1. Framing the Post-Kyoto Debate: Options for Climate Policy After 2012 STEP Seminar Series Princeton University Princeton, NJ April, 2006 Jonathan Pershing Climate, Energy and Pollution Program World Resources Institute http://www.wri.org

2. An update on the science Greenhouse gases and related indicators Policy options The international process: reviewing the state of play Framing the debate on next steps Conclusions Overview

3. An update on the science

4. 2005 Temperature Records (Deviation from 1951- 1980 mean) Source: NASA Goddard Institute for Space Studies Surface Temperature Analysis at data.giss.nasa.gov/gistemp/data.giss.nasa.gov/gistemp/

5. The Global CO2 Record: 1959 –2006 Source: NOAA http://www.cmdl.noaa.gov/projects/src/web/trends/co2_data_mlo_landscape.pdf

6. Changes in Ocean Circulation Transect at 23º N latitude –Measurements taken in 1957, 1981, 1992, 1998, 2004 Indicates a 30% reduction in ocean circulation volume since 1957 Source: Ocean current figure: www.NASA.govwww.NASA.gov Transect information: Bryden, Harry L. et al. "Slowing of the Atlantic meridional overturning circulation at 25° N." Nature 438: 655-657. 1 December 2005

7. Source: ACIA, Impacts of a Warming Arctic, Climate Impact Assessment Report, Cambridge University Press, 2004 Observed sea ice September 1979 These two images, constructed from satellite data, compare arctic sea ice concentrations in September of 1979 and 2003. September is the month in which sea ice is at its yearly minimum and 1979 marks the first year that data of this kind became available in meaningful form. Observed sea ice September 2003 DEPLETION OF SUMMER SEA ICE

8. Hurricane Trends

9. Impacts follow temperature trends Source: WashingtonPost.com, September 16, 2005, after Science Magazine 9

10. Scenario of damages in 2050 Source: The Guardian, based on Pentagon report, February 2004

11. Greenhouse Gases and Related Indicators Near- and Longer-Term Trends 11

12. World GHG Emissions (2000) Source: WRI, CAIT: http://cait.wri.org

13. National GHG Emissions, 2000

14. Per Capita Emissions, 2000

15. CO2 Intensity of economies, 2002

16. Largest Emitters: Developed & Developing

17. Most Countries Contribute Little to GHG Buildup

18. Projected Future GHG Emissions Growth % Percent change from 2000 Source: Baumert et al, 2005

19. World Primary Energy Demand Source: IEA WEO 2004 Oil Natural gas Coal Nuclear power Hydro power Other renewables 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 1970198019902000201020202030 Mtoe 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 1970198019902000201020202030 Mtoe

20. Electricity generation: fuel mix % Share of Fuel Mix Source: IEA Statistics, 2002 data 20

21. GLOBAL CO 2 EMISSIONS FOR IPCC/SRES SCENARIO GROUPS

22. Policy options

23. What will it take to stabilize the atmosphere? Need to reduce greenhouse gases globally by 60-80 percent over the century Population is likely to increase from 6 billion today to 10-12 billion Economic growth is likely to expand, perhaps by a factor of 10

24. Dealing with Climate Change Policies cover all gases and all sectors -- but emissions are not evenly divided among these –Energy and CO 2 are key Policy Choices: –Emit less (be more efficient) –Emit differently (switch fuels or processes) –Sequester –Do without (change behavior) –Adapt (learn to live with it) Policy actions include: –Market approaches (taxes, subsidies, cap-and-trade) –Regulations –R&D –Processes/outreach –Foreign Assistance

25. Policies by Instrument (1999-2004) Source: IEA (http://www.iea.org/dbtw-wpd/textbase/envissu/pamsdb/index.html)

26. GHG Flow Diagram: Global Greenhouse Gas Emissions

27. Policies by Sector (1999-2004) Source: IEA (http://www.iea.org/dbtw-wpd/textbase/envissu/pamsdb/index.html)

28. Reviewing the state of play The International Process

29. International Agreements: The UN Convention and Kyoto Protocol Targets: national caps on greenhouse gas emissions; collective reduction of 5.2% below 1990 levels by the 2008-2012 timetable…for 38 industrialized countries and economies in transition (i.e. “Annex I”) Market-based mechanisms: designed to achieve global emission reductions at the least possible cost (involves private entities, not just governments.) Compliance mechanisms: Emissions measurement standards; reporting requirements; review provisions; mandatory consequences for countries that do not comply.

