1. Developing Countries in the Context of Climate Change
Mitigation and Energy System Transformation
Rio + 20 Workshop / DAAD Webinar
Potsdam, November 27, 2012
Dr. Jan Steckel
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2. Outline of the talk
• A changing climate and developing countries
• Economic development, energy use and CO2 emissions
• The energy system transformation in the context of global justice
• Climate policy and energy – reframing model results
• Some final thoughts on climate policy and growth
2

3. A changing climate and developing countries

4. Long term trends show clear evidence
Source: Berkeley Earth Surface Temperature Project
•Temporal slow downs of global warming have occurred already in the past
•Recent independent examination of IPCC results (Berkeley Earth Surface
Temperature Project) has confirmed results 4

5. Average temperature anomaly per year
( Peterson and Baringer 2009)
Last decade was the warmest since
the beginning of industrialization ! 5

6. Projections of Global Warming
6
(IPCC 2007)

7. Tipping Points
(Lenton et al. 2008)
7

8. Impacts
8
(IPCC 2007)

9. Impacts for Developing Countries
9
(IPCC 2007)

10. Where do we stand? – GHG emissions by country today
10
(World Bank 2010)

11. Wealth and carbon emissions
4
10
P: Fossil CO2 emissions (kg C per person and year)
United States
Germany
Russia
France Japan
3 South Africa
10
Mexico
China
Egypt Brazil
2 India
10
Bangladesh
1
10
Ethiopia
Fitting line: ln P=0.987 ln K+c
3 4 5
10 10 10
K: Capital stock (US$2000 per person) 11
( Füssel 2007)

12. Economic Development, Energy Use, and CO2 Emissions

13. Role of developing countries in mitigating climate change
Global emissions
BAU
550 ppm CO2-e scenario
Based on data from Luderer et al. (2012)
Non Annex I countries will need to bare a major share of the reduced emissions !
13

14. The scope of the challenge
(WDR 2010)
Key question for developing countries:
Is leapfrogging possible?
14

15. Empirical relationship between economic and emissions growth and
energy consumption in developing countries
Energy 1971 - 2005 Emissions 1971 - 2005
Developing countries Developing countries
Stronger Stronger
coupling of coupling of
growth and growth and
energy emissions
OECD countries OECD countries
Weaker Weaker
coupling of coupling of
growth and growth and
energy emissions
‚Decoupling‘ should not be expected for (Jakob et al. 2012)
developing countries in the near to midterm
15

16. Who’s driving emissions ?
1971-2007
Annual effect on CO2 growth
- Global emissions growth in recent years mainly by newly
industrializing and developing countries
- China’s role outstanding
i. High GDP-growth
ii. Slower improvement of energy intensity
iii. Scaling effects of traditional coal use in China
16

17. Understanding emissions growth
Kaya Identity: CO2 = pop x
GDP
x E x CO2
pop GDP E
China India NICs
USA Europe (OECD) OECD (all)
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18. Drivers of global emissions
Decomposition of Carbon intensity
(updated from Steckel et al, 2011)
Global Economic
Crisis
18

19. Renaissance of Coal?
(IMF 2011)
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20. Fossil Fuel Scarcity vs. Limited Atmospheric Space
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21. Conclusions 1st part
• Leapfrogging is not taking place
• Economic growth particularly in newly industrializing countries drives
CO2 emissions
21

22. The Energy System Transformation in the Context of Global
Justice

23. Fossil Fuels Dominate the World Energy System
Traditional biomass 6%
Modern bioenergy 4%
Shares of Primary Energy Supply 2008
23

24. Transformation of the Energy System
(Luderer et 24 2011)
al.,

25. Transformation of the Energy System
models
MERGE TIMER POLES REMIND E3MG
Baseline
Many different pathways to transform the energy system
400 ppm-eq
 Different possibilities to reach low stabilisation (Knopf et al. 2009)
 400ppm can be achieved by all models 25

26. Renewable Energy Potentials
(Edenhofer et al. 2011)
26

27. Costs of Renewable Energy
(Edenhofer et al. 2011) 27

28. Costs of mitigation
( Edenhofer et al. 2011)
Costs hinge critically on:
• The stabilization target
• The biomass potential
• The availability of technologies, RE and CCS in particular
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29. Mitigation costs in developing countries
Global
NA-I countries
Luderer et al. 2012
Mitigation costs in developing countries rather moderate; however this is due to
financial transfers from developed countries 29

30. How to finance mitigation in developing countries?
Non-market based mechanisms to disburse climate finance:
Coverage of incremental investment costs
Coverage of total mitigation costs
Market-based mechanisms (International Emissions Trading):
Grandfathering, or allocation proportional to GDP
Equal per capita allocation of permits
Contraction and Convergence
30

