Climate Change: Policy & Negotiations Flashcards
2 approaches to reduce CO2 emissions
Focus on social cost of carbon (SCC)
Focus on achieving a CO2 emission target
Focus on social cost of carbon (SCC) , essential information required and which country has that
Set carbon tax at level of SCC e.g like US
Essential information: social cost of carbon
CO2 emission target, essential information required and which country has that
Set carbon tax consistent with the emission target. E.g like the UK
Essential information: price elasticity of CO2 emissions
Carbon tax
A tax on fuel in proportion to the carbon content of the fuel.
I.e coal has the largest carbon content per unit
Market price for carbon equation
P=MPC+MEC=MSC
(External cost MEC is internalised in the market price P)
Carbon tax externality diagram
MSC steeper than MPC
MB constant (horizontal)
Benefits of climate policies
Mitigate future CC damages following the fall in greenhouse gases (GHG)
SVGW
How do they estimate the SCC
Integrated assessment models
Integrated assessment model
Combine scientific and economic models to evaluate impacts of carbon emission
Integrated assessment model main modules… (4)
Socioeconomic modules- socioeconomic and emission trajectories
Climate module- relationship between emissions and climate change
Damage module- translate climate change into economic damages.
Discounting modules- calculate present value of future damages
Level of tax, and SCC
Should be set in accordance with MEC (external cost) of emissions.
SCC is the marginal costs of emitting one extra tonne of GHG
Identifying the MEC: different views on social costs between different presidents in US
Obama- $42-62
Trump- $1-7
Biden- $51-152
So uncertainty and difficulties estimating SCC
Why was Trumps low? (2)
Focused solely on damages from CC that would occur in borders of US
Also had a higher discount rate of 7% compared to 3% for the others.
Target consistent approach
Identify target, then set level of tax to achieve the target at the least cost.
Essential information- Price elasticity
How to know how different tax levels would effect emission levels
PED and XED
What is PED for energy
Relatively inelastic
XED for energy
Relatively elastic. E.g a price increase in gas may shift to use of fuel. Which then has consequences (pos/neg) depending on choice (remember coal had the most carbon content per unit, most harmful for carbon emissions)
Pros cons of SCC
Measures benefits of reducing CO2 emissions, (net benefits to society)
Cons
Hard to set- Wide range of SCC- Limited practical assistance in setting the specific tax (trumps was low compared to others)
Political considerations can distort estimates of SCC e.g discount rate and scope of GHG emissions (trump used7% and only considered within US borders
Target-consistent approach
Pros
Avoid uncertainty in estimates of climate damages and long term decarbonisation costs
Cons
Based on cost estimate of carbon that doesn’t consider benefits
Replaces scientific assessments of climate damages with subjective judgements about policy targets and choices
Paris agreement 2015
Aim to strengthen global response to CC.
Aim to hold the increase in global average temperature well below 2 degrees above pre-industrial levels.
Why 2 degrees? (Nordhaus)
Above would take climate outside range of observations which have been made
UN report 2015
2 degrees is not enough for avoiding some of the mos severe impacts of climate change, so set a new target of 1.5 degrees
Nationally determined contributions (NDCs)
Commitments on national efforts individual countries plan to take to meet objectives of Paris agreements (2-1.5degrees)
(JUST INDIVIDUAL COUNTRY ATTEMPTS TO PARIS AGREEMENT)
2 types of NDC
Unconditional NDC: Target to be reached without outside support
Conditional NDC: targets to be reached on conditions of
Financial/technical support
Climate policies implemented by other counties
UK pledges 2021
Reduce methane emissions by 30% by 2030
Halt and reverse deforestation by 2030
Stop public financing for MOST fossil fuel projects by end of 2022
Guarantee vehicles are zero-emissions by 2035 in leading markets and 2040 globallly
Nordhaus findings on SCC
Using SCC would find in mid 2100 a temperature of 4C, far outside bounds of Paris agreement (a catastrophic increase)
So SCC is not that reliable… pushing for use of a target-consistent approach instead in US
Target consistent approach findings
A lower elasticity previous assumptions -0.18
This means carbon taxes at current levels are unlikely to achieve emission reductions at speed necessary to meet Paris agreement objectives (so we need to change prices)
Need a price greater than $250 to be on target which isi outside political feasibility
Current carbon prices show $250 is unfeasible
US: $51 per tonne of CO2
UK: $76.86
Sweden: $137 (highest)
Delaying policy actions only increase effort required in future to limit warming (below 2 degree by 2100).
Consider different times from 2000 2020 and 2020 where emission peak, and their required % reduction required to limit warming below 2degree by 2100.
I.e later emissions peak, harder to limit warming below 2 degree target.
2000 peak: needs a 1-2% annual reduction
2020 peak: needs a 4-5% annual reduction
2030 peak: needs a 7% annual reduction
To reduce warming below 2 degree by 2100
