1. Implementing the Paris Agreement: The transition towards a low-carbon economy. Strategies, implications and an effective policy mix
Council Meeting on the transition to a »green economy« under the President of the Republic of Kazakhstan and chairmanship of Mr. Karim Massimov, Prime Minister of the Republic of Kazakhstan
Dr. Felix Chr. Matthes
Astana, 4th July 2016

2. After the Paris Agreement
Where do we (all) stand? (1)
With the landmark Paris Agreement (PA) coordinated efforts to avoid dangerous climate change have broadened significantly
Kyoto Protocol to the UNCCC covers 12% of global emissions
submitted INDCs cover more than 95% of global emissions
With the mechanisms of the PA the perspective of internationally coordinated climate policy has been significantly expanded
holding the increase of global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels (Art. 2.1a)
global peaking of greenhouse gas emissions as soon as possible and rapid reductions thereafter (Art. 4.1)
balance between anthropogenic emissions by sources and removals by sinks of greenhouse gas emissions (= carbon neutrality ≈ decarbo- nisation) in the second half of this century (Art. 4.1)

3. After the Paris Agreement
Where do we (all) stand? (2)
The PA establishes a long-lasting & dynamic bottom-up process
nationally determined contributions (NDCs) are key instruments, reflecting the highest possible ambitions and communicating all information necessary for clarity, transparency and understanding (Art. 4.2, 4.3, 4.8)
technical reviews of the NDCs, their implementation and achievements will be carried out, also identification of areas of improvement (Art. 4.12)
updates of NDC every 5 years (Art. 4.8)
each successive NDC will represent a progression (Art. 4.9)
every 5 years there will be a global stocktake (for the first time in 2023) to assess the collective progress towards the purpose of the PA and the long-term goals (Art. 14)
NB: recent (I)NDCs represent emission reduction efforts that are not sufficient to meet the long-term goals (1.CP21 para 17)
The Paris Agreement goes beyond mitigation (these issues are outside the scope of this presentation)

4. Medium- and long-term climate policy pathways
What do we know (on an aggregate level)? (1)
The Paris Agreement requires the parties
to build a strong analytical capital for developing strategies and implementation measures
to ensure consistency between short-/medium-term implementation measures and medium-/long-term strategies and goals
The national circumstances differ widely between the parties but some key strategic lessons can be drawn from the existing body of modelling and empirical evidence
all sectors need to contribute to greenhouse gas emission mitigation
5 strategic pillars are essential
energy & resource efficiency needs to be enhanced significantly
decarbonisation of the power sector is a key enabling option
electrification of the transport sector and heat markets is crucial
timely infrastructure upgrades and roll-outs are important
triggering innovation and its timely diffusion is key for the longer- term perspective

5. Medium- and long-term climate policy pathways
What do we know (on an aggregate level)? (2)
We don’t know the details of a decarbonised economy in the longer term but we can describe its structural characteristics even in the long term
(much) more capital-intensive: strong investment (signal) needed
(much) more coordination-intensive: more decentral elements
(much) more infrastructure-dependent: robust strategies, goals (and longer-term visions) needed
not necessarily much more expensive: macroeconomic costs typically <<5% GDP over the coming decades, if more expensive at all
structurally different: in technical, economic (macroeconomic structures, distributional aspects!) and participatory terms – requiring clear and smart adjustment and transition strategies
Timing issues are crucial – three areas are of special relevance for strategies, policies and measures
long-lived capital stocks (investments/disinvestment cycles)
infrastructures
innovation

6. A comprehensive and well-designed policy mix
needs comprehensive and well-designed analysis
Pricing policies will be complementary: Locked (and homogeneous) potentials: regulations, targeted incentive programs etc. as primary mechanisms
Pricing policies will be complementary: Innovation-intensive potentials: regulations, targeted incentive programs etc. as primary mechanisms
Pricing policies will be complementary: Potentials related to long- lived capital stocks and respective windows of opportunities: regulations, targeted incentive programs etc. as primary mechanisms
Pricing policies will be complementary: Potentials creating high infra- marginal rents and significant distributional effects (NB: market design failures): regulations, targeted incentive programs etc. as primary mechanisms
Pricing policies will/can work and be effective & efficient: Matured/competitive (and heterogeneous) potentials, incremental innovation: ETS, tax or other mechanisms
NB: pricing policies for heavily infrastructure- related potentials?!
Öko-Institut IEA

7. Medium- and long-term climate policy pathways -
Key elements of smart & robust policy mixes
Carbon pricing is an absolutely fundamental element
building business cases for matured, low- and medium-price options
preferably responsive to increasingly volatile (energy) market environments (controlling quantities)
providing certainty to investors (long-term cap trajectories and/or price control or at least elements of price control)
depending on national circumstances and potentially on sectors: carbon pricing as primary or complementary policy mechanism (e.g. depending on effective price sensitivities)
Complementary policies will be needed
to remove barriers to locked potentials
to consistently use the windows of investment/disinvestment opportunities (especially for long-lived capital stocks)
to overcome market design failures & ensure infrastructure compatibility
to drive innovation and foster a strong modernisation approach for a future-proof economy in climate policy

8. Thank you for your attention!
Dr. Felix Chr. Matthes
Energy & Climate Division
Berlin Office
Schicklerstraße 5-7
D Berlin
twitter.com/FelixMatthes