Prof. Dr. Ottmar Edenhofer, Jan Steckel, Dr. Michael Jakob

Combating Climate Change and Global Poverty

Entdeken Stakeholder Workshop

Potsdam, April 19, 2012

Climate Change, Development, and Equity

Long term trends show clear evidence

• Temporal slow downs of global warming have occurred already in the past• Recent independent examination of IPCC results (Berkeley Earth Surface Temperature Project) has confirmed results

Sour

ce: B

erke

ley

Eart

h Su

rfac

e Te

mpe

ratu

re P

roje

ct

Average temperature anomaly per year

( Pet

erso

n an

d B

arin

ger2

009)

Last decade was the warmest since the beginning of industrialization !

Projections of Global Warming

(IPCC 2007)

Tipping Points

(Lenton et al. 2008)

Impacts

(IPCC 2007)

Impacts for Developing Countries

(IPCC 2007)

Where do we stand? – GHG emissions by country today

(WDR 2010)

103

104

105

101

102

103

104

Brazil

Mexico

Ethiopia

Russia

Egypt

France

Germany United States

India

Bangladesh

China

Japan South Africa

K: Capital stock (US$2000 per person)

P: F

ossi

l CO 2 e

mis

sion

s (k

g C

per

per

son

and

year

)

Fitting line: ln P=0.987 ln K+c

Wealth and carbon emissions

( Füssel 2007)

Economic Development, Energy Use, and CO2Emissions

The scope of the challenge

Key question for developing countries: Is leapfrogging possible?

(WD

R 2

010)

Inequality in per-capita emissions across countries

(Jak

ob a

nd G

ruew

ald,

in p

rep.

)

Gin

iInd

ex o

f per

-cap

itaC

O2-

emis

sion

-Inequality in per capita emissions has decreased in last decades

-Decrease particularly driven by manufacturing sector

-Increasing inequality in transportation hinges mainly at increasing share of transportation sector

Empirical relationship between economic and emissions growth and energy consumption in developing countries

Developing countries

OECD countries

Strongercoupling of growth and emissions

Weakercoupling of growth and emissions

‚Decoupling‘ should not be expected for developing countries in the near to midterm

Developing countries

OECD countries

Strongercoupling of growth and

energy

Weakercoupling of growth and

energy

Energy 1971 - 2005 Emissions 1971 - 2005

(Jakob et al. 2012)

Development of global emissions

Contributions to net annual emissions growth coming from different characteristic factors [all in %]

China’s large contribution to recent global

emissions growth

Slower energy efficiency improvements and a growth surge, not necessarily carbonisation, explain China’s explosion of emissions

(Steckel et al. 2011)

Global emissions by countries/regions

Economic Growth as Driver of CO2 Emissions

(Ste

ckel

et a

l, 20

11)

Renaissance of Coal?

Decomposition of Carbon Intensity

17

(IMF

2011

)

Renaissance of Coal?

Fossil Fuel Scarcity vs. Limited Atmospheric Space

Conclusions 1st part

• Leapfrogging is not taking place

• Economic growth particularly in newly industrializing countriesdrives CO2 emissions

The Energy System Transformation in the Context of Global Justice

Fossil Fuels Dominate the World Energy System

Shares of Primary Energy Supply 2008

Modern bioenergy 4%Traditional biomass 6%

Transformation of Transformation of thethe Energy SystemEnergy System

(Luderer et al., 2011)

Transformation of the Energy System

E3MG

Bas

elin

e MERGE POLES REMINDTIMER

models

(Knopf et al. 2009)

Many different pathways to transform the energy system

Different possibilities to reach low stabilisation 400ppm can be achieved by all models

400

ppm

-eq

Renewable Energy Potentials

(Edenhofer et al. 2011)

Costs of Renewable Energy

(Edenhofer et al. 2011)

Costs of mitigation

Costs hinge critically on: • The stabilization target• The biomass potential• The availability of technologies, RE and CCS in particular

( Ede

nhof

eret

al.

