COP25 side-event: Global Climate Change Policy

December 12, 2019

Evaluations on International Competitiveness ofNDCs and the Role of Technological and Social
Innovations toward the Paris Long-term Goals
Keigo Akimoto
Systems Analysis Group

Research Institute of Innovative Technology for the Earth(RITE)

Global CO2 Emissions TrajectorySource) Global Carbon Project2- Global CO2 emissions increased more rapidly
since 2000.
- The emissions were almost constant from 2013
to 2016 while the global GDP increased.
- According to our analysis, the largest
contributor to this apparent decoupling was
production adjustment of iron & steel etc.
mostly in China (for a few years after 2010, theproductions were too large), and the second
largest was the shale gas revolution in the US.
- The global CO2 emissions after 2016 areincreasing again mainly due to repercussion of
the production adjustments in China.

Per-GDP CO2 Emission in European nations, US and Japan:
Production-base v.s. Consumption-base140

Note: 2010 local currency base

2014

2013

2012

2011

2010

2009

2008

2000

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

70

2002

60
2001

Norway
80
2000

70

2007

80

France100
Italy90
Switzerland

2006

90

UK120
Sweden110Germany

2005

100USJapanUK
SwedenGermany
FranceItaly
Switzerland
Norway

2004

110

US
130
Japan

2002

[Year2005=1.0][2005年=100]

120

2001

130

2005=1.0][Year[2005年=100]

Consumption-based CO2 per GDP

2003

Production-based CO2 per GDP

3Source: estimated by RITE

- In terms of the production-based CO2 emissions per GDP, the degrees of improvement of the nine countries
differs greatly.
- However, concerning the consumption-based emissions, the improvement rate of these countries does not differthat much when excluding the impact of Japan’s emission increase due to the shutdown of nuclear power
generation after the Fukushima Daiichi nuclear power accident caused by the Great East Japan Earthquake.
- Focusing only on production-based emissions may lead to wrong interpretation of emission reduction efforts ofindividual nations.

How to measure the comparability of efforts of NDCs
The Paris Agreement allows pledges of various type emission reduction targets and adopts areview process for them.
The submitted Nationally Determined Contributions (NDCs) include the targets of emissions
reduction from different base years, CO2 intensity, and CO2 emission reductions from baseline(w./w.o. clear definition of baseline).
We need to interpret them through comparable metrics to measure the efforts:
Simple metrics (easily measurable and replicable)- Emissions reduction ratios from the same base yearetc.
 Advanced metrics (more comprehensive, but require forecasts)- Emission reduction ratios from baseline emissions- Emissions per unit of GDPetc.
 More advanced metrics (most comprehensive, but require modeling)- Final energy prices- Marginal abatement cost (per ton of CO2)
- Abatement costs as a share of GDPetc.
and the effects on international competitiveness of the NDCs are significant for sustainablemeasures.

4

Emissions reduction ratio from base year of NDCs for major countries
Emissions reduction ratio from base year
Japan：in 2030, -26% from 2013
levels
US： in 2025, about -26 to-28% from 2005 levels
EU28： in 2030, -40% from 1990
levelsRussia： in 2030, -25% to-30% from 1990 levels
China： in 2030, CO2 intensity of 60% to -65% from 2005 levels

From 1990

From 2005

From 2013-17.8%-24.3%-26.0%-15 to -17%-26 to -28%

-19 to -21%

-40%-35%-24%-25 to -30%

+13 to +6%+7 to 0%+406 to +343%+96 to +72%

+17 to +2%

Underlined: official NDCs, Others: estimated by RITEEmission reduction ratios vary depending on the base year. The emission reduction ratios ofNDCs cannot be used directly for comparison of emission reduction efforts, mainly because thebase years are different across the nations.

5

CO2 marginal abatement costs of the NDCs
Average of 2025-2030

62030 (2025 for the U.S.)【World GDP loss due to mitigation】 NDCs:0.38%; the global least cost：0.06%
The least cost (equal marginal abatement costs)：6$/tCO2
Switzerland

380

Japan

378

EU28210

Canada

166

Korea

144

New Zealand95

United States

85

Norway70

East Europe (Non-EU member)

58

Thailand54

Australia

33

Mexico27

Kazakhstan

14

Belarus12

Russia4South Africa

1

Turkey

0

India

0

Ukraine

0

China

00

Source: J. Aldy et al., Nature Climate Change, 2016

--50

100

Source: K. Akimoto et al., Evol. Inst. Econ. Rev., 2016

150

200

250

300

350

400

CO2 marginal abatement cost ($/tCO2)

The estimated marginal abatement costs of NDCs are largely different among countries, and therefore the world total mitigation
costs are much larger than those for achieving the aggregated emission reductions under the least cost measures, i.e., underglobally uniform MAC.
Current economic conditions where lower GDP growth is projected will bring lower MACs in developed countries and higher
MACs in developing countries which have intensity targets, e.g., China.

