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Presentation for Aiesec Development Leadership day Is there a role for leadership in mitigating climate change?

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Title: Presentation for Aiesec Development Leadership day Is there a role for leadership in mitigating climate change?


1
Presentation for Aiesec Development Leadership
dayIs there a role for leadership in mitigating
climate change?
  • by Gerald Pech

29 September 2014
2
Overview
  • Leadership is great in business
  • The leader gets rewarded and society benefits
    from their innovative contributions
  • So does leadership also help in tackling climate
    change?
  • Here things are more protracted

3
Overview
  • Leadership in international negotiations
  • here the leader does not necessarily gain the
    most from being leader
  • and it is unclear whether leadership greatly
    changes the outcome
  • Leadership at the national level
  • here leadership would be particularly helpful but
    leaders are not particularly encouraged to lead
  • Leadership in business
  • here some incentives seem to work in the right
    direction, but not a central role for tackling
    climate change

4
Overview
  • 1 The Economics of Climate Change
  • a. Costs and Benefits of Mitigating Climate
    Change
  • b. The 2?C-Target Implications for Kazakhstan
  • c. Benefits from Cooperation
  • 2 Leadership
  • a. Leadership in International Cooperation
  • b. Leadership at National Level
  • c. Leadership in Business
  • 3 Final Thoughts

5
The economics of climate change
6
Costs and Benefits of Climate Change Mitigation
7
Likely Range of Temperature Paths
8
How Can the Economic Effects of Climate Change be
Assessed?
  • Temperature ranges as scientists tell us
  • There is risk of catastrophic climate change
  • The economist computes output loss at different
    temperature levels
  • Figuring out impact on different industry sectors
  • agriculture and fisheries as the main losers
  • coastal real estate another
  • and extrapolating share of industries in future
    economic output

9
DICE model
6
4
damage in of output
IPCC estimate
2
0
global mean temperature increase oC
1
2
3
4
5
source Nordhaus (2013)
10
What Is Missing?
  • only market or near-market sectors
  • loss of species (-)
  • greater risk of natural disasters (-)
  • health effects (-)
  • accessibility of artic sea routes ()
  • Difficult to quantify

11
Cost of Mitigating Climate Change?
  • Some measures would not cost anything but rather
    save costs
  • improved home insulation, energy saving light
    bulbs
  • 15 of CO2 emissions in US fall in this category
  • Increasing energy efficiency of household
    appliances, power generation, transport
  • Rebalancing energy mix
  • Offset projects
  • Carbon capture
  • Post-combustion removal from atmosphere

12
The 2?C-Target Implications for Kazakhstan
13
The 2?C-Target
  • Cancun agreement (United Nations Climate Change
    Conference 2010) says 2? C above pre-industrial
    level
  • Is it optimal?
  • Probably not too far off the mark
  • If it would be done in an economically efficient
    way, limiting the temperature rise to 2.3? C
    would be optimal, says Nordhaus
  • But if countries incur unnecessary costs it might
    be reasonable to allow more, say 4? C

14
How Is It Achieved?
  • Two thirds of already discovered carbon assets
    could not be commercialized before 2050 (World
    Energy Outlook 2012)
  • or carbon capture technology used at implausible
    level
  • to have a 50 of meeting the target
  • which would require a limit of 450 parts of CO2
    equivalent per million particles in the
    atmosphere hence 450 scenario

15
What Does It Mean for Kazakhstan?
  • Production of fuels has to become more energy
    efficient some of this might result in cutting
    costs, but overall producing fuels will become
    more costly
  • avoiding flaring gas from oil drilling sites, oil
    tar sands of Canada, carbon pricing (?)
  • Demand will be directed towards less carbon
    intensive energy sources
  • demand for carbon fuels will decrease

16
What Does It Mean for Kazakhstan?
150 135 50
85 mio barrels a day

17
What Does It Mean for Kazakhstan?
  • As demand for carbon fuels decrease
  • Prices for carbon fuels will come down
  • Making the most costly kinds of crude
    uneconomical
  • But Kashagan should be ok

18
What Does It Mean for Kazakhstan?
source World Energy Outlook 2012
19
(No Transcript)
20
Benefits from Cooperation
21
Benefits from Cooperation
  • Different countries have different marginal
    abatement costs
  • Depending on how much mitigation efforts they
    already have undertaken
  • A small group of countries would find it
    infeasible to cut emissions sufficiently to have
    a global impact
  • Yet the economics of international cooperation
    have some strange properties

