Managing Global Climate Change European perspective and prognosis for the COP meeting in Copenhagen,

1
Managing Global Climate Change - European
perspective and prognosis for the COP meeting in
Copenhagen, December 2009

• Frank J. Convery, Honorary President, European
  Association of Environmental and Resource
  Economists and Heritage Trust Professor of
  Environmental Policy, University College Dublin
  (frank.convery_at_ucd.ie)
• At University of California Berkeley, 223 Moses
  Hall
• Center on Governance and Institutions. Institute
  of Government Studies (IGS)
• 1600 Tuesday, August 18, 2009

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Key References

• Part 1
• Available at http//ec.europa.eu/environment/clim
  at/pdf/future_action/part2.pdf
• Part 2.
• Available at http//ec.europa.eu/environment/clim
  at/pdf/future_action/part1.pdf

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What Copenhagen is about

• The United Nations Climate Change Conference
  (COP 15) meets December 7-18, 2009 in
  Copenhagen to agree on what will follow the Kyoto
  Protocol, which runs to 2012.

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Four Essentials - Yvo de Boer, executive
secretary of the United Nations Framework
Convention on Climate Change (UNFCCC)

• Industrialised countries how much reduction in
  emissions?
• 2. How much are major developing countries such
  as China and India willing to do to limit the
  growth of their emissions?
• 3. How is the help needed by developing
  countries to engage in reducing their emissions
  and adapting to the impacts of climate change
  going to be financed? 4. How is that money
  going to be managed?

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Context

• Global greenhouse gas emissions have continued to
  rise since the Kyoto Protocol was agreed in 1997,
  and ratified in 2005, with most of the growth
  arising in developing countries.

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Table 1. GDP and Tonnes of CO2 per capita, CO2
intensity by energy mix and GDP, and percentage
Change in Total GHG Emissions, 1990-2005.
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Scientific Context

• Emerging scientific view that
• Climate change is already underway, and may
  happen sooner and more dramatically than was
  anticipated earlier, mostly on the basis that
  negative feedback warmer oceans absorbing less
  CO2, shrinking ice caps reflecting less heat away
  etc. has been underestimated.
• The most negative effects will be experienced by
  societies with limited or no resources to adapt
  to the change, with water scarcity and flooding
  being particularly notable impacts.

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US Context

• US did not ratify the Kyoto Protocol on the
  basis that
• Its implementation would damage the US economy
• It did not involve major action by developing
  countries.
• With the opting out of the US, the European Union
  became the global leader in securing ratification
  of the Kyoto Protocol.
• But the Obama administration is now playing a
  leading role in the evolution of global policy
  post Kyoto, and in particular on engaging with
  China.

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European Context 1

• Europe the incubator of the most horrific wars
  and pogroms in human history, driven by hatreds
• European Union - never again war
• But the impulse to global leadership and soft
  power ways of doing so remains..

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Mutually beneficial interdependence a key idea

• Donne, John (1573-1631). .(Devotions upon
  Emergent Occasions).
• No man is an Island, intire of itself every man
  is a piece of the Continent, a part of the maine
  if Clod be washed away by the sea, Europe is the
  less, as well as if a Promonorie were there, as
  well as if a Mannor of thy friends or of thine
  owne were any man's death diminishes me, because
  I am involved in Mankinde And therefore never to
  send to know for whom the bell tolls It tolls
  for thee.

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Wislawa Szymborska

• See how efficient it still is,
• How it keeps itself in shape-
• Our centurys hatred.
• How easily it vaults the tallest obstacles.
• How rapidly it pounces, tracks us down.
• Since when does brotherhood
• draw crowds?
• Has compassion
• ever finished first?
• Does doubt ever really rouse the rabble?
• Only hatred has just what it takes.

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European Context 2

• 1. Supportive Popular sentiment
• Climate Change in happening
• That it can be very damaging
• Danube Floods
• Heat waves
• Abraham Lincoln With public sentiment, nothing
  can fail without it, nothing can succeed.
• 2. Farmers are special...
• Pliny the Elder in regard to their Roman
  counterparts over 2000 years ago
• The agricultural population, says Cato, produces
  the bravest men, the most valiant soldiers, and a
  class of citizens the least given of al to evil
  designs.

