The document discusses the outcomes and implications of the Paris climate agreement. It finds that: - Humanity only has enough carbon budget left to limit warming to 2°C if all new energy investment is zero-carbon by 2017. - Clean energy technologies like solar and wind are experiencing rapid cost declines due to innovation and will likely be cheaper than fossil fuels within the next 10-20 years. - To meet Paris goals, policies must aggressively support clean energy innovation to drive costs down further, while internalizing external climate costs of fossil fuels through carbon pricing or other measures.

1. The Path from Paris:
Impera'ves and Opportuni'es
Eric Beinhocker
Execu&ve Director, Ins&tute for New Economic Thinking at the Oxford Mar&n School
University of Oxford
OECD Green Growth and Sustainable Development Forum, Paris
14 December 2015

2. What was achieved at COP 21?
• Architecture – from zero sum to posi&ve sum; from top-down to boTom-up
“intended na&onally determined contribu&ons”
• Ambi&on – “well below” 2˚C and “pursue efforts” to limit to 1.5˚C
• Ratchet – global stocktaking analysis and mee&ng every 5 years to increase efforts
• Funding – recogni&on of adapta&on and damages, reaffirmed $100B/year
• Poli&cs – global shi_ in the poli&cal context; no longer “whether”, now “how”
• What needs to happen next?

3. Source: IPCC AR5 WG2 (2014)
Climate risks a func&on of ‘peak warming’
Paris
agreement

4. CO2inducedpeak
warming(°C)
2.0
3.0
Each point represents a
different possible
emissions trajectory
over the 21st century
Source: Bowerman et al. (2011)
Peak warming
Significant scatter
shows that 2050
emissions are not the
best guide to peak
warming
2050 emissions GtC)
Emissions in a given year (e.g. 2050) not a reliable
guide to peak warming

5. CO2inducedpeak
warming(°C)
2.0
3.0
Cumulative carbon emissions (CCE) since 1750 (TtC)
Source: Bowerman et al. (2011)
Peak warming
The tight fit reflects a
fundamental physical
relationship between
cumulative emissions
and peak warming
Each point represents a
different possible
emissions trajectory
over the 21st century
Instead cumula&ve carbon emissions (CCE) are a
good indicator of peak warming

6. Earth’s atmospheric system is like a bathtub
filling with CO2
Source: John Sterman , MIT; Climate Interactive
• Ocean satura&on
• Soil methane release
• Deforesta&on
• Economic growth
• Economic development
• Popula&on increase
1˚C
2˚C
3˚C
To stabilize at any
temperature, emissions must
go to net zero

7. 77 118
200 241
322
377
622
731
853
0
100
200
300
400
500
600
700
800
900
< 1.5°
(66%)
< 1.5°
(50%)
< 1.5°
(33%)
< 2.0°
(66%)
< 2.0°
(50%)
< 2.0°
(33%)
< 3.0°
(66%)
< 3.0°
(50%)
< 3.0°
(33%)
GtC Remaining Total Carbon Budgets in 2014
Source: IPCC AR5 WG1
Remaining carbon budget for different warming scenarios
Humanity has max 322 GtC (1,184 GtCO2) room
le_ in the “bathtub” to meet Paris goals
ImplicaBon of Paris Accord

8. Source: Pfeiffer, Millar, Hepburn and Beinhocker (2015, forthcoming)
Under current projec&ons we will have consumed the
remaining <2˚C | 50% budget by around 2040
(1,000.0)
(800.0)
(600.0)
(400.0)
(200.0)
-
200.0
400.0
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
2052
2054
2056
2058
2060
2062
2064
2066
2068
2070
2072
2074
2076
2078
2080
2082
2084
2086
2088
2090
2092
2094
2096
2098
2100
GtC Remaining Carbon Budget per Scenario (2014-2100)
RCP2.6 (< 2.0° (50%))
RCP4.5 (< 2.0° (50%))
RCP6.0 (< 2.0° (50%))
RCP8.5 (< 2.0° (50%))
450-ppm (430-480-ppm) (< 2.0° (50%))
500-ppm (480-530-ppm) (< 2.0° (50%))
550-ppm (530-580-ppm) (< 2.0° (50%))
580-650-ppm (< 2.0° (50%))
650-720-ppm (< 2.0° (50%))
720-1000-ppm (< 2.0° (50%))
>1000-ppm (< 2.0° (50%))
Baseline (with CCS) (< 2.0° (50%))
BAU - 2040
RCP8.5 - 2038

9. 2017
Source: Pfeiffer, Millar, Hepburn and Beinhocker (2015, forthcoming)
All new energy investment globally must be zero
carbon by 2017 or we “commit” to >2˚C
Range 2005 - 2032

10. We have already discovered more fossil fuels
then we can ever burn
Source: Hepburn, Beinhocker, Farmer, Teytelboym (2014); IMF

11. We have already discovered more fossil fuels
then we can ever burn
Stop was&ng $646bn per year
of taxpayer money subsidising
discovering more!

