Global Climate Policy Scenarios for 2030 and beyond

1. Global Climate Policy Scenarios for 2030 and beyond Juan Carlos Ciscar, Peter RussEuropean Commission, JRC, IPTS IX Bled Forum on Europe7 March 2008, Bled

2. The Institute for Prospective Technological Studies (IPTS) • The IPTS, based in Seville, is one of the 7 scientific institutes of the European Commission's Joint Research Centre (JRC) • IPTS mission: to provide support to the EU policy-making process by researching science-based responses to policy challenges, with both a socio-economic and a scientific or technological dimension • Energy and climate change group, C&S Unit of IPTS

3. Overview 1. Policy framework Objectives of the modelling/foresight exercise 2. The POLES model Assumptions and Outcome 3. The GEM –E3 model Assumptions and Outcome 4. Conclusions

4. 1. Policy Framework

5. Multilateral negotiations on climate change policy • 1992: United Nations Framework Convention on Climate Change (UNFCCC) • 1997: Kyoto Protocol targets for industrialised countries (EU15: minus 8% in 2008-2012 compared to 1990) • 2001: US withdraws from Kyoto Protocol & Gothenburg summit • 2002: all Member States & Community ratified the Kyoto Protocol • 2005: Kyoto Protocol into force

6. Question of Interest March 2004 European Council request: analyse costs and benefits of EU post-2012 climate policy IPTS made part of the analysis of scenarios using numerical models • “Winning the battle against climate change” EC Communication (2005) • “Limiting Global Climate Change to 2 degrees Celsius. The way ahead for 2020 and beyond” EC Communication (2007) March 2007 European Council decision: 20 % GHG emission reduction in 2020 (compared to 1990); 30% if international agreement Bali COP of UNFCCC

7. The scenarios are described in the report: http://ftp.jrc.es/eur23032en.pdf

8. Modelling Approaches POLES GEM-E3

9. 2. The POLES Model Assessment

10. The POLES Modelling system • Partial equilibrium model of the world energy system • Recursive dynamic simulation up to the year 2050 • Endogenous energy demand and prices • 47 world regions / countries • Explicit technology modelling for many sectors • 30 power generation technologies • 8 industry sectors + transport sector + residential and services + agriculture

11. Assessing the mitigation potential: objectives • Technically feasible vision on how to reach the 2 degrees target, an ambitious emission development, for the EU and rest of the world • Global cost/technology estimates for mitigation scenarios until 2030 • Options for viable long-term technology paths identified beyond 2030 up to 2050 • Realistic role of the carbon market and the use of flexible mechanisms defined. • Identify options for policy instruments that engage all key players on the basis of their responsibilities and capabilities

12. POLES Model: Scenario assumptions Global GHG emissions peak before 2020 and reduce to 10% above 1990 levels by 2030. Global GHG emissions continue to decrease up to 2050 Multi-gas and introduction of Carbon Capture and Storage Global Emission trading market develops gradually in power and energy intensive sectors Non Trading sectors experience policies that lead to emission reductions

13. Results: Global Participation • Emissions in developed countries on a continues descending path. • Internal emissions should be at -20% by 2020 and – 60% by 2050 compared to 1990 • Developing countries emissions may grow but at lower rate than baseline. • Need to peak also between 2020 and 2025

14. Results, cost of action: role of the global carbon market Carbon market decreases investment costs by a factor of 3. • Carbon price is substantial but evolves gradual

15. Result, cost of action: How to bring in developing countries? The economic impact of internal effort and trade seem to be equitable Size of bubble corresponds to the amount traded

16. Sectoral contribution to global emission reductions (POLES)

17. Technologies that can reduce emissions from energy (POLES)

18. 3. The GEM-E3 Model Assessment

19. Motivation of CGE modelling • Market economies Prices as fundamental signals for agent decisions Interrelations between all markets/sectors • Quantitative tools for the assessment of the effects (through price changes) on the economy of • Policies e.g. trade, sectoral (energy, environment, agriculture) affecting market prices • Shocks e.g. oil price change • Quantification of direct and indirect abatement costs • Costs within energy sector • Costs in rest of the sectors • Effects through trade flows

20. The GEM-E3 World Model (1/2) • GEM-E3 World is a multi-sector, multi-country CGE model • Calibrated to 2001 (GTAP 6 data) • Dynamic model (recursive dynamics) • Extensive environmental dimension (GHG and local pollutants) • Wide variety of policy instruments (standards, taxes, permits, at World and regional level, different allowance scheme)

21. The GEM-E3 World model (2/2) • 18 World regions: EU27, Other European countries, Former Soviet Union, Mediterranean countries, USA, Canada, Australia and New Zealand, Japan, China, India, rapid growing Asian countries, Rest of Asia, Mexico and Venezuela, Brazil, Rest of Latin America, Middle East, South Africa, Rest of the World) • 18 sectors: agriculture, 4 energy branches, 9 industrial branches, 4 market and non market services Baseline scenario calibrated with POLES baseline

22. GEM E3 scenario assumptions Grouping of the countries/regions: • Developed countries (group 1): • AUZ, JPN, CAN, USA, EU27, Other EUR, FSU • High income developing countries (group 2): • Mexico and Venezuela, Mediterranean and middle east, Rapid growing Asian Countries • Developing countries (group 3)

23. GEM E3 scenario assumptions Targets calibrated to ensure similar emission trajectory as in POLES model runs. Emission change targets compared to 1990

24. GEM E3 scenario assumptions • Allocation of the target: • Allocation within a group by grandfathering • Policy instrument: emission trading • Energy intensive sectors: a World ETS, i.e. an international emission trading system for these sectors between all groups contributing to the target • Other sectors: a domestic trading system for household and sectors not included in the World ETS • Use of flexible mechanisms is possible depending on the scenarios but limited to the energy intensive sectors • The Kyoto target are respected for participating countries

25. GDP Change Results: Cost of action is consistent with global economic development

26. Welfare Change Results: household welfare

27. Conclusions • Quantitative modelling of abatement costs to meet 2 degrees target • Global participation of countries in the GHG reduction effort is indispensable for realising the 2 degrees target pathway • Energy savings throughout all sectors are one of the key elements in the reduction scenario • The use of ‘flexible mechanisms’ is central for limiting the cost of an ambitious climate change policy • There is a feasible pathway for limiting the global temperature increase to 2 degrees (e.g. annualised change in world GDP in 2030 of -0.19% )

28. Ongoing work GEM-E3 and POLES are continuously updated Linking POLES with a LULUCF model Detailed emissions from agriculture Link GHG mitigation models with air pollution models. For instance the Asia GAINS project.

29. All documents at:http://ec.europa.eu/environment/climat/future_action.htm