Analyzed three cases for evaluating economic impacts of NDCs
for major nations/regions
Case 1: NDCs

Case 2: Equal MACs
among sectors withineach nation (Autarky)

National emission reduction
targets in 2025/2030 without
CO2 emission trading

Other related policies

U.S.

26% GHG emission reduction in2025 relative to 2005

EU

40% GHG reduction relative to 1990

CO2 intensity of power generation:
Same emission reduction target
462[gCO2/kWh], & 27% renewables as those in Case 1 without CO2in TPESemission trading
20% renewables in TPES

Japan 26% GHG reduction relative to 2013 Electricity share same as the energy(energy-related CO2 emissions:
927MtCO2)

ChinaIndia
Brazil

65% reduction of CO2/GDP relative
to 2005
35% reduction of GHG/GDP relative
to 2005
43% GHG reduction relative to 2005

mix of Japanese governmental
plan.(24% renewables, 26% coal,20% nuclear)
20% renewable in TPES

40% non-fossil in power generation
45% renewables in TPESSouth 398-614 [MtCO2eq.] GHG emissions Africa

Russia 27.5% GHG reduction relative to1990

7Case 3: Equal MACs
among nations andsectors (Global trade)

Individual achievement of
Global achievement of
national emission reduction aggregated emission
targets without CO2 trading reduction targets
National emission reduction
targets in Case 1 areaggregated globally, with
global CO2 emissions trading8(%, relative to the baseline)

Changes in GDP

GDP impacts of the NDCs for the major countries in 2030
1.0%
0.5%
0.0%

Case1

-0.5%

Case2

-1.0%

Case3

-1.5%
-2.0%
-2.5%
USEU

Japan

China

India

BrazilSouth

AfricaRussiaWorldaverage

Case 1: NDCs
(including typicalenergy policies
within NDCs)
Case 2: Equal
MACs among
sectors withineach nation
Case 3: Equal
MACs among
nations andsectors (Globaltrade)

Source: estimated by a CGE type DEARS model developed by RITE

- The negative GDP impacts are large in the US, EU, and Japan in Case 1 (NDC case).
- The negative GDP impacts for the US and Japan in Case 2 (Equal MACs among sectors within each nation)
will be smaller than those in Case 1.
- The negative GDP impacts for the US, EU, and Japan, and the global impacts in Case 3 (Equal MACs amongnations and sectors) will be much smaller than those in Cases 1 and 2.
- The positive GDP impacts in Cases 1 and 2 for some developing countries are estimated.
- The negative GDP impacts for Russia are estimated in all of the three cases mainly due to the decreases infossil fuel exports.

Trade impacts in Chemical and Iron & steel sector in 2030
92.0%
Changes in(Net Import)/Production(%, relative to the baseline)

Chemical

1.0%

Increase in
Net Imports

0.0%
Increase in
Net Exports

-1.0%

-2.0%

Case1

Case2

Case3

-3.0%

US
Changes in(Net Import)/Production(%, relative to the baseline)

Iron & steel

EUJapanRest of the regions

5.0%
4.0%

Case1

Case2

Case3

3.0%
2.0%

Increase in
Net Imports

1.0%
0.0%

Increase in
Net Exports-1.0%-2.0%

USEUJapan

Other regions

Source: estimated by aCGE type DEARS model
developed by RITE

- The NDCs will make large impacts on the potential international trade balances in Chemical sector in the US, EU andJapan, and in Iron & steel sector in Japan and EU. (Cases 1 and 2)- Under the global emission trade case (equal MACs), the impacts will be relatively small. (Case 3)

Expected global GHG emissions of the aggregated NDCs andthe corresponding emission pathways up to 2100 toward +2 C goal

10200

GHG emissions (GtCO2-eq./yr)

Source) Estimate by RITE

150

About 70$/tCO2 in 2050 evenunder the least cost measures

About 6$/tCO2 in 2030 under the least
cost measures for the achievement of theexpected global emission reductions by NDCs

Baseline emissions reported
in the IPCC AR5

It is important to induce the achievements ofNDCs and further emission reductions forcountries having room for more reductions
through PDCA (plan-do-check-act) cycle.

100

It is important to seek deeper emission
reductions through disruptive innovations
and the induced social change.

50

around +2.5 to 3ºC
around +2 to 2.5ºC
below +2ºC

About 320$/tCO2 in 2050 evenunder the least cost measures
01990

2000

2010

2020

2030

2040

2050

2060

Historical emissions
Emission outlook under current policies

2070

2080

2090

2100

Consistent with the NDC, but also needdeeper emission reductions after 2030

+2.5 ºC stabilization under climate sensitivity of 2.5 ºC (around +2.6 ºC in 2100 and +3.0 ºC in 2200 under C.S. of 3.0 ºC）+2 ºC stabilization under climate sensitivity of 2.5 ºC; temporary overshoot of 580 ppm (+2.5 ºC stabilization under C.S. of 3.0 ºC)
Below +2 ºC in 2100 under climate sensitivity of 3.0 ºC; temporary overshoot of 530 ppm+2 ºC stabilization under climate sensitivity of 3.0 ºC; temporary overshoot of 500 ppm and around 450 ppm in 2300
INDC submitted by October 1 (119 countries) assumed to be implemented--

The expected global GHG emission in 2030 under the NDCs corresponds to the emission to be achieved under only 6 $/tCO2 of global
carbon price. But the required global carbon price for the 2 C goal will be 320 $/tCO2 in 2050. IPCC reports also show a similar range ofcarbon prices in 2050. Disruptive innovations and the induced social change are necessary to lower the carbon price.
Global cooperation harmonizing emission reduction efforts is important, but broad innovations both of energy supply and demand sides
are key to achieve the 2 C goal or much deeper emission reduction.

