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Adrien Vogt-Schilb Banco Mundial
Motivation
• A lot of talk about climate stabilization but limited awareness of implications
• Planning targeted to the medium term • Debate focusing on what should be done without enough discussion
of the obstacles to do so – especially in political economy terms…
Self evident?
Stabilizing the Climate
= Full Decarbonization
The future is carbon free • For any temperature limit,
there is a maximum CO2 budget
• So CO2 emissions have to go to zero at some point
• The only question is when?
Three steps to a zero-carbon future
• Step 1 – Plan ahead for a future with zero emissions
• Step 2 - Getting carbon prices and complementary policies right
• Step 3 - Mind the political economy and smooth the transition for those who stand to be most affected
Step 1 – Plan ahead for a future with zero emissions
How fast should we bring emissions to zero?
~3oC
~2oC
Baselines
Good news: we know how to get to zero emissions
Sectoral indicators help track progress along the four pillars of decarbonization
There are many co-benefits
There are many co-benefits
Abatement potential GtCO2/yr
Cost
$/
tCO
2
30
60
1.5 5 2030
target 2050
target
13
Why should we not comply to the 2030 target using only the cheap coal to gas?
Reaching a short-term target through cheap options (supply curve approach) would cause carbon-intensive lock-in
Vogt-Schilb, A., S. Hallegatte, (2014), 'Marginal Abatement Cost Curves and the Optimal Timing of Mitigation Measures'
14
time
Abtm
t
1. The 2020 target is reachable by implementing only the cheap option (as switching from coal to gas). 2. In 2020, attention goes to the 2050 target. Implementing deep (e.g. renewable electricity ) at the maximum
speed does not allow the reach 2050 target
2015
2050 target
2050
αdeep
2030
2030 target
αcheap
Reaching a short-term target through cheap options (supply curve approach) would cause carbon-intensive lock-in
Vogt-Schilb, A., S. Hallegatte, (2014), 'Marginal Abatement Cost Curves and the Optimal Timing of Mitigation Measures'
15
time
Abtm
t
2050
2Gt
αdeep 2015
1. Assume that one knows that the optimal abatement from renewable power in 2050 should be 2Gt 2. Installing that much solar power takes time. 3. We should start to implement solar plants now 4. Cheaper but faster-to-implement options required in 2050 may enter later 5. The short term target is met with the expensive option (what policy can we use?)
later
2050obj
αcheap
2030
2030 target
Optimal short-term action depends on the long-term target and implementation speed
Vogt-Schilb, A., S. Hallegatte, (2014), 'Marginal Abatement Cost Curves and the Optimal Timing of Mitigation Measures'
The zero-emission goal determine immediate needs for action
• In a case study on Brazil, we highlight the difference in strategy between a marginal and a structural change
• To get to zero emissions, we need to start now to:
• Develop and test needed technologies
• Redirect investments in long-lived equipment
• Avoid lock ins in land use and urban development
Sectoral indicators help track progress along the four pillars of decarbonization
• Beware of marginal changes that do not lead to the long-term goal.
• Progress is required on high-potential measures, and in each of the four pillars
Step 2 - Getting carbon prices and complementary policies right
Tax the bads, not the goods!
9 11
17
2
Corporate tax VAT Income taxes Diesel tax (similar tocarbon tax)
Tax evasion in the UK (%)
• Getting prices right is good fiscal policy: a carbon tax can generate revenues efficiently
• Better to tax energy consumption or emissions rather than jobs or investments
• And evasion is more difficult
• This is even more important in low-income countries with weaker institutions
Pricing is not enough: decarbonization faces many obstacles
Prices are not enough: what is needed is a policy package
• Develop the technologies we’ll need to get to zero-emissions
• Subsidies and demand-support • it makes sense to pay a higher price per abated
ton than average when using higher potential technologies or solutions
• Act on new investments, to make sure they are energy-efficient
• Norms and performance standards on cars, building, appliance, etc.
• Develop the right infrastructure • Paris without metro system would emit twice as
much, and be half less reactive to carbon pricing • This creates large financial challenges
• Inform and promote the right behaviors
Step 3 - Mind the political economy and smooth the transition for those who stand to be most affected
The political economy is key
Carbon price impacts negatively the value of
polluting assets…
… you do not want carbon pricing if you just bought…
Climate policies will be successful only if they contribute to development and poverty reduction
• Climate policies can be designed such that poor people benefit
• Revenue-raising policies makes it possible to invest in development and poverty reduction
Climate policies will be successful only if they contribute to development and poverty reduction
• Fossil fuel subsidies reform and carbon pricing can be designed so the poor people benefit
Climate policies will be successful only if they recognize and support those who are affected
• Make industries and regions benefit from the change
• Automakers and electric cars • Oil and gas industry and carbon capture and
sequestration • Green pilot projects in negatively affected areas
• Avoid concentrated losses and smooth the shock • Social protection and social safety nets • Dedicated adjustment mechanisms and worker retraining
– examples of the Japan industrial policies and from trade agreements
• Communication and stakeholder involvement is key
All of that is on www.worldbank.org/climate/decarbonization What’s next? A report on “Poverty and Climate Change,” expected in October.
Adrien Vogt-Schilb, avogtschilb@worldbank.org
Muchas gracias
Additional slides
Pathways toward zero-carbon electricity, even without nuclear and carbon capture
Carbon-free electricity
Carbon is a solid tax base – because the carbon price increases over time
0
50
100
150
200
250
300
350
400
0
1000
2000
3000
4000
5000
6000
7000
2015 2020 2025 2030 2035 2040 2045 2050
Carbone revenue (billion $2012)
Emis
sion
s (M
tCO
2/yr
)
41
time
Reaching a shorter-term target through cheap options (supply curve approach) would cause carbon-intensive lock-in
2020 target 2030 target
No time to do this in 2020-2030
No time to do this between 2010-2020 (you’d need a specific curve for 2020)
To be an option in the long term these need short-term support
150
50
350
More short-term efforts, globalemissions at 50 GtCO2/year in
2030
Unchanged policies, globalemissions at 60 GtCO2/year in
2030
Stra
nded
capa
city
(GW
) 2030-2050
2010-2030
Prices are not enough: develop the right infrastructure
• On a case study on Paris, we find that without the metro system, the Paris agglomeration would look very different.
• Transport would emit twice as much CO2 and a carbon tax would be half as efficient as with the metro system
• Infrastructure financing remains challenging
A carbon price is twice as effective in the city with public transport…
65€ 110€
… it is also probably much more acceptable politically
Avoid stranded assets
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