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European Context 3

• European Union has
• Small budget which goes mainly to farmers and
  for regional development.
• Very restricted capacity to raise taxes
  unanimous agreement of 27 Member States required
  carbon tax initiative (1992-97) failed.
• Strong regulatory powers, and ability to create
  domestic emissions trading schemes
• Single Market free movement of people, goods,
  finance, investment etc.

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European Achievements if you build it they will
come

• Philosophy
• Developing countries will only come on board if
  rich countries move and are seen to move
  effectively.
• Policy evolves step by step.
• Quantified reduction Targets to be achieved by
  specified Dates
• Limit rise to 2C
• 1990 base line
• medium target for developed countries 30
  reduction
• 2050 Long term target for developed countries
  80 reduction
• Carbon price to reflect scarcity essential
• Carbon tax - failed
• European Union Emissions Trading Scheme (EU ETS)
  succeeded.

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European Achievements 2

• 1. Kyoto ratification in 2005
• 2. Creation of carbon price via European
  emissions trading scheme (2005 indefinite)
• 3. Free allocation to 2012, then auctioning of
  allowances.
• 4. Animation of emission reduction projects in
  developing countries via CDM and use of ensuing
  credits to comply with trading obligations
• 5. By 2020 Legally binding reductions
  (20-30)in emissions in the non trading sectors
  (agriculture, residential and commercial,
  transport, light industry), renewables (16),
  energy efficiency (-20), carbon capture and
  storage (demonstration projects)

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Three categories of country

• Responsiblity intensifies as income grows
• Developed OECD
• Developing 1 rapidly growing
• Developing 2 very poor mainly Africa, parts
  of Asia

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Developed Countries - Targets for Selected
Jurisdictions, by 2020, using weighting factors
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Appropriate Mitigation Action by Developing
Countries

• Reductions below business as usual of 15-30 are
  needed by 2020
•  
• National Low Carbon Development Plans to 2050,
  with milestones for 2020 are the heart of the EU
  proposals.

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National Low carbon development Plans - features

• Reductions below business as usual of 15-30 are
  needed by 2020
•  Plans should identify  
• Win-win opportunities need capacity building,
  policy assistance, awareness heightening
• Further measures if targeted support financial
  and technical were made available
• Expected emission reductions

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Registry, and Monitoring, Reporting and
Verification (MRV)

• Enter actions in an international registry - show
  the mitigation benefits, using transparent and
  robust measurement, reporting and verification
  methods.
• Assessed by independent panel which will focus
  on
• Feasibility
• Proposals for further action and needs.

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Strong Support for Sectoral Approaches steel,
cement, transport, power generation etc.

• The following three options are identified, with
  the costs of mitigation and financial capability
  a part of all three options
• Baseline and credit reductions below a
  specified baseline rewarded to value of reduction
  achieved.
• National governments agree certain measures, and
  financial, technical and logistical support is
  provided to deliver these measures.
• Bottom up approach for target setting determine
  technical potential of GHG reductions in each
  sector on the basis of high performance
  benchmarks (Japanese the main proponent of this
  approach)

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Focus particular attention on achieving actions
and technologies for energy efficiency

• Seen as the most effective means of achieving
  substantial reductions at relatively low cost in
  both developed and developing countries.
• Power generation (combined cycle gas turbines,
  supercritical coal plants), and architecture of
  generation, transmission and distribution (smart
  grids, super conducting electric lines, power
  storage. Big co-benefits in terms of reduced air
  pollution and improved health.
• Industry shift to secondary iron and steel,
  reduce clinker content of cement, use more
  recycled paper and glass, more sustainable
  building materials and insulation.
• Final energy demand huge gains in heating and
  lighting, generalised use of low temperature
  solar thermal (domestic hot water)
• Transport improvement in power train
  efficiency, lower weight, change in fuel mix

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Research and development are essential

• International Energy Agency
• Over the last two decades, public energy RD
  spending in developed countries has dropped
  dramatically, on average to below half of 1984
  levels in 2004
• Current levels of investment are very unlikely to
  achieve the sort of step change in technology
  that is needed to deliver the sought outcomes.
  Even a doubling of current levels of investment
  may not be enough. It concludes in its executive
  summary of the "2008 Energy Technology
  Perspectives" that 'While details are difficult
  to establish, independent studies have suggested
  that public sector RDD needs to increase by
  between two and ten times its current level.'

