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The Costs and Value of Climate Change: A Strong Sustainability Approach

This article discusses the costs and benefits of climate change mitigation strategies, with a focus on the concept of "strong" sustainability. It explores the economic impacts of limiting carbon dioxide concentrations and compares the costs of climate change against the costs of cutting fossil fuel usage. The analysis includes estimates from various economists and scientists, highlighting the potential economic damages and the need for cost-benefit analysis in climate policy.

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The Costs and Value of Climate Change: A Strong Sustainability Approach

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  1. Vom Preis des Klimaschutzes und vom Wert der Erde Kosten-Nutzen-Analyse und das Konzept der ‘starken’ Nachhaltigkeit in der Klimapolitik Mittwoch, 18. April 2007 ETH Zürich Dr. Ottmar Edenhofer

  2. Cost-Benefit-Analysis

  3. Source: Edenhofer, Lessmann et al. 2006 Mitigation Costs with ITC

  4. Economists trying to guess the ultimate costs of limiting carbon-dioxide concentrations…most estimates are at the low end – below 1 %. The Economist September 9th 2006, p. 9 Sir Nicholas has tried to assess the future costs of climate change…and has set them against the costs of cutting fossil-fuel usage enough to stabilise carbon-dioxide concentration in the atmosphere. His answer to the second part of his calculation is fairly uncontroversial. The Economist November 4th 2006, p. 14

  5. Natural Scientists Kemfert-high Stern Review Environmental Scientists Nordhaus In % of GDP Kemfert-low Social Scientists Tol Temperature Increase Economic Damages in % of GDP Source: OECD (2003) and Kemfert (2004)

  6. Natural Scientists Kemfert-high Stern Review Environmental Scientists Nordhaus In % of GDP Kemfert-low Social Scientists Tol Temperature Increase Economic Damages in % of GDP Source: OECD (2003) and Kemfert (2004)

  7. Cost-Benefit Analysis Losses BAU: GWP - 0.84% / 8.5% (2175-2195) Losses CBA: GWP - 0.8% / 1.8% (2050) ; Cons. - 1.2% / 3.3%(2050)

  8. Stern‘s Welfare Function = Welfare = Consumption = Intragenerational Equity = Pure Rate of Time Preference

  9. Stern‘s Welfare Function = Welfare = Consumption = Intragenerational Equity = Pure Rate of Time Preference

  10. Stern‘s Welfare Function = Welfare = Consumption = Intragenerational Equity = Pure Time Preference Rate

  11. Comment: Ethical Duality Both parameters determine the overall investment rate i in a simple Ramsey model: = Labour Productivity = Capital Income Share = Population Growth

  12. Investment Rate and Ethical Duality Intergenerational Inequality Inequality between Rich and Poor a = 5 %, n = 1 %, = 30 %

  13. Investment Rate and Ethical Duality Intergenerational Inequality Inequality between Rich and Poor Equality a = 5 %, n = 1 %, = 30 % Inequality

  14. The Mitigation Gap ‘Business as Usual’ Emissions Reduction

  15. Mitigation Costs and Induced Technological Change

  16. What is an Energy System?

  17. EJ/a Coal PC Biomass Combined Heat-power Solar energy Natural Gas NGCC Wind energy Hydropower Nuclear LWR Geothermal energy Electricity production (business as usual scenario) Source: Edenhofer/Lueken 2007

  18. Hard Coal: Global Distribution of Reserves & Resources 2,078 Gt = scaling factor 1 Global Reserves: 728 Gt Source: BGR (2005), Reserves, Resources and Availability of Energy Resources 2005

  19. Brown Coal: Global Distribution of Reserves & Resources 434 Gt = scaling factor 1 Global Reserves: 207 Gt Source: BGR (2005), Reserves, Resources and Availability of Energy Resources 2005

  20. Extraction Costs for Fossil Fuels

  21. Extraction Costs for Uranium

  22. Extraction Costs for Uranium

  23. The Nuclear Energy Sector in REMIND Uranium Ore TNR Fresh fuel Thermal Reactor TNR fuel production Electricity TNR Spent fuel TNR direct disposal TNR Spent fuel TNR reprocessing ILW t&s ILW ILW Depleted uranium Recycled uranium Plutonium conditioning HLW t&s Plutonium HLW HLW LLW T&s LLW LLW intermediate storage FNR reprocessing FNR Spent fuel FNR Spent fuel FNR direct disposal Terminal storage FNR Fresh fuel Fast Reactor FNR fuel production Electricity

