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-TAXBEN - WP5 Design of Transitional Climate Policy. Christoph Böhringer, Ulf Moslener ZEW, Mannheim, Germany. Assessment Framework Transition to Long-Term Climate Policy. Approach: Transitional Climate Policy. Residual efficient policy:. Transitional policy:.

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slide1

-TAXBEN -

WP5

Design of Transitional Climate Policy

Christoph Böhringer, Ulf Moslener

ZEW, Mannheim, Germany

  • Assessment Framework
  • Transition to Long-Term Climate Policy
slide2

Approach: Transitional Climate Policy

Residual efficient policy:

Transitional policy:

“Efficient” residual policies from 2030 to meet given long-term climate policy target

“Politically feasible” policy options (e.g. up to 2030)

2000

2030

2100

Long-term Integrated analysis:

slide3

GHG-Emissions

Climate Model

ConcentrationTemperature

Ecosystem Model

Impacts

Economic Model

Integrated Assessment Modeling framework

  • Linkage between economic model and climate model:

Temperature

  • Cost-effectiveness framework:
  • No economic evaluation of climate feedbacks
  • Derivation of efficient policies to meet temperature or concentration targets
slide4

Preliminary Analysis

  • Compared:
    • Business as Usual until 2030; efficient thereafter
    • Kyoto until 2030; efficient thereafter
    • Efficient path to 2°C
  • Potentially large excess-cost of transitional climate policies;drastically rising carbon prices for delayed action(as compared to the “efficient” path)
  • Burden sharing debate due to global (public) good nature of climate protection may become substantially more critical due to “foregone action”
slide5

Transition to Long-Term Climate Policy

Dimensions

  • Time horizon: “window” of long-term horizon
  • Regional coverage: global versus subglobal
  • Key sectors: agriculture, primary energy sectors, electricity, transport, etc.
  • Policies: market-based (e.g. cap and trade regimes -sectoral/regional), command & control (e.g. technology-specific policies)
  • Instruments to represent policies (taxes/subsidies, permits, standards)
slide6

Possible Transitional Climate Policies

  • Cap&Trade Policies(CPB: Post 2012 AnnexB – trading with and without US participation)
  • Carbon Tax Policies(e.g. Stiglitz-Proposal)
  • Technology Scenarios(e.g. AP6-type aggreements)
  • Domestic Policy Priorities
  • “Leaders” moving ahead (“L20”)(ZEW: L20 climate scenario)
  • Other transitional climate regimes…
slide7

Example – A Group (“L20“) Moving forward

Key idea of L-20 approach

  • 160-Nation bureaucracy obstructs effective negotiation process
  • Leverage on negotiation outcomes by focusing on “key countries” – at least initially

Countries

  • Intersection of 20 largest countries by GDP AND emissions AND population (USA, Japan, Russia, Brazil, Mexico, China, India, Indonesia, EU)

Secenarios

  • Absolute emission constraints but Cap & Trade
  • Dimensions of analysis
    • Emission allocation rules (equity criteria)
    • Participation (Global coverage versus Leaders only)
slide8

Beyond-2012 – “L20” Scenario Specification

Allocation rule

ega

Egalitarian

Entitlement based on population

atp

Reduction based on GDP

Ability to pay

ppa

Reduction based on Emissions

Polluter pays

Participation

Global“L20”-regions only; (or “L20” until 2030)

Global emissions ceiling set at 30 Gt ofCO2 from 2015 onwards

slide9

Emission Reduction versus BaU

Leaders

(in case of L20)

Global

slide10

Aggregate Welfare – L20 “for ever” versus Global

Welfare Implications (% HEV from BaU)

slide11

ega

atp

ppa

L20 as Transition – Switch to Global after 2030

Welfare Implications (% HEV from BaU)

slide12

Conclusions

  • Delayed action may induce large excess-cost of transitional climate policies
  • Burden sharing debate may become substantially more critical due to “foregone action”
  • Example: “L20” - Leadership of a group of large countries
  • Egalitarian allocation rule: Leaders (“L20” countries) prefer leadership to global coverage
  • Ability-to-pay and polluter-pays: global application of allocation rule makes “Leaders” group better off than leadership
  • Leadership appears less costly (to the Leaders) if restricted to transitional phase
slide14

Objectives

  • Framework for consistent assessment of climate policy designs:
    • Trade-off analysis between political feasibility (“bottom-up”) and long-term efficiency (“top-down”)
    • Suitable for cost-benefit and cost-effectiveness approach
  • Illustrative quantitative simulations:
    • Efficient achievement of long-term temperature targets (benchmark)
    • Excess costs of transitional scenarios
slide16

BaU until 2030

Kyoto

„Efficient Path“

Delayed Action: Carbon Price

slide18

Overview of Scenarios

General settings:

  • Time horizon: 2030
  • Absolute emission constraints

Cap & Trade

  • “Where“-flexibility

N.B.: Regions without “restrictive” cap obtain BaU emissions!

Reference scenario (“doing-nothing case”):

  • BaU: Business-as-Usual reference scenario (DOE/IEO)

Dimensions for Beyond-2012 climate policy architectures:

  • Emission allocation rules
  • Regional coverage of commitment coalition
slide19

Aggregate Welfare Implications (% HEV from BaU)

Scenario-Switch to Global coverage after 2030

 Costs for Leaders substantially reduced