12. Our choices
• Drive all new energy investment to zero carbon
star&ng by 2017
OR
• Write-off/strand large por&on of global energy
system in 2020s-2040s
• Make an expensive, risky bet on massive carbon,
capture and storage (CCS) deployment in
2020s-2040s
• Exceed 2˚C threshold and face major climate risks
and adapta&on costs (ability to adapt not
guaranteed)

13. Good news – a clean energy economy is a beTer
economy

14. Clean energy will win because it is a
technology not a commodity
Source: Farmer and LaFond (2015)
Commodity costs
follow a random
walk
Technology costs
decline over
Bme

15. Solar (a technology) has dropped drama&cally
in price, coal (a commodity) has not
Source: Farmer and LaFond (2015)

16. Wright’s Law (1936) – technology costs decline
with cumula&ve produc&on volume
Cost vs. cumula&ve produc&on = power law
Theodore Wright
Source: Farmer and LaFond (2015)

17. Following Wright’s Law solar will likely become
cheaper than coal in 2020-2030
Source: Farmer and LaFond (2015)

18. Characteris&cs of technologies with rapid
improvement rates
• Small unit sizes, lots of experiments
• Short &me between “genera&ons”
• Embedded in larger ecosystem of innova&on (e.g.
semiconductor, biotech)
✓Solar PV
✓Wind
✓BaTeries
Clean energy technologies
✓Electric vehicles
✓Smart grid
✓Smart homes/buildings
✓Bioengineered fuels
? Biomass
? Geothermal
? Gas CCS
✗Coal CCS
✗Nuclear

19. Impera&ve to shi_ R&D and subsidies to clean
energy technologies
Source: Apollo Project (2015); OECD

20. Policy framework: make the good stuff cheap
and the bad stuff expensive
• Make the good stuff cheap
– Drama&cally scale-up investments in R&D
– Drive up clean energy cumula&ve volumes – ride Wrights
Law
• Subsidies
• Feed-in tariffs
• Renewable porvolio/carbon content standards
• Building codes
• Government purchasing
– Enable deployment
• Smart grid investments
• EV charging infrastructure
• Remove regulatory barriers
• Reform/new ins&tu&onal structures

21. Policy framework: make the good stuff cheap
and the bad stuff expensive
• Make the bad stuff expensive
– Remove all fossil fuel subsidies and tax breaks
– Implement a carbon price
• Taxes at mine-head, well-head, import point, or on
genera&on may be increasingly feasible
– Full disclosure of “material” stranded asset risks in the
financial system (e.g. FSB task force)
– Global implementa&on of air quality and public health
regula&ons
• Major health benefits
• Reduces economic aTrac&veness of coal

22. My G20 wish list
• Clear commitment to “net-zero” by 2040
• End all fossil fuel subsidies
• No new fossil fuel investments a_er 2020 developed
countries, 2025 emerging, 2030 developing
• Pledge to 10x clean energy R&D

23. THANK YOU
For more informa&on please see www.inet.ox.ac.uk

24. Source: Pfeiffer, Millar, Hepburn and Beinhocker (2015, forthcoming)
BACKUP – Year of carbon budget deple&on
RCP2.6 RCP4.0 RCP6.5 RCP8.5 Cat. 1 Cat. 2 Cat. 3 Cat. 4 Cat. 5 Cat. 6 Cat. 7
450-
ppm
(430-
480-
ppm)
580-720-
ppm
720-
1000-
ppm
>1000-
ppm
450-
ppm
(430-
480-
ppm)
500-
ppm
(480-
530-
ppm)
550-
ppm
(530-
580-
ppm)
580-650-
ppm
650-720-
ppm
720-
1000-
ppm
>1000-
ppm
66% 77 2022 2022 2023 2021 2023 2023 2023 2022 2022 2022 2021 2022
50% 118 2026 2026 2027 2024 2028 2027 2027 2026 2026 2026 2025 2025
33% 200 2037 2033 2036 2030 2040 2038 2036 2034 2034 2032 2031 2031
66% 241 2045 2037 2040 2033 2049 2044 2040 2038 2038 2036 2034 2034
50% 322 - 2044 2047 2038 - - 2052 2047 2045 2042 2039 2040
33% 377 - 2049 2051 2041 - - 2062 2053 2050 2046 2042 2043
66% 622 - 2076 2068 2054 - - - - 2078 2063 2056 2058
50% 731 - - 2075 2059 - - - - 2097 2071 2061 2063
33% 853 - - 2082 2064 - - - - - 2080 2067 2070
Warming* Likelihood**
Budget
(CCE)*** in
2014
Year of budget achievment (2005-2100)
IPCC
Baseline
avg.
** Fractions of scenario simulations meeting the warming objective with that amount of CCE
*** CCE at the time the temperature threshold is exceeded that are required for 66%, 50%, and 33% of the simulations assuming non-CO2 forcing follows the
RCP8.5 scenario (similar emissions are implied by the other RCP scenarios). For the most scenario-threshold combinations, emissions and warming continue after
the threshold is exceeded. Nevertheless, because of the cumulative nature of the CO2 emissions these figures provide an indication of the cumulative CO2
emissions implied by simulations under RCP-like scenarios. Values are rounded to the nearest 50.
[GtC]
< 1.5°
< 2.0°
< 3.0°
* Warming due to CO2 and non-CO2 drivers. Temperature values are given relative to the 1861-1880 period

25. Forecast of levelised solar costs

26. Forecast of levelised wind costs

27. Incremental capital cost likely to be negligible
Global investment requirements, 2015-2030, constant 2010 USD, trillions
From
+$4T or 4%
(ex. OpEx)
to
-$1T or -1%
(incl. OpEx)
Source: Global Commission on Climate and Economy (2014)