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-TAXBEN - WP5 Design of Transitional Climate Policy

-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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-TAXBEN - WP5 Design of Transitional Climate Policy

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  1. -TAXBEN - WP5 Design of Transitional Climate Policy Christoph Böhringer, Ulf Moslener ZEW, Mannheim, Germany • Assessment Framework • Transition to Long-Term Climate Policy

  2. 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:

  3. 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

  4. 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”

  5. 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)

  6. 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…

  7. 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)

  8. 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

  9. Emission Reduction versus BaU Leaders (in case of L20) Global

  10. Aggregate Welfare – L20 “for ever” versus Global Welfare Implications (% HEV from BaU)

  11. ega atp ppa L20 as Transition – Switch to Global after 2030 Welfare Implications (% HEV from BaU)

  12. 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

  13. Backup

  14. 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

  15. Emission Reduction Trajectories

  16. BaU until 2030 Kyoto „Efficient Path“ Delayed Action: Carbon Price

  17. L-20 Summary Statistics

  18. 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

  19. Aggregate Welfare Implications (% HEV from BaU) Scenario-Switch to Global coverage after 2030  Costs for Leaders substantially reduced

  20. Aggregate Welfare Implications (% HEV from BaU)

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