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HARALD WINKLER

Workshop at the 2009 Climate Change Summit Wednesday 4 March 2009. Economics of climate change Context and concepts related to mitigation. HARALD WINKLER. Energy Research Centre University of Cape Town. Climate change – an integrated framework. Source: IPCC 2001.

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HARALD WINKLER

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  1. Workshop at the 2009 Climate Change Summit Wednesday 4 March 2009 Economics of climate change Context and concepts related to mitigation HARALD WINKLER Energy Research Centre University of Cape Town

  2. Climate change – an integrated framework Source: IPCC 2001

  3. Environmental issue, rising emissions Deeply economic issue – at heart of energy economy “Climate change presents a unique challenge for economics: it is the greatest and widest-ranging market failure ever seen” (Stern Review 2006) Climate change economics

  4. History: minerals-energy complex • Complex comprising mining, minerals processing, the energy sector, and associated industries (Fine & Rustomjee 1996) • Coal • ¾ of TPES • > 90% of electricity • ‘cheap’ and inefficient • Particular challenge for mitgation … • … while increasing access to affordable eneryg services • Short-term: energy efficiency • Medium-term: change fuel mix

  5. Future: low-carbon future • Redefine competitive advantage • from attracting energy-intensive sectors • to building a new advantage around climate-friendly technologies and systems

  6. Towards climate policy • LTMS strategic option of ‘Use the Market’ • Polokwane resolution on climate change • Treasury work on environmental fiscal reform • Theme of ‘putting a price on carbon’ • Question is ‘how?’

  7. Carbon and carbon markets • Markets are a means, not an end • May be efficient, but not good at equity • Carbon cycle is global – problem of common property management • How to manage • Multi-laterally – UNFCCC, but also other scales • Price vs quantity • Pure regulation – standards • Pure price – tax • Combination – cap-and-trade

  8. Conceptual distinctions Economic instruments Regulatoryinstruments GHG emission standards Carbon tax Direct Cap and trade Fuel input tax Indirect Building standards Greenor white certificates

  9. Some broad questions • What would the distributional implications of different economic instruments be? • What are the implications, including costs and benefits, of choosing to use an economic instrument for mitigation? • How could different instruments be combined • How responsive is the system (and its parts) to various economic instruments for mitigation? (elasticity) • What would a consistent and effective approach to energy-intensive sectors, in order to increase efficiency, encourage fuel switching and eventually diversify products • What are the key design elements that need to be considered to design the best instrument for mitigation in SA? • What supportive measures might be needed to implement a set of instruments? Implications of existing policy? What legal and institutional arrangements could we build on?

  10. Thank you Energy Research Centre University of Cape Town Environmental Policy Research Unit, University of Cape Town Genesis Analytics www.erc.uct.ac.za

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