Towards a Global Deal on Climate Change

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Towards a Global Deal on Climate Change Nicholas
Stern Delhi, 31st March 2008
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Part One

• Risks and Targets

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Projected impacts of climate change
Global temperature change (relative to
pre-industrial)
1C
2C
5C
4C
3C
0C
Food
Falling crop yields in many areas, particularly
developing regions
Falling yields in many developed regions
Possible rising yields in some high latitude
regions
Water
Significant decreases in water availability in
many areas, including Mediterranean and Southern
Africa
Small mountain glaciers disappear water
supplies threatened in several areas
Sea level rise threatens major cities
Ecosystems
Extensive Damage to Coral Reefs
Rising number of species face extinction
Extreme Weather Events
Rising intensity of storms, forest fires,
droughts, flooding and heat waves
Risk of Abrupt and Major Irreversible Changes
Increasing risk of dangerous feedbacks and
abrupt, large-scale shifts in the climate system
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Probabilities (in ) of exceeding a temperature
increase at equilibrium
Source Hadley Centre From Murphy et al. 2004
Currently at 430ppm, rising at 2.5ppm p.a. and
this rate of increase is increasing
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Structure of argument on global mitigation
objectives

• Risk of going above 5C increase are very severe
  e.g. would induce massive movements of population
  including in the sub-continent thawing of
  Himalayan glaciers/ snows with floods/torrents in
  rainy season dry rivers in dry season and loss
  of water from run-off droughts and floods more
  severe cyclones more severe sea-level rise..
• Global deal essential for India
• Stabilisation to 550 or 500ppm CO2e ?buys sharp
  reduction in probabilities of dangerous
  temperature increases relative to BAU
• Global cuts of 30-50 by 2050 required for target
  of stabilisation range 550- 500ppm CO2e implied
  carbon price around 30 per tonne
• Cost of action to get in range looks acceptable
  relative to reduction of risks and damages
  avoided

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Part Two

• Flows and Costs

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Delaying mitigation is dangerous and costly
Source Stern Review
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Reducing emissions requires action across many
sectors
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Cost of action or inaction

• Stern Review examined results from bottom-up (Ch
  9) top-down (Ch 10) studies concluded that
  world could stabilise below 550ppm CO2e for
  around 1 of global GDP. Subsequent analyses
  IEA/IPCC/McKinsey have indicated similar or lower
  figures
• Starting planning now with clear targets and good
  policies allows measured action and keeps costs
  down. Delayed decisions/actions (or slow ramp),
  lack of clarity, bad policy will increase costs
• Associated co-benefits (energy security, reduced
  pollution) and opportunities (innovations, new
  markets)
• Review probably under-estimated emission growth
  (growth of emissions from China particularly)
• Probably under-estimated risks of
  high-temperatures (omitted features in climate
  science modelling) and damages from high
  temperatures (implausible overly linear
  extrapolations)
• Thus magnitude of avoided damages under-estimated

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Part Three

• A Global Deal

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Basic Criteria for a Global Deal

• Effectiveness the scale must be commensurate
  with the challenge
• Efficiency we must keep down the costs of
  emissions reduction
• Equity the rich countries must take the lead

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Commitments percentages

• G8 Heiligendamm global 50 by 2050 (consistent
  with stabilisation around 500ppm C02e)
• California (and US under e.g. Obama/Clinton) -
  80 from 1990 levels by 2050. McCain 65 target
  and has sponsored cap-and-trade bill
• France 75 by 2050 (Factor 4), relative to 1990
• EU Spring Council 60-80 by 2050 and 20-30 by
  2020, relative to 1990
• Germany 40 by 2020, relative to 1990
• India to stay below rich country average per
  capita

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Equity and the GHG reservoir

• Long-term stabilisation at 550ppm CO2e implies
  that only a further 120ppm CO2e can be
  allocated for emission, given that we start at
  430ppm CO2e (or further 70ppm if targeting
  500ppm)
• Can view the issue as the use of a collective
  reservoir of 270ppm (i.e. 550 minus the 280ppm
  of 1850) over 200 years. Over half of reservoir
  already used mainly by rich countries. (i.e.
  150ppm CO2e increase from 280 to 430)
• Equity requires a discussion of the appropriate
  use of this reservoir given past history
• Thus convergence of flows does not fully capture
  the equity story, from emissions perspective
• Equity issues arise also in adaptation, given
  responsibilities for past increases

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Target stocks, history, flows

• Current 40-45 GtCO2e p.a. Current stocks around
  430ppm CO2e pre-industrial stocks 280ppm
• The United States and the EU countries combined
  accounted for over half of cumulative global
  emissions from 1900 to 2005
• 50 reduction by 2050 requires per capita global
  GHG emissions of 2-3T/capita (20-25 Gt divided by
  9 billion population)
• Currently US 20, Europe 10, China 5, India
  1.5 T/capita
• Thus 80 reductions would bring Europe, but not
  US, down to world average. Many developing
  countries would have to cut strongly too if world
  average of 2-3 T/capita is to be achieved. If one
  billion people are around 4 5 T/capita then
  (e.g.) another one billion would have to be
  around 0 1 T/capita
• Requires close to zero carbon electricity and
  surface transport

