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A Proposed Global Climate Policy Architecture: Comprehensive Emission Targets from Specific Formulas. Jeffrey Frankel Harpel Professor, Harvard Kennedy School Academic Seminar Series Resources for the Future, April 23, 2009.

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A proposed global climate policy architecture comprehensive emission targets from specific formulas

A Proposed Global Climate Policy Architecture: Comprehensive Emission Targets from Specific Formulas

Jeffrey Frankel

Harpel Professor, Harvard Kennedy School

Academic Seminar Series

Resources for the Future,April 23, 2009


What successor to the 2008 12 regime ideally in copenhagen in december
What successor to the 2008-12 regime? Comprehensive Emission Targets from Specific Formulasideally in Copenhagenin December

  • Features of Kyoto worth building on --

    • Politics: Quantitative limits maximize national sovereignty

    • Economics: Market mechanisms

    • Thus (2001) “You’re Getting Warmer: The Most Feasible Path for Addressing Global Climate Change Does Run Through Kyoto.”

  • What is missing:

    • Participation by US, China, & other developing countries

    • A mechanism for setting targets far into the future

    • Any reason to expect compliance.

J. Frankel, Harvard


Desiderata for the next stage requirements for the next multilateral treaty
Desiderata for the next stage, Comprehensive Emission Targets from Specific Formulas requirements for the next multilateral treaty

  • Comprehensive participation

    • getting US, China, India, et al, to join

  • Efficiency -- esp. trading

  • Dynamic consistency – a credible century path

  • Equity -- re poor countries

  • Compliance-- No country will join if the plan implies, ex ante, big economic sacrifice overall.

  • Robustness -- No country will stay in if compliance implies, ex post, huge economic cost in any given period.

J. Frankel, Harvard


Proposed architecture for quantitative emissions targets
Proposed Comprehensive Emission Targets from Specific FormulasArchitecture for Quantitative Emissions Targets

  • Unlike Kyoto, my proposal seeks to bring all countries in & to look far into the future.

  • But we can’t pretend to see with a fine degree of resolution at a century-long horizon.

  • How to set a century of quantitative targets?

    • A decade at a time, in a sequence of negotiations;

    • but within an overall flexible framework of formulas,

    • building confidence as it goes along.

J. Frankel, Harvard


The formulas are designed pragmatically, based Comprehensive Emission Targets from Specific Formulason what emissions paths are possible politically:

  • unlike other approaches based purely on:

    • Science (concentration goals),

    • Ethics (equal emission rights per capita),

    • or Economics (cost-benefit optimization).

  • Why the political approach?The usual proposed paths are not dynamically consistent: it is not credible that successor governments will abide by today’s leaders’ commitments.

J. Frankel, Harvard


“An Elaborated Proposal For Global Climate Policy Architecture: Specific Formulas and Emission Targets for All Countries in All Decades,” March 2009

Suggests a framework of formulas that produce precise numerical targets for CO2 emissions in all regions in all decades.

J. Frankel, Harvard


The formulas are driven by 6 axioms
The formulas are driven by 6 axioms: Architecture: Specific Formulas and Emission Targets for All Countries in All Decades,”

  • The US will not commit to quantitative targets if China & major developing countries do not commit to quantitative targets at the same time, due to concerns about economic “competitiveness” & carbon leakage.

  • China & other developing countries will not make sacrifices different in character from those made by richer countries who have gone before them.

  • In the longer run, no country can be rewarded for having “ramped up” its emissions high above the levels of 1990.

  • No country will agree to join if it costs more than, say, 1% of GDP throughout the century.

  • No country will abide by targets that cost it more than, say, 5% of GDP in any one period.

  • If one major country drops out, others will become discouraged and the system may unravel.

J. Frankel, Harvard


Building on existing commitments
Building on existing commitments Architecture: Specific Formulas and Emission Targets for All Countries in All Decades,”

  • Between now and 2050, the EU follows the path laid out in the 2008 EC Directive (50% below 1990),

  • US follows the path in the Lieberman bills (67% below 1990) ,

  • and Japan, Australia & Korea follow statements that their own leaders have recently made.

  • China, India & others agree immediately to quantitative targets which at first merely copy their BAU paths, thereby precluding leakage.