2011

)

Investment Requirements

business-as-usual 450ppm-CO2

(Luderer et al. 2011)

How to finance mitigation in developing countries?

Non-market based mechanisms to disburseclimate finance:

Coverage of incremental investment costs

Coverage of total mitigation costs

Market-based mechanisms (International Emissions Trading):

Grandfathering, or allocation proportional to GDP

Equal per capita allocation of permits

Contraction and Convergence

Non-Market Transfers

(Jak

ob e

t al,

subm

itted

.)

Emission Trading

(Jakob et al, submitted.)

per capita per capita

Risk of Adverse Effects

DataResource Exports, FDI: Year 2009Aid: Year 2008ETS: ReMIND scenario Year 2020

Climate Finance Range[% of GDP]

How to Avoid a Climate Finance Curse?

• Possible problems with financial inflows: volatility, Dutch disease, rent-seeking

• Higher risk of climate finance curse with emissions trading; butproblem to efficiently deliver non-market transfers

• Transfer of rents can be limited by appropriate choice of allocation; but might conflict with notions of equity

• Properly designed institutions can reduce risk of climate financecurse (e.g. price corridors, sovereign wealth funds, civil societyinvolvment)

Conclusions 2nd part

• Leapfrogging is not taking place

• Economic growth particularly in newly industrializing countries drives CO2 emissions

• A structural transformation of the energy system is possible at modest costs (according to state-of-the art models); but without historical precedent

• How to design climate policy in developing countries is a key issue

Climate Policy, Poverty, and Equity

Energy Access

(Edenhofer et al. 2011)

Number of people (millions) without access to electricity

Energy and Human Development Index

(Ste

ckel

et a

l. su

bmitt

ed)

Threshold at around 40 GJ per capita10 GJ per capita can be explained by subsistence needs (e.g. Pereira et al. 2011)

Infrastructure needs can explain parts of the gap

A per capita energy demand of 10 to 20 GJ in developed countries seems to be stable given today’s technologies.

Developed Countries

Developed Countries

Developing Countries will catch up(Scenario data in blue)

(Steckel et al. submitted)

Cement

Steel

38

Model results

Non Annex I

Annex I Europe

India

FE p

er c

apita

[GJ]

25303540455055

FE p

er c

apita

[GJ]

15

20

25

30

80

100

120

140

160

80

100

120

140FE

per

cap

ita [G

J]FE

per

cap

ita [G

J]

Bas

elin

e 20

30

Bas

elin

e 20

50

Cat

3+4

2030

Cat

3+4

2050

Cat

1+2

2030

Cat

1+2

2050

Bas

elin

e 20

30

Bas

elin

e 20

50

Cat

3+4

2030

Cat

3+4

2050

Cat

1+2

2030

Cat

1+2

2050

Bas

elin

e 20

30

Bas

elin

e 20

50

Cat

3+4

2030

Cat

3+4

2050

Cat

1+2

2030

Cat

1+2

2050

Bas

elin

e 20

30

Bas

elin

e 20

50

Cat

3+4

2030

Cat

3+4

2050

Cat

1+2

2030

Cat

1+2

2050

IAMs predict large scale reduction of energy useIn developing countries!

Can climate policy impact growth?

(Dol

lar a

nd K

ray,

200

2)

Mitigation trap in a Solow model

kYkskk

)(

kY Production function: 

Capital formation: 

In the case of climate policyβ decreases. 

The trap gets more likely in the presence of climate policy in the form of βK(s) [Independent from the form of the function s(k)]

K0 KC

[$]

(Ste

ckel

201

2)

Conclusions 3rd part

• Leapfrogging is not taking place• Economic growth particularly in newly industrializing countries

drives CO2 emissions • A structural transformation of the energy system is possible at

modest costs (according to state-of-the art models); but without historical precedent

• How to design climate policy in developing countries is a key issue

• Infrastructure can next to subsidiary needs explain an energy threshold for development

• For low development levels climate policy might have the potential to induce a poverty trap

Further research needed !

Thank you for your attention!