Workshop at the 2009 Climate Change Summit
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Workshop at the 2009 Climate Change Summit Wednesday 4 March 2009. Economics of climate change Context and concepts related to mitigation. HARALD WINKLER. Energy Research Centre University of Cape Town. Climate change – an integrated framework. Source: IPCC 2001.

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HARALD WINKLER

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Harald winkler

Workshop at the 2009 Climate Change Summit

Wednesday 4 March 2009

Economics of climate change

Context and concepts related to mitigation

HARALD WINKLER

Energy Research Centre University of Cape Town


Climate change an integrated framework

Climate change – an integrated framework

Source: IPCC 2001


Climate change economics

Environmental issue, rising emissions

Deeply economic issue – at heart of energy economy

“Climate change presents a unique challenge for economics: it is the greatest and widest-ranging market failure ever seen” (Stern Review 2006)

Climate change economics


History minerals energy complex

History: minerals-energy complex

  • Complex comprising mining, minerals processing, the energy sector, and associated industries (Fine & Rustomjee 1996)

  • Coal

    • ¾ of TPES

    • > 90% of electricity

    • ‘cheap’ and inefficient

  • Particular challenge for mitgation …

  • … while increasing access to affordable eneryg services

  • Short-term: energy efficiency

  • Medium-term: change fuel mix


Future low carbon future

Future: low-carbon future

  • Redefine competitive advantage

    • from attracting energy-intensive sectors

    • to building a new advantage around climate-friendly technologies and systems


Towards climate policy

Towards climate policy

  • LTMS strategic option of ‘Use the Market’

  • Polokwane resolution on climate change

  • Treasury work on environmental fiscal reform

    • Theme of ‘putting a price on carbon’

    • Question is ‘how?’


Carbon and carbon markets

Carbon and carbon markets

  • Markets are a means, not an end

    • May be efficient, but not good at equity

  • Carbon cycle is global – problem of common property management

  • How to manage

    • Multi-laterally – UNFCCC, but also other scales

    • Price vs quantity

  • Pure regulation – standards

  • Pure price – tax

  • Combination – cap-and-trade


Conceptual distinctions

Conceptual distinctions

Economic instruments

Regulatoryinstruments

GHG emission standards

Carbon tax

Direct

Cap and trade

Fuel input tax

Indirect

Building standards

Greenor white certificates


Some broad questions

Some broad questions

  • What would the distributional implications of different economic instruments be?

  • What are the implications, including costs and benefits, of choosing to use an economic instrument for mitigation?

  • How could different instruments be combined

  • How responsive is the system (and its parts) to various economic instruments for mitigation? (elasticity)

  • What would a consistent and effective approach to energy-intensive sectors, in order to increase efficiency, encourage fuel switching and eventually diversify products

  • What are the key design elements that need to be considered to design the best instrument for mitigation in SA?

  • What supportive measures might be needed to implement a set of instruments? Implications of existing policy? What legal and institutional arrangements could we build on?


Thank you

Thank you

Energy Research Centre University of Cape Town

Environmental Policy Research Unit, University of Cape Town

Genesis Analytics

www.erc.uct.ac.za


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