30. UNFCCC – State of Play 1992: UNFCC 1997: Kyoto Protocol 1998 – 2001: Following Kyoto, negotiators spend several years developing rules to implement Kyoto agreement (i.e., Marrakech Accords) 2004: Ratification and entry into force (with attendant agreement from Russia on gas and WTO) Beginning of post-Kyoto discussions –2003: New Delhi (Cop 9): focus on adaptation –2004: Buenos Aires (Cop 10): consideration of post Kyoto commitments –2005: SB 22: Seminar of Government Experts (SOGE) Nov/Dec 2005: Montreal: COP/MOP 1

31. Montreal Outcomes Annex I parties continue discussions on post Kyoto regime – based on emissions markets –US and Australia largely oppose talks –However, at the state/local level, both US and Australia experimenting with emissions trading regimes Non-Annex I parties reject any discussion of accepting binding emissions caps (language allowing discussion of next steps explicitly states it will “not open any negotiations leading to new commitments.” Marrakech Accords adopted (with ET, JI, and CDM as well as rules governing forest activities). –News rules opening CDM to “programmatic” as well as “project” activities

32. International Politics: the EU “Climate Change is a major threat” “While the Kyoto Protocol takes us in the right direction, it is not enough. We need to cut GHG emissions radically, but Kyoto doesn’t even stabilize them. It won’t work as intended unless the US is part of it.” There are huge opportunities in environmental technology, and huge possibilities in sustainable development.” -- Prime Minister Tony Blair, 2005

33. International Politics: Developing Countries “Climate change has, and for the foreseeable future will continue to have a profound impact on the development prospects of our societies.” “The UNFCCC and the Kyoto protocol establishes a regime that adequately addresses the economic, social and environmental impacts of sustainable development.” “The regime rests on differentiation of obligations among Parties…developed countries should therefore take the lead in international action to combat climate change.” “The convention establishes economic and social development and poverty eradication as the first and overriding priorities of developing countries.” -- Joint Declaration, Gleneagles, 2005 Brazil, China, India, Mexico, S. Africa

34. International Politics: The US “Climate change, with its potential to impact every corner of the world is an issue that must be addressed by the world.” “The Kyoto Protocol was fatally flawed in fundamental ways.” “We’re creating a National Climate Technology Initiative…” -- President Bush, 2001

35. Framing the debate on next steps

36. Form and Stringency Are NOT the Same

37. Stringency is about how much… Meinshausen, Malte. "On the Risk of Overshooting 2°C." Proceedings from International Symposium on Stabilisation of Greenhouse Gas Concentrations -- Avoiding Dangerous Climate Change, Exeter, 1-3 February 2005 at www.stabilisation2005.com/programme.html.www.stabilisation2005.com/programme.html Risk of increased temperature

38. …which presumes a cost for action as well as a risk from inaction… Source: IPCC TAR

39. Implications of delayed action Source: Meinshausen, 2005 …and when.

40. Form is everything else

41. Market options Metric Legal Character ScopeMarket Effect Kyoto Target Emission (GHG equivalent) BindingNational Creates supply and demand Intensity Target Emissions per unit output (GDP) BindingNational Creates supply and demand Sectoral Target Emissions or emissions per unit sectoral output (intensity) Binding Sectoral (e.g.,steel, cement, aluminum) Creates supply and demand No-Regrets Target Emissions or emissions per unit output (intensity) Non-binding National or sectoral Creates supply only Action Target Emission reductions (GHG equivalent) BindingNational Creates supply and demand CDM+ Emission reductions (GHG equivalent) Non-bindingProjectsCreates supply only Notes: Additional options could be created by combining several of the above. E.g., a no-regrets (non-binding) intensity target. Shading reflects the characteristic that best distinguishes the approach from a Kyoto-style target.

42. EU and US emission market trends Source : http://www.chicagoclimatex.com/mktdata_ccfe/sfi/hi storical/Historical_Prices.xls EU ECX Price US CCX Price

43. CDM growing Data based on 919 projects (compare with 716 in December 2005) Strong growth started in last Q05 and continues 1.3 billion credits expected pre-2012 Source: Scharf & Ellis (OECD), 2006

44. Country CO 2 Change 1990–2002 MtCO 2 GDP per capita (GDP/Pop) Population (Pop) Energy Intensity (E/GDP) Fuel Mix (CO 2 /E) China124712215-968 United States8632316-20 France2175-6-15 United Kingdom-36243-20-13 Russian Federation-453-5-3-12-3 % Contributions to CO 2 Changes But setting new post-2012 targets is difficult… Source: Baumert et al, 2005

