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Scenarios For Differentiating Commitments :

A quantitative analysis

EU Expert Group on Further Action

Berlin, May 14, 2003

Odile Blanchard, LEPII-EPE (Previously IEPE)

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Overview

• Possible elements and options of a climate protection architecture

• Differentiated commitment scenarios : objectives, methodology, assumptions

• Comparative results

• Implementation issues

• Conclusion

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Designing a Climate Protection Architecture:Possible Elements and Options

1. Legal Nature of Commitments - Binding - Non-Binding - Mixture

2. Type of GHG Limitation Commitment- Tax- PAMs (e.g., harmonized PAMs; SD-PAMs)- Targets (e.g., fixed, dynamic, dual)

3. Approach to Differentiating Commitments- Pledge-based (e.g., Kyoto-style)- Principle-based (e.g., Brazilian Proposal, equal per capita)

4. Timing and Triggers - By existing or new Annex

5. Coverage and Scope of Actions- Different gases and/or sectors

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Designing a Climate Protection Architecture:Possible Elements and Options

Continued…

6. Market-Based Mechanisms - Int’l emissions trading - CDM - Sector-CDM

7. Financial and Technology Commitments- Funding for adaptation/impacts compensation- Funding for clean energy development

8. Accountability Mechanisms - Measurement, reporting, and review of commitments - Compliance system

9. Overall Environmental Objective- UNFCCC Article 2- More specific (e.g., keep 450 CO2 eq. option open)

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Building on the Kyoto Protocol: Options for Protecting the Climate

1. Introduction: An Architecture for Climate Protection

2. Continuing Kyoto: Emission Caps in DCs?

3. Sustainable Development Policies and Measures

4. Evolving to a Sector-Based CDM

5. Dual-Intensity Targets: Reducing Uncertainty

6. Learning from the Argentine Voluntary Commitment

7. The Brazilian Proposal on Relative Responsibility

8. Equal Per Capita Entitlements

9. Differentiated Commitment Scenarios: Quantitative Analysis

10. Conclusion: Building and Effective and Fair Climate Protection Architecture

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9. Differentiated Commitment ScenariosObjectives

• Illustrate the formalization of a few emission allocation proposals, 2010-2030

• For each allocation scenario, quantitatively assess :

- the emission allowances distributed across countries

- the emission reduction costs

- the impacts of trade

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9. Differentiated Commitment ScenariosMethodology

• Set an intermediate (2030) environmental goal, compatible with a long term CO2 concentration target of 450-550 ppmv : 9.4 GtC in 2030

• Define 3 worldwide scenarios:

- Per Capita Convergence scenario

- Relative Responsibility scenario

- Emissions-Intensity Target scenario

• POLES model and ASPEN software

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Why stabilization below 10 GtC by 2030 ?

Fossil fuel CO2 emissions from mitigation scenarios for 550ppmv stabilization

IPCC TAR WGIII

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Why stabilization below 10 GtC by 2030 ?

Fossil fuel CO2 emissions from 76 post- SRES stabilization scenarios

IPCC TAR WGIII

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Tools developed at IEPE

• POLES (Prospective Outlook on Long-term Energy Systems): a world simulation energy model, partial equilibrium, 38 countries/regions. Main outputs :– energy supply, demand, price projections to 2030– GHG emission marginal abatement curves (MAC) by

regions/countries

• ASPEN (Analyse des Systemes de Permis d’Emission Negociables), computes :– GHG emission allocations based on the allocation rule

chosen ;– emission permit price and trade flows, for any permit

market

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Quantitative assessments:2010 and 2030 assumptions

• 2010 CO2 world emissions : 7.8 GtC (+38 % /1990), resulting from :

– Annex 1 : comply with KP commitment, except USA, Eastern Europe

– USA : Feb 14, 2002 “Bush Adm. Rule” (-18 % emission intensity over 10 years)

– Eastern Europe: BAU emissions (to avoid “hot air”)

– Non-Annex 1: BAU emissions

• 2030 BAU world emissions : almost 12 GtC (+ 111% /1990)

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Emissions per capita scenario : assumptions

• Convergence year: 2050, at 0.95 tC/cap.