  24. EJ/a Electricity production (450 ppm Scenario) Coal PC Biomass Combined Heat-power Natural Gas NGCC with CCS Solar energy Natural Gas NGCC Wind energy Hydropower Nuclear LWR Geothermal energy

  25. EJ/a Electricity production (450 ppm scenario with nuclear power phase-out) Energy costs due to nuclear power phase-out will increase by 4.6 % Coal PC Biomass Combined Heat-power Natural Gas NGCC with CCS Solar energy Natural Gas NGCC Wind energy Hydropower Nuclear LWR Geothermal energy

  26. Additional costs due to nuclear phase-out (mitigation costs with nuclear phase-out minusmitigation costs without nuclear phase-out ) relative cost increase (%) learning rate of solar energy floor costs of solar energy ($/kW) Default values for solar energy: learning rate 0,2 – floor costs 1000 $/kW

  27. Biomasse: Potential and its utilisation

  28. Menschliche Eingriffe in die BiosphäreGegenwärtige Aneignung der globalen Netto-Primärproduktion (HANPP) Haberl et al. (2006) Natürl. Veget. (GtC/yr) Aktuelle Vegetation Veränderte Vegetation Ernte / Entnahme Feuer HANPP Total Rückflüsse 65.5 59.2 6.3 7.2 1.1 14.7 1.5 100% 90% 10% 11% 2% 23% 2% Menschliche Eingriffe = 270 EJ/yr (kalorisch) (inkl. 35-55 EJ/yr Bioenergie) Bioenergie-Projektionen bis 2100: 400 EJ/yr = 7-9 GtC/yr

  29. Comparative Advantage of Renewables

  30. Bioenergy Potential of Europe(15% of Primary Energy Consumption in 2030) EEA, 2006

  31. Anteil der Emissionen nach Sektoren im Jahr 2000 Stern Review, 2006

  32. EU Commission: An Energy Policy for Europe Climate Protection 2° C - 450ppm Security of Supply Competitiveness Curb Emissions • 20% reduction EU emissions • by 2020 • 30% reduction industrialised • nations and EU 2020, if • negotiatable • 60-80% reduction target for • industrialised nations until 2050 • 20% share renewables in EU • primary energy by 2020 • 20% improvement in • energy efficiency 2020 • 10% share biofuels 2020 • 12 large CCS plants in EU 2015 • Reform and extend EU ETS • A European Strategic Energy • Plan (SET-Plan) Diversify and Stabilise Energy Imports Liberalize EU Energy Markets • Ownership unbundling • energy transmission • Stronger regulation • energy markets • Expand trans-european • energy grids • Energy Charter • EU-Russia • Launch North-Africa-EU • energy partnership • Establish EU strategic • gas reserve

  33. Source: IEA

  34. CO2 Market Fossil Power Plant Fossil Power Plant CO2 Price Electricity Efficiency Renewable Energy Carbon Capturing and Sequestration The Carbon Market Cap: Reduced Emissions CO2-Emissions Auction CO2 Certificates CO2 Certificates Grand- fathering! buy sell Grid Households Industry

  35. Verkehrssektor in den Emissionshandel!

  36. Global CO2 Market CO2 Price Carbon Central Bank Efficiency Renewable Energy CCS (Global) Technology Initiative A Bretton Woods Carbon Market CO2-Emissions EU ETS RGGI California

  37. EUA Closing Prices, historical The graph shows daily bid-offer close EUA Dec 2007 prices from December 2004 (blue line) in the OTC market, and EUA Dec 2008 from Sept 2005 (red line). The data was updated 15 March 2007 32€ 28€ 24€ 20€ 16€ 12€ 8€ 4€ 0€ Apr 05 Aug 06 Aug 05 Oct 06 Dec 05 Feb 05 Jun 05 Oct 05 Dec 05 Feb 06 Apr 06 Jun 06 Dec 06 Feb 07 Source: Point Carbon

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