Title: Presentation for Aiesec Development Leadership day Is there a role for leadership in mitigating climate change?
1Presentation for Aiesec Development Leadership
dayIs there a role for leadership in mitigating
climate change?
29 September 2014
2Overview
- 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
3Overview
- 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
4Overview
- 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
5The economics of climate change
6Costs and Benefits of Climate Change Mitigation
7Likely Range of Temperature Paths
8How 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
9DICE model
6
4
damage in of output
IPCC estimate
2
0
global mean temperature increase oC
1
2
3
4
5
source Nordhaus (2013)
10What 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
11Cost 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
12The 2?C-Target Implications for Kazakhstan
13The 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
14How 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
15What 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
16What Does It Mean for Kazakhstan?
150 135 50
85 mio barrels a day
17What 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
18What Does It Mean for Kazakhstan?
source World Energy Outlook 2012
19(No Transcript)
20Benefits from Cooperation
21Benefits 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
22The 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
23Cost of Emission Reduction
from Finus/van Ierland/Dellink (EG 2006)
24Collective action and Leadership
25Leadership in International Cooperation
26Does 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
27Lessons 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
28The 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
29Is 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
30Leadership at National Level
31What 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
32And 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
33Problems 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
34Leadership in Business
35How 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
36Attracting 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
37Leading 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
38Final 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
39Sources
- 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