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Key elements of a global deal / framework (I)

• Targets and Trade
• Confirm Heiligendamm 50 cuts in world emissions
  by 2050 with rich country cuts at least 80
• Rich country reductions and trading schemes
  designed to be open to trade with other
  countries, including developing countries
• Supply side from developing countries simplified
  to allow much bigger markets for emissions
  reductions carbon flows from rich to
  developing countries to rise to 50-100bn p.a.
  by 2030. Reform CDM to operate on wholesale
  level. No aggregate targets until rich countries
  prove credibility

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Key elements of a global deal / framework (II)

• Funding Issues (flows from rich to developing)
• Strong initiatives, with public funding, on
  deforestation to prepare for inclusion in
  trading. For 10-15 bn p.a. could have a
  programme which might halve deforestation.
  Importance of global action and involvement of
  IFIs
• Demonstration and sharing of technologies e.g.
  5 bn p.a. commitment to feed-in tariffs for CCS
  coal would lead to 30 new commercial size plants
  in the next 7-8 years
• Rich countries have caused most of the problem.
  Poor countries suffer earliest and hardest. Rich
  countries to deliver on Monterrey and Gleneagles
  commitments on ODA in context of extra costs of
  development arising from climate change
  potential extra cost of development with climate
  change upwards of 80bn p.a. by 2015

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Implications for India of an effective, efficient
and equitable global deal

• Sharp reduction of risks (economic, security,
  climate) for India
• Cleaner, safer, more biodiverse and more
  sustainable development
• Substantial inflows of funding for move to low
  carbon economy (possibly tens of billions of
  dollars)
• Major transfers of technology
• Substantial resources for adaptation to more
  hostile climate, in context of past rich country
  responsibility for rise in stocks of GHGs

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Part Four

• Possible Role for India

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India steering toward a global deal I

• Insist rich country cuts are at least 80 by 2050
  and they have credible interim targets for 2020
• Explain that proposing equality in flows by 2050
  is a very weak demand given the history
• Explain that those countries (including USA)
  around or above 20 tonnes per capita should be
  cutting by 90
• At the same time the rich countries must
  recognise that they must demonstrate
• (i) low carbon growth
• (ii) credible mechanisms, including carbon
  trading, for helping finance developing country
  investments
• (iii) credible mechanisms for transferring
  technology
• (iv) funding for extra challenge for developing
  countries in more hostile climate (adaptation)

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India steering toward a global deal II

• Explain significance of Merkel/Heiligendamm offer
  by PM Manmohan Singh lays down clear challenges
  to rich countries
• Show actions India is taking and planning
  including Feb. 2008 budget statement (para. 109)
  and Climate Change Action Plan (June 2008)
• Propose that developing countries create their
  own credible action plans including energy
  efficiency deforestation facilitating carbon
  trading alternative fuels and technologies
• Design the successor to Clean Development
  Mechanism (do not wait for rich countries to
  propose) capable of operating on scale
• Design incentive mechanisms for promoting the
  transfer of technology

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Foundations of Strategy for India

• Steer international community towards an
  equitable global deal
• Act in self-interest to reduce energy costs and
  dependence on hydrocarbons in a world of high
  energy prices and energy insecurity.
• Explore Indias natural advantages of sun, wind,
  gas, tropical forests
• Harness Indias entrepreneurship, technical
  skills and diversity
• Leveraging the countrys decentralisation strategy

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Possible Policy Measures in India - 1

• These possible measures not only show action in
  India which will promote the global deal India
  and the world urgently need for sustainability,
  they are also in the short and medium term in
  Indias self-interest. Challenge is to align
  individual incentives with Indias self-interest.
• Revenue raising
• Taxes on pollutants including in power and
  transport, or quota trading with auctioned
  permits
• Reform power sector, particularly reduce T D
  losses
• Reduce energy subsidies
• New incentives technologies
• Zero tariffs for imports of cleaner technologies
  and reduced taxes on cleaner technology
• Emissions regulations
• Public transport sustainable cities electric
  vehicles
• Promote and demonstrate CCS for coal solar
  nuclear gas hydro CHP 2nd generation
  bio-fuels etc.
• Technology challenge fund

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Possible Policy Measures in India - 2

• Institutional
• Carbon monitor and regulator
• Climate change committee to assess progress and
  promote policies
• World class emissions trading platform
  demonstrate for trade within and outside India
• Reform grid to promote decentralisation and
  selling as well as buying
• Institutions to encourage afforestation and
  arrest deforestation
• Adaptation CRUCIAL CHALLENGE
• Information base meteorology/ science
• Infrastructure irrigation, transport, flood
  defence
• Agriculture new crops techniques
  insurance/early warning

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Illustrative growth for India
Income/ capita
tonnes/ capita
1600
6
3
2
100
1
2030
2020
2040
2010
2050
2008

• Rich world followed emission path close to income
  path
• One example only many simulations and possible
  paths should be examined, together with
  associated policies
• Europe likely to be down to 7 or 8 tonnes/capita
  by 2030
• India will require fundamental change to energy
  strategy
• Negotiate payment for difference between curves