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Technology the ultimate reality check

• Richard Feynman, (Nobel Prize winning physicist)
  For a successful technology, reality must take
  precedence over public relations, for nature
  cannot be fooled.
• And emissions trading guarantees a payoff..
• Edison Anything that won't sell, I don't want to
  invent

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European view on RD

• A major boost to research, development and
  demonstration of low-carbon and adaptation
  technologies in all economic sectors and
  activities.
• Build on the needs identified in national
  low-carbon development strategies and
  assessments.
• Fund capacity building, science and
  technology-oriented cooperation, reducing market
  access barriers on environmental goods and
  services and improved global research
  coordination.
• At least double energy-related RDD by 2012 and
  increase it to four times its current level by
  2020, with a significant shift in emphasis
  towards low-carbon technologies, especially
  renewable energy sources
• Research on impacts, adaptation and other
  mitigation options to climate change need to be
  strengthened at the international level.

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European Action on R, DD

• Implementing the European Strategic Energy
  Technology Plan (SET-Plan).
• Create one of its first Knowledge and Innovation
  Communities on climate mitigation and adaptation
  as part of the European Institute on Innovation
  and Technology (EIT), in line with the broader
  RDD policy objectives of the EU
• Under the revised EU ETS, 300 million allowances
  are set aside to help stimulate the construction
  of carbon capture and geological storage
  demonstration plants as well as innovative
  renewable energy technologies.

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Developing and linking Cap and trade Emissions
Schemes Developed countries

• Adam Smith Man is the only animal that makes
  bargains one dog does not change bones with
  another dog.
• A global carbon market can and should be built by
  linking comparable domestic emissions trading
  systems. This will promote cost-effective
  emission reductions.
• EU should reach out to other countries to ensure
  an OECD-wide market by 2015 and an even broader
  market by 2020.

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Trading and Developing Countries Sectoral
trading as a bridge

• The Commission aims for the development of a new
  carbon market mechanism at sectoral level as an
  intermediate step towards the introduction of cap
  and trade systems. Such a new mechanism and a
  reformed CDM allows countries to participate in
  the global carbon market according to their
  different responsibilities and capabilities...A
  sectoral carbon market mechanism could be focused
  on key sectors where emissions are increasing
  most rapidly or that are part of competitive
  world markets and where data collection is
  relatively simple and straightforward.

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Aviation and Maritime Transport

• The EU has included CO2 emissions from aviation
  in its emissions trading system from 2012.
• If at the end of 2010 there is no agreement in
  ICAO and IMO, emissions from international
  aviation and maritime transport will be counted
  towards national totals under the Copenhagen
  agreement which will ensure comparable action by
  all developed countries.

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Project based Clean Development Mechanisms (CDM)

• In the medium term CDM should only be continued
  for countries without a national low carbon
  development plan.
• i.e. Confine to Least Developed Countries (LDCs)
• A priority will be increasing energy efficiency
  in the electricity sector.
• Sectoral Agreements a bridge for more developed
  countries.

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Financing the reduction of emissions - needs

• Requirement Net global incremental annual
  investments of 175 billion by 2020 required.
• More than half will have to be invested in
  developing countries, including the forestry
  sector.
• Investment in areas such as energy efficiency
  and low-carbon technologies will spur innovation
  and growth and enhance energy savings and
  security.
• Investments in reduced deforestation will
  safeguard global biodiversity and ensure local
  long-term sustainable development.
• National low-carbon development strategies will
  have to provide
• Estimate of additional net investment costs for
  mitigation
• Viable financing and mitigation policy options to
  leverage such investments.

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Finance - sources

• Public funding and the Use of carbon crediting
  mechanisms.
• Options
• 1. Offsets from sectoral agreements linked to
  trading schemes
• 2. Agreed amounts based on polluter pays
  principle (emissions) and ability to pay (GDP) -
  emission rights could be withheld for those
  countries that do not provide the agreed amount.
• 3. Certain percentage of the allowed emissions
  would be set aside from each developed country.
  These emissions are then auctioned to governments
  at the international level. This percentage could
  increase progressively in line with the per
  capita income
• 4. Global instrument to address international
  aviation and maritime transport (e.g. the
  proceeds from auctioning allowances under a
  global cap and trade system applying to those
  sectors).
• 5. Additional public revenue that will be
  generated by auctioning allowances in the EU ETS.
  From 2013. Member States could use some of this
  revenue to honour their international financial
  obligation under the future climate change
  agreement

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Governance of international financial flows for
climate change

• Sources of funding for adaptation and mitigation
  are likely to be multiple, coordination and
  cooperation will need to be improved.
• A high-level forum on international climate
  finance should bring together key decision makers
  from the public and private sectors and
  international financial institutions. It would
  regularly review funding availability and
  expenditure and provide recommendations for
  improvements.
• This forum should cooperate closely with the
  Facilitative Mechanisms for Mitigation Support.

