Q Adrien Vogt-Schilb Banco Mundial
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Adrien Vogt-Schilb
Banco Mundial
q
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?
Baselines
~3oC
~2oC
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
Reaching a short-term target through cheap options
(supply curve approach) would cause carbon-intensive lock-in
$/tCO2
Cost 60
30
1.5 5
Abatement potential
2030 2050 GtCO2/yr
target target
Why should we not comply to the 2030 target using only the cheap coal to gas?
13
Vogt-Schilb, A., S. Hallegatte, (2014), 'Marginal Abatement Cost Curves and the Optimal Timing of Mitigation Measures'Reaching a short-term target through cheap options
(supply curve approach) would cause carbon-intensive lock-in
2050Abtmt
target
αdeep
2030
target
αcheap
2015 2030 2050 time
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
14
Vogt-Schilb, A., S. Hallegatte, (2014), 'Marginal Abatement Cost Curves and the Optimal Timing of Mitigation Measures'Optimal short-term action depends on the long-term target and implementation speed
2050obj
Abtmt
αcheap
2Gt
2030
target
αdeep
2015 2030 later 2050 time
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?)
15
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• 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 Sectoral indicators help track progress along the four pillars of decarbonization
Step 2 - Getting carbon prices and complementary policies right
Tax the bads, not the goods!
• Getting prices right is good fiscal
policy: a carbon tax can generate
revenues efficiently Tax evasion in the UK (%)
17
• Better to tax energy consumption
or emissions rather than jobs or 11
investments 9
• And evasion is more difficult 2
Corporate tax VAT Income taxes Diesel tax
• This is even more important in low- (similar to
income countries with weaker carbon tax)
institutionsPricing 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 behaviorsStep 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 keyMuchas gracias 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
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
7000 400
Carbone revenue (billion $2012)
6000 350
Emissions (MtCO2/yr)
300
5000
250
4000
200
3000
150
2000
100
1000 50
0 0
2015 2020 2025 2030 2035 2040 2045 2050Reaching 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 No time to do this To be an option in
between 2010-2020 in 2020-2030 the long term
(you’d need a specific these need short-
curve for 2020) timeterm support
41Stranded capacity (GW)
2030-2050
350
2010-2030
150
50
More short-term efforts, global Unchanged policies, global
emissions at 50 GtCO2/year in emissions at 60 GtCO2/year in
2030 2030Prices 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 challengingA carbon price is twice as effective in
the city with public transport…
65€ 110€
… it is also probably much more acceptable politicallyAvoid stranded assets
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