Climate change Klas Eklund

1. Climate change Klas Eklund
January 28, 2017

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3. Consequences of global warming
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4. Greenhouse gases
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Sharply increasing emissions of
greenhouse gases

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Man warms the planet
Source: IPCC

7. The sources of emissions
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8. Cumulative emissions
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9. Emissions: countries of origin
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10. 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

26. But events are forcing policy action
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27. Technical change is a strong driver
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28. 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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29. What about Trump?

30. Technology will trump Trump
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31. Solar + battery + smart grid = the future?
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32. From peak oil to peak demand?
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