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Adaptation

• Support to the most vulnerable and the poorest
  (LDCs)
• All countries - comprehensive national adaptation
  strategies.
• Improving the tools to define and implement
  adaptation strategies including
• methodologies and technologies for adaptation,
  capacity building
• strengthened role for the UNFCCC process by
  mobilising stakeholders, including international
  organisations
• ensuring a more coordinated approach to risk
  management/disaster risk reduction.

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Funding the Costs of Adaptation

• Adaptation costs in all developing countries
  23-54 billion per year in 2030.
• Early measures will generate a net benefit to the
  economy, e.g. measures to improve water use
  efficiency in areas that will suffer from water
  shortages.
• Multilateral insurance pool to cover disaster
  losses should be explored to complement existing
  funding mechanisms
• Based on the issuance of bonds, the proposed
  Global Climate Financing Mechanism (GCFM) would
  allow early spending on priority climate-related
  actions. These funds would in particular allow
  for an immediate reaction to urgent adaptation
  needs with a high return such as disaster risk
  reduction.

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Land Use Land Use Change and Forestry (LULUCF)

• Key mechanism
• Global Forest Carbon Mechanism (GFCM) to achieve
  REDD (Reduced Emissions from Deforestation and
  forest degradation)  
• Funded by Developed countries would have to
  contribute a fair share of finance to the Global
  Forest Carbon Mechanism (GFCM).
• Operating Principles
• Eligiblity - Developing countries that ratify
  the post-2012 climate agreement
• Focus GFCM - REDD and support
  capacity-building activities
• Financial support from GFCM provided on the
  basis of a countrys performance towards REDD
• Beneficiary countries need to have effective
  forest governance structures in place and to
  respect the rights of forest-dependent people
• Nationwide implementation involving the entire
  forestry sector will be required
• GFCM will aim to secure the highest co-benefits
  possible (e.g. by protecting biodiversity and
  combating poverty)
• Emission cuts must be assessed, monitored and
  accounted for at national level, with independent
  verification of the reductions achieved.

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Funding for the GFCM

• A major portion of EU funding for GFCM from
  proceeds from the auctioning of emission
  allowances under the EU Emissions Trading System
  (EU ETS).
• Estimated that if 5 of auctioning revenue were
  made available to GFCM, this would raise 1.5 to
  2.5 billion in 2020

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The Great Recession and Copenhagen history is
always a surprise....

• And all economic and emission projections
  wrong....
• An economic forecaster is like a cross-eyed
  javelin thrower. He doesnt win many accuracy
  contests, but he does keep the crowds attention.

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Short term impacts

• Will meet Kyoto obligation by 2012 (-8) and 2020
  obligations (-20 or -30) much easier.
• Carbon price in EU ETS has fallen, but extent
  buffered by fact that allowances can be banked up
  to 2020.

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Medium term impacts and Actions

• Reduced investment in existing low carbon
  technologies more difficult to fund everything,
  including, e.g. Wind power
• Reduced revenues available to governments
  revenues from EU ETS action likely to be used to
  make up growing public sector deficits .
• Reduced support for transfers to LDCs, research
  and development etc.

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The US and Europe

• European Pride that we have led in spite of the
  truth of Edward Mortimers somewhat jaded view
  that A nation is a group of people united by a
  common dislike of their neighbours, and a shared
  misconception about their ethnic origins
• Relief and angst in equal measure as US moves to
  centre stage....
• Quiet nostalgia for Bush regime......
• Cavafy (Waiting for the Barbarians)
• And now, whats going to happen to us without
  barbarians?
• They were, those people, a kind of solution.
•  

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Europe and California

• Some key interfaces
• Focus on energy efficiency
• Low carbon development Plans as fulcrum for
  identifying and financing priorities
• Independent monitoring, reporting and
  verification (MRV) as central requirement
• Innovation and enterprise and RDD.

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Thanks for your attention
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