Image of standard scenario by models and real world scenarios for deep cuts
11

Realistic world requirement:
Innovations stimulated & implemented

Model world:
Ordinary technology progress
Baseline scenario

Baselinescenario
CO2emission

CO2emission
Intervention scenario

Carbonprice

Carbon price/
Marginal abatement cost

By technology andsocial innovations
Intervention scenario

Carbonprice
Implicit or explicit carbon price/
Marginal abatement cost

- High carbon prices of over 100$/tCO2 in real price are unlikely to be accepted globally in a real world. Global
harmonization will be really unrealistic in the level.
- Technology and social innovations which will bring low (implicit or explicit) carbon prices and the induced
low energy demand societies are key to achieve deep emission cuts.

Disruptive Innovations of End-use Technologies
12Source: C. Wilson (IIASA)

Disruptive innovations of end-use technologies
such as IoT, AI, will be able to induce:
1) Shift from atomized to connected
2) Shift from ownership to user-ship3) Sharing economy & circular economy

Human society will be able to continue
economic growth and resolve manysocial issues through building highly
integrated systems of Cyberspace(virtual) and Physical space (real)
Source: Government of Japan (Cabinet Office)Innovations in end-use technologies through IT and AI,and the induced social changes
449 Watts

5 Watts
2.5 Watts

Power72 Watts

13• Energy consumption is not our purpose, but is just aphenomenon accompanied with consumption of
goods and services, which is conducted for ourwelfare increase. Energy embodied in goods andservices must be taken into account.
• The end-use products and services will usuallydiffuse rapidly, and the embodied energy and CO2 may
decrease rapidly.

Stand-byenergy use

75 kWh
0.1 kg1706 kWh
Embodied energy
26 kg

Source：IIASA

WeightOperation ratio ofautomobiles is about 5%.
Large room exists for its
improvement by theachievement of fullyautonomous cars.

There are large opportunities toachieve social changes and toincrease energy efficiency
through fully autonomous cars,
food system improvement, etc.
which can be induced byinnovations of IoT, AI etc.

Global automobiles owned: impacts of sharing
induced by fully autonomous cars
Passenger car in use [million vehicle]

CO2 marginal abatement costs for 2 C

2050

3000

142500

FCV

2000

EV1500

PHEV

1000

HEV500

ICEV

Unit: $/tCO2 (real price)
In case of uniform carbon price (the least cost case)

2050

2100

SSP2 (Middlescenario)

154

269

SSP1

165

187

SSP1 & car- andride-share

126

185

0SSP2

SSP1Baseline

SSP1 & carand ride-share

SSP2

SSP1

SSP1 & carand ride-share

2℃ pathways (>50%)

Source) estimated by using DNE21+, developed by RITE

- Assumed cost reductions of environmental friendly cars, e.g., hybrid vehicle, PHEV, EV, FCV for SSP1 lead to wide diffusion ofthese cars. (SSP2 ⇒ SSP1)- The sharing brings higher operation ratios, and then induces economic travels even with high price cars as well as reductions in
number of cars, and EVs diffuse relatively more widely even in Baseline scenario. (SSP1 ⇒ SSP1 & car- and ride-share)- The marginal abatement costs for the sharing mobility scenario (SSP1 & car- and ride-share) are much lower than those for thescenarios without sharing mobility.

Conclusions

15

 Increasing trend of global CO2 emissions continues.
 In some developed nations, a relatively long decreasing trend of the emission can be observed,
but it was induced mainly by industrial structure change, and the consumption-based CO2emissions were not reduced in most of the nations. High energy cost burden induced theoverseas transfer of industries. The international competitiveness issue is very important.
 The marginal abatement costs for the currently submitted NDCs are greatly different amongnations. Such large differences will hinder global efficiency of emission reductions andsustainable efforts of participating nations.
 According to the assessments for the macro economic impacts, some developing
nations/regions with almost zero marginal abatement costs will have positive impacts on GDP
and on outputs of some energy-intensive sectors as carbon leakages take place throughinternational trade. The coordination of the NDCs through the review process will be important.
 On the other hand, the coordination based on high carbon prices are unrealistic in the realworld. Broad innovations both of energy supply and demand sides will be necessary and key
to achieve the 2 C goal or much deeper emission reduction.
 The energy demand decrease opportunities particularly through IT, IoT, AI will be
desired/expected for deep reductions in the mitigation costs.