J. Frankel, Harvard


When the time comes for developing countries cuts
When the time comes for developing countries’ cuts, Architecture: Specific Formulas and Emission Targets for All Countries in All Decades,”

  • their emission targets are determined by a formula that incorporates 3 elements,designed so they are only asked to take actions analogous to those already taken by others:

    • a Progressive Reduction Factor,

    • a Latecomer Catch-up Factor, and

    • a Gradual Equalization Factor.

J. Frankel, Harvard


The targeted reductions from bau agreed to at kyoto in 1997 were progressive with respect to income
The targeted reductions from BAU agreed to at Kyoto Architecture: Specific Formulas and Emission Targets for All Countries in All Decades,” in 1997 were progressive with respect to income.

Cuts ↑

Incomes →

J. Frankel, Harvard


The three factors in the formulas
The three factors in the formulas Architecture: Specific Formulas and Emission Targets for All Countries in All Decades,”

  • Progressive Reduction Factor:

    • For each 1% difference in income/cap => target is 0.14% greater emissions abatement from BAU (as also agreed at Kyoto).

  • Latecomer Catch-up Factor:

    • Gradually close the gap between the latecomer’s starting point & its 1990 emission levels, at the same rate as US. (Goal: avoid rewarding latecomers for ramping up emissions).

  • Gradual Equalization Factor:

    • In the long run, rich & poor countries’ targets converge in emissions per capita. (Goal: equity)

J. Frankel, Harvard


The resultant paths for emissions targets, permit trading, the price of carbon, GDP costs, & environmental effects

  • estimated by means of the WITCH model of FEEM, Milan, co-authored & applied by Valentina Bosetti.

J. Frankel, Harvard


Bottom line
Bottom line: the price of carbon,

  • Concentrations level off at 500 ppm in the latter part of the century.

  • No country in any one period suffers a loss as large as 5% of GDP by participating.

  • Present Discounted Value of loss < 5% GDP.

J. Frankel, Harvard


The 11 regions

EUROPE = the price of carbon,

Old Europe +

New Europe

US = The United States

KOSAU = Korea + S. Africa + Australia (3 coal-users)

CAJAZ = Canada, Japan & New Zealand

TE = Russia & other Transition Economies

MENA = Middle East + North Africa

SSA = Sub-Saharan Africa

SASIA= India & the rest of South Asia

CHINA = PRC

EASIA = Smaller countries of East Asia

LACA = Latin America & the Caribbean

The 11 regions:

J. Frankel, Harvard


Two versions
Two versions the price of carbon,

  • (I) Cut developing country emissions only after thresholds. 1a:

    • China’s target is not cut below BAU until 2040

      • => permit sales > 1 gigaton of Carbon in 2040.

    • SEAsia does not have to cut below BAU

      • => permit sales > 1 gigaton in 2080-2100;

      • and it registers big economic gains toward the century end.[1]

    • Africa similarly.

  • I judge such huge international transfers unsustainable politically.

  • (II) Instead, assign developing countries earlier targets. 1b:

    • Southeast Asia & Africa get targets below BAU after 2050;

    • move forward by 10 years the date China takes on cuts (to 2030),

    • and by 5 years the date MENA is asked to do so (to 2040).

      • An additional reason was to reduce the slackening in global targets—observable as a carbon price dip —that would otherwise occur around 2035.

    • Version (II) is presented here. Version (I) in Appendix.

    • [1] Figs. 2a-6a & Table 3a; or Fig.s 2-8 and Tables 1 & 2 – especially Fig. 7 -- in HPICA DP 08-08.

J. Frankel, Harvard


Emissions path for rich countries fig 2b
Emissions path for rich countries the price of carbon, Fig. 2b

Predicted actual emissions exceed caps, by permit purchases.

J. Frankel, Harvard


Emissions path for poor countries fig 4b
Emissions path for poor countries the price of carbon, Fig. 4b

Predicted actual emissions fall below caps, by permit sales.

J. Frankel, Harvard


Emissions path for the world fig 5b
Emissions path for the world the price of carbon, Fig. 5b

Global peak date ≈ 2035

J. Frankel, Harvard


Price of carbon dioxide fig 6b
Price of Carbon Dioxide the price of carbon, Fig. 6b

rises slowly over 50 years, then rapidly.

J. Frankel, Harvard


Concentrations stay below 500 ppm goal fig 7b
Concentrations stay below 500 ppm goal the price of carbon, Fig. 7b

J. Frankel, Harvard


Temperature rises 3° rather than 4° the price of carbon, Fig. 8b

Yes, I know. The pay-off is a let-down.

