Prof. Dr. Ottmar Edenhofer, PIK Munich, 28 th May th Munich Economic Summit Adapt, Mitigate, or Die? Chair: Economics of Climate Change Research Domain Sustainable Solutions Co-Chair of WG III

2 Projections of Global Mean Temperature IPCC 2007 Different Scenarios

3 Tipping Points in the Earth System T. M. Lenton & H. J. Schellnhuber (Nature Reports Climate Change, 2007)

Potential policy-relevant tipping elements that could be triggered by global warming this century, with shading indicating their uncertain thresholds. For each threshold, the transition from white to yellow indicates a lower bound on its proximity, and the transition from yellow to red, an upper bound. The degree of uncertainty is represented by the spread of the colour transition. Burning Embers T. M. Lenton & H. J. Schellnhuber (Nature Reports Climate Change, 2007) Year 2100 range (IPCC 2007)

5 Dangerous Climate Change 5

6 Defining a Division of Labour between Mitigation and Adaptation 6

7 World Map of Wealth Capital stock per person very low low medium high very high Source: Füssel (2007)

8 World Map of Carbon Debt Carbon emissions per person from fossil fuel burning ( ) very low low medium high very high

9 Carbon Dept and Wealth Source: Füssel (2007)

10 550ppm-eq 450ppm-eq 400ppm-eq baseline The Historical Challenge 3 stabilisation targets with different probabilities to reach the 2° goal: 550ppm-eq, 450ppm-eq, 400ppm-eq Negative Emissions

11 Energy Mix of a Decarbonised Future Baseline550ppm400ppm Knopf, Edenhofer et al. (2009) Example: REMIND

12 There is more than one path towards a carbon-free economy MERGE POLES REMIND TIMER baseline 550 ppm 400 ppm E3MG Knopf, Edenhofer et al. (2009)

13 There is more than one path towards a carbon-free economy MERGE POLES REMIND TIMER baseline 550 ppm 400 ppm E3MG  400ppm can be achieved by all models  Different possibilities to reach low stabilisation Knopf, Edenhofer et al. (2009)

14 Risks of Low stabilisation x x xxxxxx 400ppm-eq high biomass potential with all options no nuclear beyond baseline low biomass potential No CCS no renewables beyond baseline Knopf, Edenhofer et al  Limit of ambitious mitigation due to technology failures

15 Source: IMF International Commodities Database

16 Renaissance of Coal

17 The “Infinite” CO 2 Reservoir Edenhofer, Kalkuhl (2009)

18 Architecture of a Global Contract

19 The Classical Pigou Tax Optimal extraction path Suboptimal extraction path (“Green Paradox”) The stock of fossil fuels will be taxed according to: The Pigou tax might be counterproductive: Marginal climate productivity

20 Extraction of resources: Gt CO 2 coal Atmosphere as a deposit: around 1000 Gt CO 2 for the 21 st century Why a CO 2 tax might not work Pigou-Tax: Counterproductive when it is seen by the suppliers as an increasing function of time Taxing Resource Rents: Optimal but difficult to implement Stock-dependent taxes for individual resource owners: Optimal, but high transaction costs Decreasing tax: Politically not feasible Taxing capital income: Impact on the extraction path unclear

21 Transatlantic carbon market Canada ETS Max 550 Mt CO 2 eq Start: 2010? US ETS Max 6.000Mt CO 2 eq Start: ? RGGI ETS 150 Mt CO 2 Start: 2009 Midwestern GHG Accord ? Mt CO 2 eq Start: ? EU ETS 2.000Mt CO 2 Started: 2005 South Africa? Max 450Mt CO 2 eq Start: ? Australia ETS Max 360Mt CO 2 eq Start: 2010 NZ ETS 98 Mt CO 2 eq Started: 2008 South Korea Max 560Mt CO 2 eq Start: 2013? Japan ETS Max 1.300Mt CO 2 eq Start: ? California ETS 400Mt CO 2 eq Start: 2012 Swiss ETS 2Mt CO 2 Start: 2008 WCI ETS 800+Mt CO 2 eq Start: 2012

22 R&D-Investment in Energy Technologies Updated version of IPCC (2007), AR4

23 Reducing Deforestation: Fossil vs. LUCF CO 2 emissions

24 Mitigation and Adaptation 24

25 Architecture of a Global Contract