1. Michael Obersteiner IIASA Regional Carbon Budgets: From methodologies to quantification. Beijing, China, 15-18 November 2004 Coupling Carbon Processes and Economics

2. Overview Motivation to manage the carbon cycle –Financial Analyst´s point of view Scenarios of what needs to be done –What is the biospheric contribution More trade offs than synergies

3. Effective compliance with Art. 2 UNFCCC!?

4. Risk analysis… the Chartist Nokia EricssonSiemens

5. Ericsson Nokia

6. Buy Gold

7. Data is from the climate system!!! GISP and IPCC data, own calculations

8. Concentration s Growing No Analogue Level&speed High volatility Abrupt Chang e

9. The obvious number!? 371, ….550,….750…? Which number would you pick…..?

10. Gold from Science? IPCC for the 4 th assessment emission scenarios that lead to concentrations of <450 are not planned No low emission climate runs No benchmark

11. Climate Risk Management - Ostriching? Climat e Stabilization target is a SOCIAL CONSTRUCTION –Plausibility of stabilization targets Little preparation

12. How to stabilize atmospheric CO 2 concentrations Use less energy –Improve energy efficiency –Life style changes –Stabilize population Use other forms of energy –Natural gas instead of coal –Renewables –Nuclear Capture and store carbon –From fossil fuels and/or biomass (in energy conversion plants) –From the atmosphere (in trees, soils or in CO 2 capture facilities)

13. Spatial Distribution of GDP Important inputs to the spatially explicit forestry and regional agricultural model Necessary information for vulnerability, adaptation and impact assessment

14. The cost to stabilise the atmosphere Source Azar & Schneider, 2002. Ecological Economics

15. The figure shows the various sources of GHGs and the mitigation achieved from the baseline in the A2 mitigation scenarioThe figure shows the various sources of GHGs and the mitigation achieved from the baseline in the A2 mitigation scenario Energy represents the top sector for potential mitigationEnergy represents the top sector for potential mitigation Sinks contribute significantly in reduction of forest CO2Sinks contribute significantly in reduction of forest CO2 A2-Stabilization Scenario (Fossil Intensive)

16. CO 2 -concentration 350 ppm, with capture

17. Herzog et al Scientific American, February 2000. with structural traps 130 – 500 Gton C 30 – 650 Gton C Enhanced oil recovery 20 – 65 Gton C Grimston et al (2001). Carbon storage possibilities

18. Biophysical –Climate, CO 2 etc… –Land Cover –Relief Socioeconomic –Population –GDP –Forest sector Forest and agri growth modeled 1. LUC 2. C sequestration/GHGs 3. Bio4BE production Land values LU competition Management options applied InputOutputModeling

19. National Economic Models Scenario Market Regional Farm Type Models Farm ModelsStand level Models Regional Forest Models Model for GHG Response to Management Common Database and Standards Common Database and Data Structure Harmonized System Boundaries IPCC GPG and /or FGA Accounting Consistent Baseline Assumptions Joint Catalogue of GHG Mitigation Measures Uniform Validation Criteria Agreed Sustainability Constraints Common IT Standards Standard Scenario Assumptions and Story Lines Joint Vision INTEGRATED POLICY FRAMEWORK Georeferenced Database

20. EPIC simulates many processes: Weather: simulated or actual Hydrology: evapotranspiration, runoff, percolation, 5 PET equations,... Erosion: wind and water, 6 erosion equations,... Carbon sequestration: plant residue, manure, leaching, sediment,... Crop growth: NPK uptake, stresses, yields, N-fixation,... Fertilization: application, runoff, leaching, mineralization, denitrification, volatilization, nitrification,... Tillage: mixing, harvest efficiencies,... Irrigation and furrow diking,... Drainage: depth,... Pesticide: application, movement, degradation,... Grazing: trampling, efficiency,... Manure application and transport,... Crop rotations: inter-cropping, weed, competition, annual and perennial crops,... on a daily time step

21. Geography of Analysis

22. PICUS 2.0

23. Overview of the Regional Agri-Model Data (FADN) - Yields - Area - Variable costs - Producing activities - Size of farms - Altitude - … Other sources - Emissions coefficients - Soils characteristics - Fertilizer uses and prices - … Typology 15 countries, 101 regions 734 farm-types Model inputs - Prices - Technical parameters - CAP-related parameters Calibration 734 models Maximize gross margin Subject to : - Technical constraints - Policy constraints Model output - Optimal area - Livestock numbers - Animal feeding - Net emissions Estimation

24. Basic Modeling Processing Markets Feed Mixing Other Resources AUM Grazing Labor Pasture Land Natl. Inputs Forestland Water Livestock Production Crop Production Export Domestic Demand Import Biofuel/GHG Demand Forest Production Cropland

25. Mitigation Strategy Equilibrium 0 100 200 300 400 500 020406080100120140160180200 Carbon price ($/tce) Emission reduction (mmtce) CH4 N2O Ag-Soil sequestration Afforestation Biofuel offsets

26. Afforestation in B1

27. Carbon Sequestration Total Carbon Supply: B1/A2

28. Bioenergy Supply for 2000-2100 B1 (Price < 6$/GJ)

29. Land Use Change until 2100 for B1 Intensity map: (affected) ha x C-uptake Existing forest Afforestation Deforestation

30. Wrap-up Slumbering Beast Much lower stabilization targets are NECESSARY AND PLAUSIBLE The Problem is currently with the fossil fuels and a large(st) potential of the solution is in the Agri&Forestry&Bioenergy sector.

31. Winning is not easy Carbon price (tax or cap-and-trade system) Energy efficiency standards Support technology development Agi&Forestry market reform Minimize associated social and environmental costs

33. THANK YOU! 371, ….550,….750…?

34. Carbon permit Electricity Pulp / paper Biomass Energy Market Policy Climate Policy Sector Policy / Technology Land use Policy

35. Modular Commitment Strategy CO 2 El BM \pi

36. Diversity of Approaches Engineering models & Biophysical Model Equilibrium Approaches (Static – Dynamic) Spatially Explicit and Multisectoral Risk and Uncertainty Augmented

37. Goal Contribute to integrate sinks in ETS –GPG (accounting, certification, verification) –Cost competitiveness and potentials –Transaction Cost Contribute to policy formulation –CAP –Energy –Climate –Forestry –Clean Air –… Policy Integration