Climate change Klas Eklund January 28, 2017

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Consequences of global warming

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Greenhouse gases

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Sharply increasing emissions of

greenhouse gases

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Man warms the planet

Source: IPCC

The sources of emissions

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Cumulative emissions

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Emissions: countries of origin

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Cumulative emissions

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Counting backwards

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The need to reduce emissions

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Cost curve, bottom-up (McKinsey 2008)

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First best solution:

A global price on emissions

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An efficient climate policy

Stern: Climate change is the greatest market

failure in history

The task: Align own interest with public

interest

Preferably: One price in all sectors and all

countries

– Taxes or trade in emission rights?

Policy costs are low – if the market failure is

corrected

Sector-wise targets and tools are more

expensive

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Taxes or emission trading?

Taxes are robust – but politically difficult

Trade gives volatile prices

– But makes it possible to link systems, step-by-step

– And simplifies financial transfers to poor countries

EU as a test pilot

– Start-up period with great problems – that can be

corrected

– Lower ceiling, higher price

– Don’t distribute rights for free – auction!

– More sectors into the system!

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Prerequisites for actions to work

The regulator must know the size of external

effects

– A complete cost-benefit analysis, for the long haul

And also the effects of the price change

– Means knowledge about reactions of companies

– And technical change

Emissions rights necessitate selection of

companies and allotment of right

Both taxes and emissions trades presuppose

measurement and monitoring

And a working judicial system

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All sectors will be affected

Construction

Lighting, heating, insulation

Energy

Higher energy efficiency, CCS

Renewables, nuclear power

Manufacturing

Engines, efficiency, CCS

Transports

New engines and fuels, efficiency

Forestry and agriculture

Reforestation

GMO and fertilisation

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Renewables and nuclear are climate-

friendly

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We are very small

– 0.2 per cent of global emissions

– A global perspective is necessary

– International negotiations, ambitious national

target, finance reductions in poor countries,

R&D and climate aid

We are green

– Courtesy of hydro, bio, nuclear and regional

heating

– Marginal mitigation costs are high

Sweden is small and green

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Sweden: Broken link?

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Economics is not all…

Political conflicts are blocking a global price strategy – Equity

– Aid

– Financing

Regulations are politically tempting – Sector-wise, national, regional

The result: a non-optimal haphazard combination of prices and regulations – Both globally and nationally

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A global strategy should be broad

Carbon emissions is not an isolated issue – part of development and growth strategy

A global target for emissions reductions

Steps towards a global price – through taxes and trade in emissions rights

Credits for climate projects

Sector agreements

R&D stimulus

Reforestation

Climate aid

Green finance

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How to share the burden?

Equal emissions per capita?

Equal cumulative emissions?

”Greenhouse Development Rights”

– Historical responsibility…

– …and ability

But GDR is sensitive to which assumptions are made

– Consumption or production?

– When do we start accumulate historical debt

All attempts to reach global top-down agreements

with set national targets have failed

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The elusive concept of fairness Chinese emissions under different allocation schemes

But events are forcing policy action

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Technical change is a strong driver

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The Paris agreement, 2015

General agreement to keep temperature rise ”well

below” 2 degrees

Long-term goal of ”de-carbonization”

Not a treaty

No set national targets from above

Voluntary national pledges

– Not enough – around 3 degrees warming?

– But procedures for following up and setting new targets

Small increases in climate finance

US, EU, China and India all signed up

Conclusion: A big but not sufficient step

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What about Trump?

Technology will trump Trump

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Solar + battery + smart grid = the future?

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From peak oil to peak demand?

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