45. …even for a single country

46. Expectations for the Market Post-2012 Some Annex I Parties continue with market development (likely to include US, but to exclude Russia) –Key is institutional capacity to manage market compliance, including adequate assurance of integrity of emissions reductions –Politics will dictate level of effort; US engagement critical Some developing countries adopt market approaches and participate in global emissions trading market (e.g., Korea, Mexico) –China, depending on rate of institutional development, may engage over medium term (e.g., by 2020) Other countries continue to participate in CDM/project offset systems, including with “programmatic” CDM

47. The alternative to markets: A policy approach Source: David Victor, Presentation at RFF, February 2006

48. Policies may not focus on climate… Source: IEA WEO, 2002 Global Energy Poverty

49. Other development challenges exist… Motor vehicles per 1000 people, selected countries Source: Bradley and Baumert, 2005, “Growing in the Greenhouse”

50. Motor Vehicle Shares of Criteria Pollutants in Chinese Cities Source: Schipper and Ng, 2005 City CO (%)HC (%)NOx (%) Beijing (2000) 777840 Shanghai (1996) 869656 Guangzhou (2000) 845045 …and are multifaceted…

51. …including energy security as well as environmental issues Source: Schipper and Ng, 2005 Oil Production, Consumption and Imports for China

52. Three scenarios for China: Carbon from Motor Vehicles Source: Schipper and Ng, 2005 2003 RoadOil SavedIntegrated Transport

53. Considering a Sectoral Agreement Source: Baumert et al, 2005

54. Sectoral “Fit” for Agreement ICAO has failed to reach conclusions on emissions reduction plan EU proposals being considered include: –Fuel tax –Ticket tax –Slot auctioning –Emissions charge –Modal transfer incentives

55. Sectoral “Fit” for Agreement Voluntary agreement through International Aluminum Institute (26 members with 80% of global production) Key climate change targets include an 80% reduction in PFC emissions and a 10% reduction in smelting energy per ton of aluminum produced; to be reached by 2010 (using a 1990 base year). To date have already achieved PFC reduction of 73%

56. The technology chain Grubb, M. and R. Stewart, 2003. “Promoting Climate-Friendly Technologies: International Perspectives and Issues.” Introductory paper for the INTACT High-Level Transatlantic Dialogue on Climate Change

57. USG Roadmap for Climate Change Technology Development and Deployment for the 21st Century Source: U.S. Climate Change Technology Program Strategic Plan, Draft for Public Comment – September 2005

58. Technology Penetration Source: http://www.aimpowergen.co m/wind_power.html

59. But R&D are not keeping pace Current levels of Government R&D investment have fallen, while industrial R&D has become shorter-term. Source: IEA Data

60. Thoughts on the PAMs approach Moving to scale is possible, but policies likely to differ from country to country. Policies that incorporate development priorities can garner near-term engagement by developing countries, particularly large emitters such as India and China Comparing level of effort will be difficult; no single metric is likely to provide robust method for evaluation. –Political agreements, involving complex negotiations, may address this concern –Public awareness to support national policies will likely require significant reporting on policies adopted– which, in turn will require international assistance. Once sufficient capacity is built, countries may move to adopt GHG market systems

61. A brief comment on adaptation Global Impacts of Natural Disasters, 1980 - 2004

62. Adaptation in a future regime Money, money, money –Expected damages amount to several percent of global GDP, with preponderance of damages in developing nations New international agreement(s) may provide “steer” for development assistance, but seems, at present, unlikely to establish significant new institutional arrangements to pay for impacts or their amelioration Policies are mostly unlikely to be climate specific; key will be links to development –Water resources –Health care –Coastal zone management –Infrastructure development

63. Conclusions

64. The post-Kyoto architecture (1) New scientific information compels more aggressive action The Kyoto structure WILL continue –Emissions trading with new more stringent targets and some additional countries –Markets will provide stimulus to new technology research, development and diffusion –Current systems for financial transfer to developing countries will remain – albeit unlikely to grow significantly

65. Kyoto is not likely to be the sole mechanism for future efforts In parallel to the Kyoto market-based regime, countries (developed and developing) will adopt policies (including for sectoral and technology based approaches) driven by other concerns: –Energy security (leading to aggressive focus on energy efficiency, focus on indigenous supply and development of alternative fuel options such as biomass, nuclear, RE) –Local air quality (technologies such as IGCC, replacement of gasoline vehicles with hybrids and EVs or H 2 ) –Key is how “climate friendly” these policies will be Independent of international agreement, we are likely to see increasing energy investment – including some financial transfers to developing countries –Some new investment in climate friendly technology such as CCS The post-Kyoto architecture (2)

66. The post-Kyoto architecture (3) We are not on a path to avoid significant climate change The question is how hot things will get… Adaptation will become a more central policy imperative over time ?