Gabriel Bachner - Thomas Kerekes 1 A Goal for Climate-Change Policy The Stern-Review Chapter 13

Gabriel Bachner - Thomas Kerekes „The science and economics both suggest that a shared international understanding of what the objectives of climate-change policy should be would be a valuable foundation for policy.“ (Stern-Review, p. 288) If policy makers around the world differ:  Distribution of efforts inequitable and inefficient

Gabriel Bachner - Thomas Kerekes

Gabriel Bachner - Thomas Kerekes different types of goals are not inconsistent

Gabriel Bachner - Thomas Kerekes Any goal should be  closely related to the ultimate impacts  able to adjust over time  easy to monitor  clear, simple and specific A goal for atmospheric concentration would satisfy these requirements!

Gabriel Bachner - Thomas Kerekes How to select a stabilisation level? Marginal Benefits:  Reflect expected impact on wellbeing of achieving a lower temperature change and the reduced risk of extreme events. Marginal Costs:  Reflect the need to accelerate the introduction of measures against climate change Uncertainty => only a range is possible

Gabriel Bachner - Thomas Kerekes

Gabriel Bachner - Thomas Kerekes stabilisation level should not be above 550 ppm CO 2 e stabilisaton at 450 ppm or below very difficult and costly to reach The Stabilisation goal should be between ppm CO 2 e

Gabriel Bachner - Thomas Kerekes Asymmetry  Not possible to reach a lower level, if new information is collected, that implies that CC is worse than expected  Possible to allow the concentration level to rise, if new information is collected, that implies that CC is less worse than expected

Gabriel Bachner - Thomas Kerekes Uncertainty & Asymmetry => A more demanding (not less) long-term policy should be set! Policy debate should seek a level between the lower and upper limit of the range. It is important that during this process initial actions to reduce emissions are not delayed.

Gabriel Bachner - Thomas Kerekes The need for strong and urgent action Case for strong action determined in 3 ways: 1. Bottom-up approach Chapters 3,4,5,8,9 2. Model-based approach Chapters 6,10 3. Price-based approach

Gabriel Bachner - Thomas Kerekes Bottom-up Just comparing damages without mitigation with the costs of mitigation 2. Model-based Comparison + taking account of interactions in climate system and global economy

Gabriel Bachner - Thomas Kerekes Bottom-up and Model-based approach: „The benefits of strong action clearly outweigh the costs.“ (Stern-Review, p. 285) Modest net costs today can earn big return later on! See red line in Fig and 13.2

Gabriel Bachner - Thomas Kerekes

Gabriel Bachner - Thomas Kerekes

Gabriel Bachner - Thomas Kerekes Price-based Comparing marginal costs of abatement with the social costs of carbon (SCC) SCC: impact on expected wellbeing by emitting an extra unit of carbon, at any particular time on the present value (at that time).

Gabriel Bachner - Thomas Kerekes SCC depends on: - Size of stock allready in atmosphere - Uncertainties and discount rates - Global Warming Potential (how long in the atmosphere and when emitted?) SCC expected to increase over time, because stock is expected to grow! One extra unit C: more damage at the margin the later it is emitted

Gabriel Bachner - Thomas Kerekes Wide range of estimates: Tol (for DEFRA-Study): $ 29/tCO2 (mean) PAGE2002 (Stern-Review): $ 85/tCO2

Gabriel Bachner - Thomas Kerekes => Difficult to apply policy, driven by that approach Possible would be: Pigou-Taxation on GHG-intensive goods and services

Gabriel Bachner - Thomas Kerekes DEFRA vs. Stern-Review aspects that tend to push SCC of Stern-Review:  full „expected utility“ and risk aversion  greater weight to „non market“ impacts  low pure time preference  equity weighting  uncertainty about climate sensitivity  amplifying feedback risks

Gabriel Bachner - Thomas Kerekes Costs of mitigation Extra mitigation costs of choosing a lower goal are small

Gabriel Bachner - Thomas Kerekes A reduction from 750ppm to 650ppm is cheaper than from 550ppm to 450ppm

Gabriel Bachner - Thomas Kerekes Optimal mitigation Temperature reduction Nordhaus and Boyer (1999) 557 ppm to 538 ppm (in 2100) 2.42 °C to 2.33 °C Tol (1997)-4 °C to °C Manne et al. (1995) 800 ppm to 750 ppm (in 2100) 3.85 °C to 3,6 °C

Gabriel Bachner - Thomas Kerekes Problems: Uncertanties amplifying feedbacks tipping points Manne et al. (1995): higher discount rate Tol (1997): relatively low cost of climate change Nordhaus and Boyer (1999): low and slow economical growth

Gabriel Bachner - Thomas Kerekes EU: temperature change less than 2 °C reduced risk of climate change impacts and avoid thresholds effects some critical statements for the 2 °C limit  hard to reach  Ambitious target

Gabriel Bachner - Thomas Kerekes „Policy should ensure that abatement efforts intensify over time. Emissions reductions should be driven to the point where their marginal costs keep pace with the rising social cost of carbon.“ (Stern-Review, p. 302)

Gabriel Bachner - Thomas Kerekes The social cost of carbon will be lower with a sensible climate change policy than under „business as usual“

Gabriel Bachner - Thomas Kerekes H... High BAU trajectory S... Stabilisation trajectory E... Emissions/year Benefits of CC-Policy: Annual Costs of Abatement (appr.): Benefits less Costs (Benefits of CC-Policy): BAU- Emissions Difference between SCC of the two trajectories x

Gabriel Bachner - Thomas Kerekes The Role of adaptation can reduce the negative impacts of future climate change no direct prevention Mitigation prevents climate change and damage costs Mitigation  reducing cost of climate change over the next years

Gabriel Bachner - Thomas Kerekes „In the longer run, both adaptation and mitigation will be required to reduce climate-change damage in cost- effective and sustainable ways.“ (Stern-Review, p. 306)

Gabriel Bachner - Thomas Kerekes The three approaches can be used to cross- check conclusions from adopting any one of them. „...spending somewhere in the region of 1% of gross world product on average forever could prevent the world losing the equivalent of % of gross world product for ever.“ (Stern-Review, p. 285)

Gabriel Bachner - Thomas Kerekes Thanks for your attention

Gabriel Bachner - Thomas Kerekes QUESTIONS 1. What are the three aproaches to „examine strong and urgent action“ and what are their characterstics?

Gabriel Bachner - Thomas Kerekes Why is it important, that we find a shared international understandig of what the objectives of climate-change-policy should be?

Gabriel Bachner - Thomas Kerekes What are the advantages of choosing the atmospheric concentration level as a goal?

Gabriel Bachner - Thomas Kerekes It is only possible to find a range for the target of the atmospheric concentration level and not a specific value. Why?

Gabriel Bachner - Thomas Kerekes What is the main message of the model based estimates for the increase in mitigation costs from reducing a stabilisation goal?

Gabriel Bachner - Thomas Kerekes Why is the stabilisation level at 450 ppm CO 2 e today hardly to reach? Which points are important to get a lower emission level?

Gabriel Bachner - Thomas Kerekes The EU adopted an objective to limit global average temperature change to less than 2°C. Is that possible and what are the arguments of the critic?

Gabriel Bachner - Thomas Kerekes What are the differences between mitigation and adaptation?