• Transition period : 2011-2049 with a yearly carbon budget to allocate (resource sharing)

• 2010-2030 yearly global CO2 emissions budget calculated on a linear basis to reach 9.4 GtC in 2030. 2030-2040: global emissions stabilization at 9.4 GtC

• 2040-2050: -1%/y global emissions reduction

• Using one of GCI’s proposed equations for convergence

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Emissions per capita scenarioConvergence equation

• Country’s annual emissions share:Sy = Sy-1 - (Sy-1 - Py)*exp(-a*(1-))

Sy : emissions share in year y

Py : population share in year yaconvergence coefficient (= 4)

elapsed time ratio between starting year (2011, ) and convergence year (2050, )

• Country’s annual emissions entitlement: share Sy multiplied by the global CO2 emissions budget of year y

• Source: adapted from GCI

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Relative responsibility scenario : assumptions

• Brazilian-type approach : reductions sharing

• 2010-2030 yearly global CO2 emissions budget: same as for Per capita convergence scenario

• 2010-2030 yearly global CO2 emission reductions relative to BAU

• Distribution of the yearly reductions among ALL countries, based on relative responsibility

• CO2 cumulative emissions from 1900

• Responsibility of a country: ratio of cumulative emissions of the country/world cumulative emissions

• 2011-2015 relative responsibility: refers to 2005 ratio 2016-2020 to 2010; 2021-2025 to 2015 BAU; 2026-2030 to 2020 BAU.

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Relative responsibility scenario : calculating emission reductions, an example

• 2030 global CO2 reductions:

BAU - Emission Budget= 11.981 - 9.4 = 2.581GtC

• 2030 US relative responsibility :US CO2 cumulative emissions 1900-2020: 111.3 GtC

World CO2 cumulative emissions 1900-2020: 421 GtC

US 2030 responsibility ratio: 111.3 / 421 = 26.43 %

• US 2030 emission reductions relative to BAU :2.581 * 26.43 % = 0.682 GtC = 682 MtC

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Emissions-Intensity Target scenario: assumptions

• 2030 global CO2 emissions target: still 9.4 GtC

• Approach based on relative changes of em / GDP (no absolute figures for em/GDP) ; country specific

• Various simulations carried out to reach the 9.4 GtC target

• Simulation used:

– Annex I improve CO2/GDP by 2 % yearly from BAU trend ;

– Non-Annex I : 0.5 % improvement from BAU trend

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Results: Comparing Emission Allowances

• All scenarios meet the near-term environmental goal

• In all scenarios, more stringent emission limitations in Annex I than in Non-Annex I countries

• 2030 emission allowances above 1990 levels for all Non-Annex I countries

• In the Per Cap Convergence scenario, some Non-Annex I countries would have allowance surpluses relative to their BAU emission projections in 2030

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Results : comparing emission allowancesReduction (–) or increase (+) in 2030 emissions relative to 1990

(%)

Countries

Per Capita Convergence

Scenario

Relative Responsibility

Scenario

Emissions-Intensity

Target Scenario Annex I

United States -34 -5 -6 European Union -31 -34 -33 Japan -31 -19 -32 Australia and New Zealand -19 +59 +5 Former Soviet Union -51 -32 -35 Other Economies in Transition

-34 -37 -32

Annex I, all others -35 +6 -26

Non-Annex I

Brazil +322 +264 +275 Mexico +93 +88 +105 India +713 +557 +551 South Asia, excl. India +2,130 +635 +620 China +173 +223 +233 South Korea +48 +239 +248 Southeast Asia +270 +289 +291 Africa +626 +274 +282 Gulf States +111 +194 +209 Non-Annex I, all others +195 +151 +167

World +66 +66 +66

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Results: Comparing Emission Allowances

Distribution of CO2 Emissions allowances

1990 2010 2030 2030 allowances Actual Projected Projected

emissions emissions emissions (BAU) Per cap conv. Relative resp. Emis. int. targAnnex I 69% 51% 41% 26% 34% 32%Non-Annex I 31% 49% 59% 74% 66% 68%

Total (MtC) 5679 7832 11981 9400 9400 9400

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Results: Comparing Emission Allowances

Per capita CO2 emission allowances 1990 2010 2030 2030 tC / cap Emission Allowances

Actual

Emissions Projected Emissions

Projected Emissions

(BAU)

Per Capita Convergence

Scenario

Relative Responsi-

bility Scenario

Emission- Intensity Target

Scenario

Annex I

United States 5.1 5.6 5.8 2.6 3.8 3.7 European Union

2.4 2.4 2.8 1.7 1.6 1.6

Japan 2.4 2.4 2.8 1.7 2.0 1.7 Australia and New Zealand

3.0 3.1 3.8 1.6 3.1 2.0

Former Soviet Union

3.3 2.0 3.2 1.6 2.2 2.1

Other EITs 2.2 1.9 2.5 1.6 1.5 1.6 Annex I, others

3.5 3.8 4.1 1.7 2.8 2.0

Non-Annex I

Brazil 0.4 0.6 1.0 1.0 0.9 0.9 Mexico 1.0 1.1 1.4 1.2 1.1 1.2 India 0.2 0.5 0.8 1.0 0.8 0.8 South Asia, excl. India