J. Frankel, Harvard


The next paper co authored with valentina bosetti
The next paper the price of carbon, (co-authored with Valentina Bosetti)…

  • (1) See if we can hit concentrations = 450 ppm

    • Answer, so far: yes, but not within the constraints.

  • (2) See if the emission target trajectories suggested by others violate our constraints (e.g., 5% of GDP in some periods), and how badly.

    Of the eventual extensions I hope to do,

  • the most important will be to introduce uncertainty, especially in the form of stochastic growth processes.

    • Robustness will require:

      • Possible decadal updates of BAU & formula parameters;

      • within-decade indexation of targets to GDP.

J. Frankel, Harvard


Preliminary results from target cuts severe enough to reach a 450 ppm target by 2100
Preliminary results from target cuts severe enough to reach a 450 ppm target by 2100...

J. Frankel, Harvard


Show gdp losses of 6 7 for most countries in the later decades to hit 450 ppm
a 450 ppm target by 2100...show GDP losses of 6-7% for most countries in the later decades, to hit 450 ppm.

J. Frankel, Harvard


Appendix i commitments recently made by country leaders
Appendix I: Commitments recently made by country leaders a 450 ppm target by 2100...

European Union

  • The EU emissions target for 2008–2012 was agreed at Kyoto: 8 % below 1990.

  • Brussels in 2008:

    • In the 2nd 2015–2020 period, target = 20 % below 1990.

    • For the 3rd period (2022–2027), and thereafter up to the 8th period (2048–2052), the EU targets progress in equal increments to a 50 % cut below 1990.

      Japan

  • PM Fukuda in 08: Target = 60 % below 2000 by 2050. (Assume equal increments over 2010- 2050.)

    TheUnited States (Now way above Kyoto targets)

  • We assume average annual emissions growth rate is cut ½ during 2008–12,

    • to 0.7 % per year, so that emissions in 2012 are 31.5 % above 1990;

  • and flat over 2012–2017.

  • Then we implement the Lieberman–Warner formula

    • emissions in 2050 reach 67 % below 1990 => 98.5 % below 2012. => Reductions of 2.6 % per year.

      Australia PM Rudd in 08:plans to cut emissions to 60 % below 2000 by 2050

      Korea (Would be the first non-Annex I country to take a target.)

  • Pres. Myung-bak Lee, March 2008: “tabled a plan to cap emissions at current levels over the first Kyoto period” and “vowed his country would slash emissions in half by 2050,”

    • Emissions have risen 90 % since 1990.

      • It is hard to imagine applying the brakes so sharply as to switch from 5 % annual growth to 0.

  • My interpretation: emissions flatten between 2007 and 2022

    China

  • Reportedly announced plans to start cutting emissions in 2030, presumably vs. BAU

    (ahead of the 2007 G8 summit, according to Germany’s environment minister -- FT 3/12/07.)

  • J. Frankel, Harvard


    Appendix ii more on hitting 450 ppm
    Appendix II: More on hitting 450 ppm a 450 ppm target by 2100...

    • Our 1st pass at attaining 450 ppm concentrations entailed:

      • negative emissions allocated to W. Europe by 2065 !

      • Very big purchases of permits from developing countries. Seems unlikely.

      • And even then does not quite hit 450 ppm.

    • At a 2nd pass, we tightened parameters & moved up further the dates at which developing countries start cutting below BAU.

    J. Frankel, Harvard


    Next step
    Next step a 450 ppm target by 2100...

    • EU:

      • in 2015-2020, EU target is 30 % below 1990 levels, rather than 20 %.

    • Developing countries start cutting below BAU still earlier than before:

      • MENA starts making cuts in 2020

      • LACA starts in 2020

      • China starts in 2020

      • South Asia in 2030.

      • East Asia in 2035

    J. Frankel, Harvard


    450 ppm goal with even earlier starting dates for developing countries so they peak 2030
    450 ppm goal a 450 ppm target by 2100...with even earlier starting dates for developing countries,so they peak ≈ 2030

    {

    J. Frankel, Harvard


    450 ppm goal a 450 ppm target by 2100...with even earlier starting dates for developing countries=> permit purchases by richcountriesare smaller.