31. Non-Market Transfers
31
(Jakob et al, submitted.)

32. Emission Trading
per capita per capita
(Jakob et al, submitted.)
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33. Transfer payments and long term growth
Negative influence of resource rents on
Sachs and Warner, 2001
GDP / capita 1970 - 1989
long term growth conceivable
(“Resource Curse“)
Resource exports in % of
GDP, 1970
Climate
Finance Range
[% of GDP]
• Climate rent comparable to
resource rent
• Transfers might be in the same
order of magnitude
Data: • Institutional quality of receiving
Resource Exports, FDI: Year 2009
Aid: Year 2008
countries is critical
ETS: ReMIND scenario Year 2020
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34. How to Avoid a Climate Finance Curse?
• Possible problems with financial inflows: volatility, Dutch disease, rent-
seeking
• Higher risk of climate finance curse with emissions trading; but
problem to efficiently deliver non-market transfers
• Transfer of rents can be limited by appropriate choice of allocation; but
might conflict with notions of equity
• Properly designed institutions can reduce risk of climate finance curse
(e.g. price corridors, sovereign wealth funds, civil society involvment)
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35. Conclusions 2nd part
• Leapfrogging is not taking place
• Economic growth particularly in newly industrializing countries drives
CO2 emissions
• A structural transformation of the energy system is possible at modest
costs (according to state-of-the art models); but without historical
precedent
• How to design climate policy in developing countries is a key issue
35

36. Climate Policy and Energy – Reframing model results

37. Energy Access
(Edenhofer et al. 2011)
Number of people (millions) without access to electricity
37

38. Energy and Human Development Index
i. Do countries need to
meet a certain level of
Very high energy consumption
High
to reach high
development levels?
ii. What does that mean
for climate mitigation
targets?
Low
Threshold at around 40 GJ per capita
10 GJ per capita can be explained by subsistence needs
Decoupling of energy consumption and development not oberserved in the past
38

39. Energy and development in scenarios
BAU $50
$30
$10
GDP per capita [$]
GDP per capita [$]
Final Energy per capita [GJ] Final Energy per capita [GJ]
• Decoupling of energy and development is seen in
mitigation scenarios
• Energy threshold is however ignored
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40. Energy and Human Development Index
i. Do countries need to
meet a certain level of
Very high energy consumption
High
to reach high
development levels?
ii. What does that mean
for climate mitigation
targets?
Low
Threshold at around 40 GJ per capita
10 GJ per capita can be explained by subsistence needs
Decoupling of energy consumption and development not oberserved in the past
40

41. Infrastructure needs can explain parts of the gap
Cement
Developed Countries
Developing Countries will catch up
(Scenario data in blue)
Steel
Developed Countries
A per capita energy demand of 10 to 20 GJ in developed
countries seems to be stable given today’s technologies.
41
(Steckel et al. submitted)

42. Energy and Human Development Index
Very high
High
Low
Threshold at around 40 GJ per capita
10 GJ per capita can be explained by subsistence needs
10 – 20 GJ per capita might be due to infrastructure uptake and maintenance
42

43. Conclusions 3rd part
• Leapfrogging is not taking place
• Economic growth particularly in newly industrializing countries drives
CO2 emissions
• A structural transformation of the energy system is possible at modest
costs (according to state-of-the art models); but without historical
precedent
• How to design climate policy in developing countries is a key issue
• Infrastructure can next to subsidiary needs explain an energy threshold
for development
• Models predicting modest costs do not take this into account or make
strong assumptions 43

44. Some final thoughts on climate policy and growth
44

45. Drivers of emissions growth
Annual poverty alleviation Annual emissions growth 1980 – 2008 [%]
0%
Annual Poverty Reduction 1981 - 2008
-4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6%
-1%
1980 – 2008 [%]
-2%
-3%
[%]
Worldbank Data (2012)
-4%
-5%
-6%
-7%
Annual growth in CO2 emissions 1981 - 2008 [%]
Regions with the highest
success in poverty East Asia incl. China
alleviation also show
high growth rates in
emissions
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46. Can climate policy impact growth?
Growth is beneficial for the poor!
(Dollar and Kray, 2002)
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47. Mitigation trap in a Solow model
Production function: [$]
Y = β ⋅ kα
Capital formation:
(Steckel 2012)
•
k = k + s( k ) ⋅ Y − δk
K0 KC
In the case of climate policy
β can decrease.
The trap gets more likely in the
presence of climate policy in the
form of βK(s) [Independent from
the form of the function s(k)]
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48. Conclusions
• Impacts from climate change will hit developing countries hardest
• Mitigation burden is equally high (or even higher) for developing
countries
• Technologies might help to mitigate climate change, but …
• low carbon technologies are still more expensive than fossil fuels
• Models see that mitigation costs are comparably low for developing
countries
• Transfers to developing countries might impose negative effects on
long term growth
• Mitigation might impose a poverty trap under certain circumstances,
but further research is needed !
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49. Thank you for your attention!
http://www.pik-potsdam.de/members/steckel