0.1 0.2 0.3 0.8 0.3 0.3

China 0.6 1.1 1.6 1.2 1.4 1.5 South Korea 1.5 2.8 4.7 1.8 4.2 4.3 Southeast Asia

0.4 0.6 1.2 1.0 1.1 1.1

Africa 0.3 0.3 0.5 0.9 0.5 0.5 Gulf States 1.2 1.6 1.9 1.2 1.2 1.8 Non-Annex I, others

0.6 0.7 1.0 1.0 0.9 0.9

World 1.1 1.1 1.5 1.2 1.2 1.2

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Results: Comparing Costs and Trade

• Across all scenarios, higher emission reduction costs in Annex I than in Non-Annex I

• Trade: all countries benefit from trade ; typically, Annex I countries are buyers; Non-Annex I countries are sellers

• Highest volume of trade and highest gains from trade in the Per Capita Convergence scenario

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Results :Comparing impacts of trading

Per Capita Convergence Relative Responsibility Emissions–Intensity Target

Permit price: $ 97

Total Cost to Meet Target ( % of GDP)

Gains from Trade

(Billion $)

Total Cost to Meet Target (% of GDP)

Gains from Trade

(Billion $)

Total Cost to Meet Target (% of GDP)

Gains from Trade

(Billion $)

Annex I

United States 0.48 81.9 0.24 4.9 0.24 5.8 European Union 0.21 47.1 0.23 60.7 0.22 53.6

Japan 0.24 26.9 0.17 11.4 0.24 28.6 Australia and New Zealand 0.49 6.3 0.01 0.6 0.35 1.3 Former Soviet Union 1.27 66.9 0.62 5.0 0.73 9.8 Other Economies in Transition 0.40 3.6 0.44 5.0 0.37 2.8 Annex I, all other 0.47 19.9 0.20 1.3 0.41 14.6

Non-Annex I

Brazil -0.06 1.6 0.06 0.0 0.03 0.0

Mexico 0.04 0.1 0.06 0.0 0.00 0.4

India -0.35 28.6 -0.05 5.5 -0.03 4.8 South Asia, excl. India -1.89 32.9 -0.01 0.5 0.01 0.3

China 0.13 0.2 -0.04 12.2 -0.07 16.5

South Korea 0.67 31.6 0.02 0.3 0.00 0.5

Southeast Asia 0.03 1.4 -0.02 3.4 -0.03 3.6

Africa -1.38 55.6 0.06 0.2 0.03 0.6

Gulf States 0.63 13.6 0.09 0.2 -0.01 1.0 Non-Annex I, all other -0.05 3.5 0.06 0.1 0.02 0.3

World 0.11 421.6 0.11 111.4 0.11 144.7

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Implementation issues : Per capita convergence

• Principle-based : egalitarian

• What long-term environmental goal (“emission budget”) ? What yearly contraction path ? What level of convergence?

• Emissions trading is essential

• Does not account much for national circumstances

• Acceptability : low for Annex I, high for Non-Annex I

• Variants : more acceptable but more complex (e.g. Aslam’s proposal : fixed minimum per capita level + variable per capita portion related to country-specific circumstances)

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Implementation issues : Relative responsibility

• Principle-based : polluter pays

• Choice of indicator of responsibility: how far down the causal chain of global warming ?

• Data challenges:

– Consensus on distant past CO2-energy related figures ?

– Data for CO2 from land-use change, non-CO2 GHGs? Sensitivity analyses.

• Acceptance of Annex I responsibility for pre-1990 emissions ?

• Bringing developing countries on board :

– Delay participation (thresholds: GDP/cap, non-Annex I responsibility vs Annex I)

– Reductions relative to a dynamic baseline

– Responsibility principle for Annex I, other basis for non-Annex I commitments

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Implementation issues : Emissions-intensity targets

• Pledge-based target: as many targets as countries ; choice of adjustment form of GHG emissions to GDP changes, need for capacity building

• Additional data set : GDP

• GDP measure : domestic currency

• Emission intensity targets expressed in rates of change, rather than absolute terms

• Emissions trading: after compliance period ; or allow trade during commitment period (GDP projections and commitment period reserve)

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Conclusion (1): Scenarios for differentiating commitments

• Reaching 550 ppmv stabilization of CO2 concentrations by 2100 requires stringent reductions in the near-term, particularly by Annex I countries

• Emission allowances and emission reduction costs vary for each country across the 3 scenarios

• Helpful information for countries to shape their negotiating position

• Extension of work: exempt some countries from emission limitations ; mix approaches

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Conclusion (2): options for climate protection

• No proposal can satisfy the interests and concerns

of all countries

• Design of a menu of near-term options to build confidence and capacity…

- Stronger leadership of developed countries in emission reductions

- Multiple options : enhanced participation in emission reductions

- But potentially insufficient to address climate change over the LT

• … coupled to a principled, long-term framework

- To combat bargaining power of pledged-based commitments

- To avoid the complexity of multiple options

- Could include a more definite environmental objective