    {

    J. Frankel, Harvard


    450 ppm goal with even earlier starting dates for developing countries global emissions peak 2025
    450 ppm goal a 450 ppm target by 2100...with even earlier starting dates for developing countriesGlobal emissions peak ≈ 2025

    J. Frankel, Harvard


    Environmental effectiveness concentrations actually level off at 450 ppm by 2050
    Environmental Effectiveness a 450 ppm target by 2100...Concentrations actually level off at 450 ppm by 2050 !

    J. Frankel, Harvard


    Environmental effectiveness
    Environmental Effectiveness a 450 ppm target by 2100...

    .

    Even though the 450 ppm target is achieved by mid-century, the pay-off in further temperature moderation, relative to 500 ppm, is not large. There are diminishing returns to CO2 abatement in two senses: The marginal cost of abatement rises in dollar terms, and the marginal cost of temperature moderation rises in terms of CO2.

    J. Frankel, Harvard


    Price of carbon for 450 ppm case
    Price of Carbon for 450 ppm case a 450 ppm target by 2100...

    Reaches $100 / ton

    already by 2010 (=> ≈ 25¢/gal. of gasoline or heating oil);

    $1,800 / ton by 2100.

    J. Frankel, Harvard


    Resulting per capita emissions
    Resulting Per Capita Emissions a 450 ppm target by 2100...

    Thanks to the beyond-2050 convergence rule, emissions/capita again nicely converge.

    J. Frankel, Harvard


    But again the 5 of gdp loss constraint is violated during the latter decades for at least 3 regions
    But again the 5% of GDP loss constraint is violated a 450 ppm target by 2100...during the latter decades,for at least 3 regions

    J. Frankel, Harvard


    The pdv of cost as share of gdp also exceeds the 1 threshold discount rate 5
    The PDV of cost, as share of GDP, a 450 ppm target by 2100...also exceeds the 1% threshold(discount rate = 5%)

    • The global cost is 1.8% of GWP.

    J. Frankel, Harvard


    Appendix iii
    Appendix III a 450 ppm target by 2100...

    • Version (a), where developing countries are not asked to cut emissions below BAU until they cross certain thresholds.

      • MENA 2030

      • China 2040

      • SEAsia 2100

      • Africa never

    J. Frankel, Harvard


    Targets for emission per capita by region fig 2 hpica dp 08 08
    Targets for emission per capita, by region a 450 ppm target by 2100...Fig. 2, HPICA DP 08-08

    J. Frankel, Harvard


    Emissions path for industrialized countries fig 2a
    Emissions path for industrialized countries a 450 ppm target by 2100...Fig. 2a

    Predicted actual emissions exceed caps, by permit purchases.

    J. Frankel, Harvard


    Emissions path for poor countries fig 3a
    Emissions path for poor countries a 450 ppm target by 2100...Fig. 3a

    Predicted actual emissions fall below caps, by permit sales.

    J. Frankel, Harvard


    Fig t1 permit trade 2010 2035 late ldc targets
    Fig. T1: Permit Trade 2010-2035 a 450 ppm target by 2100...(late LDC targets)

    J. Frankel, Harvard


    Fig t2 permit trade 2040 2090 late ldc targets
    Fig. T2: Permit Trade 2040-2090 a 450 ppm target by 2100...(late LDC targets)

    J. Frankel, Harvard


    Emissions path for the world in the aggregate fig 4a
    Emissions path for the world, in the aggregate a 450 ppm target by 2100...Fig. 4a

    J. Frankel, Harvard



    Loss of Aggregate Gross World Product Rapidlyby budget period, 2015-2100 with later targets for developing countriesFig. 6

    J. Frankel, Harvard


    Concentrations almost hit the 500 ppm goal fig 7a fig 9 hpica dp 08 08
    Concentrations almost hit the 500 ppm goal RapidlyFig. 7a (Fig. 9, HPICA DP 08-08)

    J. Frankel, Harvard


    Temperature rises 3 rather than 4 fig 8a fig 10 hpica dp 08 08
    Temperature rises 3° rather than 4° RapidlyFig. 8a (Fig. 10, HPICA DP 08-08 )

    J. Frankel, Harvard


    Harvard Project on Rapidly

    International

    Climate Agreements;

    directed by

    J.Aldy & R.Stavins.

    Thanks to ValentinaBosetti

    Paper:http://ksghome.harvard.edu/~jfrankel/SpecificTargetsHPICA2009.docAvailable at: http://ksghome.harvard.edu/~jfrankel/currentpubsspeeches.htm#On%20Climate%20Change


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