22
The Economics of Cooperation
  • Everyone can be made better off if they all join
    in the effort to mitigate
  • But for each country it is tempting to take the
    free rider position
  • Similar to the well-known prisoners dilemma
  • That only some countries cooperate and others
    stay on the sidelines may be a stable outcome
  • the threat of stopping to cooperate does not work
  • stronger medicine is needed to encourage
    widespread participation

23
Cost of Emission Reduction
from Finus/van Ierland/Dellink (EG 2006)
24
Collective action and Leadership
25
Leadership in International Cooperation
26
Does Leadership Promote International Cooperation?
  • Does president Obamas use of administrative
    powers to cut carbon emissions encourage Chinese
    reciprocity?
  • China has recently taken action against the
    emissions
  • But mainly because citizens complain about local
    impact of emissions
  • At the international level, Obamas action may
    just make it less likely that China moves

27
Lessons of the Kyoto Protocol
  • Kyoto, negotiated 1997, in force 2005-2012
  • Of the main emitters, only EU, Japan and Eastern
    European transition economies have joined
  • Kazakhstan ratified in 2009

28
The Enforcement Problem
  • Even when countries join, there is no guarantee
    that they keep their pledges
  • Signatories miss out on their targets
  • EC target - 8 on base year 1990
  • compliance gap in 2007 6.5
  • Canada target -6
  • compliance gap 31.1

29
Is There a Silver Bullet?
  • Punishment for countries which do not join or
    which do join but renege on their pledges
  • Could take form of a carbon tariff on imports
    from those countries which might be acceptable
    under WTO rules
  • If a country allows unrestricted emissions this
    might be considered a price dumping policy
    under WTO rules and entitle others to retaliate
  • As of yet untested!
  • But WTO itself has looked more febrile recently

30
Leadership at National Level
31
What National Leadership Can Achieve
  • President Obamas use of administrative powers to
    cut carbon emissions certainly moved the US in
    the right direction
  • There has been the argument that many countries
    would benefit from reducing carbon dioxide
    emissions
  • by reducing local environmental effects and
    earning tax revenue

32
And Kazakhstan?
  • Highest emissions of CO2 per capita in Europe and
    Central Asia
  • Still heavily subsidizes (in the end consumption
    of) carbon fuels
  • Yet started to introduce a market for trading
    carbon emission allowances
  • and requires all companies with more than 20,000
    t CO2 equivalent emissions in 2012 to use
    allowances

33
Problems to Overcome
  • Politicians are probably interested in political
    costs (of emission abatement) rather than
    economic costs
  • Voters whose livelihoods are directly threatened
    by mitigation efforts (oil workers in Oklahoma)
    are vocal and effective opposition
  • Under my administration, America is producing
    more oil today than at any time in the last eight
    years. (Obama, cit. in McKibbins, 2014)
  • Is there a grand bargain at national level?
  • Easier in post-industrial societies and easier in
    Europe than the US

34
Leadership in Business
35
How Is Business Affected?
  • As target of government regulation
  • or as potential target of regulation
  • incentive to pre-empt government action by
    announcing voluntary measures
  • but also make adjustments to expected future
    government policies
  • As competitor for costumers and employees
  • both tend to value a companys reputation for
    environmentally responsible behavior

36
Attracting Qualified Employees
  • A reputation for ecologically and socially
    responsible behaviour is vital for an employer to
    attract graduates
  • for 15 of German college graduates it is the
    most decisive factor in their choice of employer
  • for 67 it is one decisive factor

37
Leading in the Battle for Hearts and Minds
  • Sir Richard Branson of Virgin Airlines and his
    pledge to make 10 bn available for research
  • But other companies made pledges at last weeks
    UN event
  • Incentives work in the right direction
  • If your competitor makes a pledge, it increases
    incentives for you to make a pledge
  • So this is an example where leadership works

38
Final Thoughts
  • Whilst leadership in business clearly has the
    effect of motivating followers to make pledges
  • voluntary contributions are unlikely to solve the
    problem on their own
  • Companies are only indirectly motivated and
    keeping pledges is a different matter
  • In the end, tackling climate change is the job of
    governments, not private businesses
  • There, national leadership would be helpful
  • But international leadership has its limits

39
Sources
  • Nordhaus, D., The Climate Casino, Yale UP 2013
  • Klein, Naomi, This Changes Everything
  • Krugman, P., Gambling with Civilization, NY
    Review of Books 7 November 2013 Link
  • McKibben, B., Will We Lose the End Game, NY
    Review of Books 10 July 2014 Link
  • IPCC website Link
  • IEA, World Energy Outlook, 2012 Link
  • OECD, Energy Subsidies and Climate Change in
    Kazakhstan, ENV/EPOC/EAP(2013)7 Link
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