Introduction

1. Rio, Kyoto, Copenhagen, Cancun, Durban ..... what's next? A skeptical view on climate negotiations. Carlo Carraro President, University of Venice Vice Chair, IPCC WG III Chairman, Scientific Advisory Board, FEEM

2. Introduction • Climate change problem is an important but difficult • challenge for human beings/our societies • Climate change control is a global public good • Long term dimension of the problem • Pervasive uncertainties on the physical and economic dimensions of the climate change problem 1

3. International Negotiations • In 1997 all UNFCCC countries (189) approved the Kyoto Protocol that entered into force in 2006. The Kyoto Protocol however has a minor impact on GHG concentrations and temperature • At the G8 meeting in L’Aquila, then in Pittsburgh at MEF, and finally in Copenhagen at COP XV, main countries agreed to stabilise temperature increase at 2°C (no more than 2°C...) • Same principles have been reaffirmed in Cancun at COP XVI. However, G8/G20 countries failed to deliver an international agreement on policy and measures to achieve such target.

4. 3. The arithmetics of climate The present level of concentrations is about 430 ppm CO2-eq Uncertainty of the emissions-temperature nexus is relevant 3

5. 2 °C target … some basic numbers • According to IPCC, in order to keep temperature increase below 2°C with good probability, concentrations of GHGs should not exceed 380-390 ppm CO2-eq. • If we accept the possibility of overshooting the target, the level of concentrations can be higher but not greater than 450 ppm. • The present level of GHG concentration is 430 ppm CO2-eq (390 CO2 only), well above the 380-390 ppm level necessary to make a temperature increase above 2°C unlikely. • 450 ppm CO2-eq will be reached within six years, whatever world leaders decided in L’Aquila and in Copenhagen. • If 550 ppm CO2-eq are reached, there is little chance to stay below 2°C.

6. Reality check…. • If we assume that emissions will halve by 2050, declining at a constant pace from 2010, concentrations of CO2 in the atmosphere will be 40 ppm higher in 2050. • This implies that all GHG concentrations will reach 470 ppm CO2-eq in 2050, assuming that emissions of non CO2 gases are heroically cut to zero starting from 2010. • The emissions path envisaged by MEF leaders is thus in line with a 550 ppm target by the end of the century. Hence, more than 2 degrees...

7. Even a 550 ppm target would bevery difficult to achieve… • Given the projected dynamics of world population and economic growth, the objective of limiting concentrations below 550 ppm CO2-eq implies that average per capita emissions in the second half of this century are to be reduced from about 2 to about 0.3 tC per year. • In other words, the world will have to emit not more than today’s India’s average – quite a significant reduction for most industrialised countries (US average per capita emissions are about 6 tC) and for countries that aim at similar lifestyle standards. • Just to provide another benchmark, 0.3 tC is the amount of GHGs emitted by an individual flying – one way – from the EU to the US East coast!

8. Required emission reductions

9. If China and India don’t reduce their own emissions, there is no chance to reach even the 550 ppm target BaU Targets OECD countries India Other LDCs China

10. 9. The climate equation in brief Emissions of Greenhouse Gasses (carbon dioxide, methane, ...) remain in the atmosphere for decades or even centuries Natural absorption is very slow for carbon dioxide Temperature is a function of concentrations, not of emissions In order to achieve the most ambitious targets (1.5 - 2.0*C) it is necessary to reduce the stock of GHGs: negative emissions Emissions Concentrations Climate Temperature 9

11. 10. GHGs emissions Fonte: IPCC AR4 (2007). Fonte: IPCC AR4 (2007). 10

12. We need global action 11

13. What’s behind the increase in emissions? …strong pressure on energy supply Increasing role of renewables … but the energy mix will be dominated by fossil fuels if their negative environmental effects are not internalized through appropriate climate policies Source: WEO 2009

