn’t need to be paid
domestically => carbon markets and permit allocation
tradingResource sharing:
Allocation based on the equalization of regional per
capita emissions by 2050
Effort sharing:
Allocation based on equalization of regional mitigation
costs (2025 onwards)

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Actual emissions and allowances in 2050 compatible with 2°C

EU/US:-90-95%
EU/US:-70-80%
China:-70%
China:-50%

MEast:+25%
India:+40%

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What carbon market and transfers will be needed?
In both schemes, a large carbon market would be neededby the year 2030
• 4 GtCO2-yr by 2030 … in every year, more than twice theCERs issued by all CDM projects to date
• 100 USD Billions-yr of transfers• Trading positions depend on regional abatement
opportunities and allocation scheme: OECD buyers,
China/Russia/Middle East sellers only in the effort sharing
scheme.

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The clean energy investment gapMcCollum et. Al
2014 Climate
Change Economics

A gap of about 500 USD Billions-yr exists, 2/3 of which in developing economies
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Financing the Investment gap with carbon markets

Half of the investment gap in developing economies can be covered bycarbon markets, the rest by energy subsidy removal37

Upscale of low carbon power technologies is needed

Source: van der Zwaan et al., 2014, Climate Change Economics
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Conclusions
1. Countries at all levels of income have the opportunity tobuild lasting economic growth at the same time as reducing
the risks of climate change.
2. This is made possible by structural and technologicalchanges unfolding in the global economy and opportunities
for greater economic efficiency.
3. The capital for the necessary investments is available, andthe potential for innovation is vast.
4. What is needed is strong political leadership and credible,consistent, progressive policies. The real issue is redirecting investments and expenditures. This is why longterm, stable, policy signals are crucial.
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Conclusions
5. Around US$90 trillion is likely to be invested in infrastructure in
the world’s urban, land use and energy systems in the next
two decades. Namely, about 5-6 trillion a year.
6. How these investments are managed will shape future
patterns of growth, productivity and living standards.
7. Additional investments for a low carbon society are only about
0,6 trillion a year.
(The development of cities in particular will be crucial. Cities
generate around 80% of global economic output, and around
70% of global energy use and energy-related GHG emissions.
How the world’s largest and fastest-growing cities develop willbe critical to the future path of the global economy andclimate.)
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Thank you!
www.carlocarraro.org

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