14. Increase will be large particularly in developing countries Source: WITCH model

15. Energy poverty map About 1,8 million people without access to electricity …

16. Population growth Three more billion people on Earth….

17. 16. Energy and development - 2 Carraro and Massetti (2010) 16

18. 17. CO2 emissions and development Carraro and Massetti (2010) 17

19. Why it is hard to build an international agreement? 18

20. 19. Why it is hard to build consensus? Strong inertia of the climate system requires to take costly measures now, to enjoy benefits one century from now: intergenerational coordination problem GHGs emissions get perfectly mixed in the global atmosphere: international coordination problem Large uncertainty on cost of mitigation The most ambitious targets appear highly unrealistic: we are about to pass the level of concentrations that would prevent the attainment of the +2ºC target with high probability 19

21. 20. Act now or later? 20 KAL's cartoon, Jun 17th 2010 | From The Economist print edition

22. 21. The importance of participation 21 Carraro and Massetti. www.voxeu.org, 3 September 2009.

23. 22. The cost of mitigation • Strong increase of costs as the target becomes more stringent Fonte: RECIPE Project (2009); Discounted consumption loss; 3% discount rate. Concentrations level of only CO2. 22

24. 23. Delayed action If there is delay, or non-coordinated action costs increase considerably Delaying action beyond 2030 makes it impossible to achieve the 450ppm CO2 only target. Source: RECIPE Project (2009); Cost of stabilizing CO2 concentrations at 450 ppm, with different hypothesis of international cooperation. 23

25. 24. The technology puzzle • Problems in the deployment of key carbon-free technologies increase costs Source: RECIPE Project (2009); cost of stabilizing CO2 concentrations at 450 ppm, with different hypothesis on the availability of technologies. 24

26. The incentives to participate in a global agreement 25

27. 26. Climate change impacts The impacts of climate change are expected to vary widely across regions. Developing countries would be more affected than their developed counterparts Uncertainties are large, however, as reflected by the wide variance in damage estimates across studies 26

28. 27. Abatement costs - carbon tax 27

29. 28. Abatement costs - carbon tax 28

30. 29. Free Riding Incentive on the GC 29

31. Towards a bottom-up architecture? 30

32. Future challenges: • More energy, to meet an increasing energy • demand • A “clean” energy, to control climate change • A more equally distributed energy to favour • economic development in poorer region • and thus global economic growth

33. Obstacles: • High financial needs for investments in the • energy sector • Insufficient and weak governance of global • issues implies unavoidable climate change • (more than 2 degrees C) • Resources are also needed for investments in • adaptation to climate change

34. Investments in the energy sector to stabilize GHG concentrations at 450 CO2 eq. 33

35. Investments to adapt to climate change Source IIED (2009) About 175 billions per year

36. R&D investments Source: WITCH model Roughly 50 Blns a year of energy innovation investments in the next two decades  for a total of about 650 billions/year… 35

37. Investments: some conclusions Climate policy will induce higher investments in the energy sector (with respect to the BaU scenario) Low-carbon world requires a new energy mix: conventional fossil fuels power plants are substituted by nuclear, coal power plants with CCS and renewable sources Large investments have to be diverted – in a relatively short time frame – towards complex and risky technologies Significant innovative efforts are required especially outside the power sector 36

38. Green stimulus of national recovery package Ratio of green stimulus of national recovery packages, absolute volumes in bn€ The green share of the European recovery plan (58.7% ) is high wrt other countries’ package 37 Source: GEF 2009, based on Bernard et al. 2009; data from HSBC 2009

39. Conclusions Both the increased energy demand and the climate challenge require additional investments in the energy sector At the same time, policy signals are necessary to divert investments that would be undertaken anyway The development and application of green technologies can be an opportunity for Europe: it does not require additional investments but a reshuffle of their mix Net positive effect on employment Investments in energy innovation and in climate adaptation are also necessary Carbon markets can be an important source of revenue to finance part of these investments

40. Thank you!

41. 40. Title The realism of negotiations’ objectives. Can the 2 degree targets actually be achieved? Is the focus on a global agreement meaningful? The incentives for different countries or regions to participate in a climate agreement The financial resources needed to stabilize GHG concentrations The time horizon of climate negotiations and the likelihood of a climate agreement in the next decade The possibility to move away from traditional global negotiations, by focusing on a bottom-up domestic policy-driven approach The necessity to invest more resources on adaptation to climate change 40