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REPORTS - ASSESSMENT REPORTS |
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Climate Change 2001: Synthesis Report |
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| Question 7
What is known about the potential for, and costs and
benefits of, and time frame for reducing greenhouse gas emissions?
- What would be the economic and social costs and
benefits and equity implications of options for policies and measures,
and the mechanisms of the Kyoto Protocol, that might be considered to
address climate change regionally and globally?
- What portfolios of options of research and development,
investments, and other policies might be considered that would be most
effective to enhance the development and deployment of technologies
that address climate change?
- What kind of economic and other policy options might
be considered to remove existing and potential barriers and to stimulate
private- and public-sector technology transfer and deployment among
countries, and what effect might these have on projected emissions?
- How does the timing of the options contained in
the above affect associated economic costs and benefits, and the atmospheric
concentrations of greenhouse gases over the next century and beyond?
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There are many opportunities including technological options
to reduce near-term emissions, but barriers to their deployment exist.
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Q7.2-7 |
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Significant technical progress relevant to the potential
for greenhouse gas emission reductions has been made since the SAR in
1995, and has been faster than anticipated. Net emissions reductions
could be achieved through a portfolio of technologies (e.g., more efficient
conversion in production and use of energy, shift to low- or no-greenhouse
gas-emitting technologies, carbon removal and storage, and improved land
use, land-use change, and forestry practices). Advances are taking place
in a wide range of technologies at different stages of development, ranging
from the market introduction of wind turbines and the rapid elimination
of industrial by-product gases, to the advancement of fuel cell technology
and the demonstration of underground CO2 storage.
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Q7.3 |
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| The successful implementation of greenhouse
gas mitigation options would need to overcome technical, economic, political,
cultural, social, behavioral, and/or institutional barriers that prevent
the full exploitation of the technological, economic, and social opportunities
of these options. The potential mitigation
opportunities and types of barriers vary by region and sector, and over
time. This is caused by the wide variation in mitigative capacity. Most
countries could benefit from innovative financing, social learning and innovation,
institutional reforms, removing barriers to trade, and poverty eradication.
In addition, in industrialized countries, future opportunities lie primarily
in removing social and behavioral barriers; in countries with economies
in transition, in price rationalization; and in developing countries, in
price rationalization, increased access to data and information, availability
of advanced technologies, financial resources, and training and capacity
building. Opportunities for any given country, however, might be found in
the removal of any combination of barriers. |
Q7.6 |
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| National responses to climate change can
be more effective if deployed as a portfolio of policy instruments to limit
or reduce net greenhouse gas emissions. The
portfolio may include -- according to national circumstances -- emissions/carbon/energy
taxes, tradable or non-tradable permits, land-use policies, provision and/or
removal of subsidies, deposit/refund systems, technology or performance
standards, energy mix requirement, product bans, voluntary agreements, government
spending and investment, and support for research and development. |
Q7.7 |
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Cost estimates by different models and studies vary for
many reasons.
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Q7.14-19 |
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| For a variety of reasons, significant
differences and uncertainties surround specific quantitative estimates of
mitigation costs. Cost estimates differ because of the (a) methodology6
used in the analysis, and (b) underlying factors and assumptions built into
the analysis. The inclusion of some factors will lead to lower estimates
and others to higher estimates. Incorporating multiple greenhouse gases,
sinks, induced technical change, and emissions trading7
can lower estimated costs. Further, studies suggest that some sources of
greenhouse gas emissions can be limited at no, or negative, net social cost
to the extent that policies can exploit no-regret opportunities such as
correcting market imperfections, inclusion of ancillary benefits, and efficient
tax revenue recycling. International cooperation that facilitates cost-effective
emissions reductions can lower mitigation costs. On the other hand, accounting
for potential short-term macro shocks to the economy, constraints on the
use of domestic and international market mechanisms, high transaction costs,
inclusion of ancillary costs, and ineffective tax recycling measures can
increase estimated costs. Since no analysis incorporates all relevant factors
affecting mitigation costs, estimated costs may not reflect the actual costs
of implementing mitigation actions. |
Q7.14 & Q7.20 |
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Studies examined in the TAR suggest substantial opportunities
for lowering mitigation costs.
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Q7.15-16 |
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| Bottom-up studies indicate that substantial
low cost mitigation opportunities exist.
According to bottom-up studies, global emissions reductions of 1.9-2.6
Gt Ceq (gigatonnes of carbon equivalent), and 3.6-5.0 Gt
Ceq per year 8
could be achieved by the years 2010 and 2020, respectively. Half of these
potential emissions reductions could be achieved by the year 2020 with direct
benefits (energy saved) exceeding direct costs (net capital, operating,
and maintenance costs), and the other half at a net direct cost of up to
US$100 per t Ceq (at 1998 prices). These net direct cost estimates
are derived using discount rates in the range of 5 to 12%, consistent with
public sector discount rates. Private internal rates of return vary greatly,
and are often significantly higher, affecting the rate of adoption of these
technologies by private entities. Depending on the emissions scenario this
could allow global emissions to be reduced below year 2000 levels in 2010-2020
at these net direct cost estimates. Realizing these reductions involves
additional implementation costs, which in some cases may be substantial,
the possible need for supporting policies, increased research and development,
effective technology transfer, and overcoming other barriers. The various
global, regional, national, sector, and project studies assessed in the
WGIII TAR have different
scopes and assumptions. Studies do not exist for every sector and region. |
Q7.15 & Q7
Table 7-1 |
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| Forests, agricultural lands, and other
terrestrial ecosystems offer significant carbon mitigation potential. Conservation
and sequestration of carbon, although not necessarily permanent, may allow
time for other options to be further developed and implemented.
Biological mitigation can occur by three strategies: (a) conservation
of existing carbon pools, (b) sequestration by increasing the size of carbon
pools,9
and (c) substitution of sustainably produced biological products. The estimated
global potential of biological mitigation options is on the order of 100
Gt C (cumulative) by year 2050, equivalent to about 10 to 20% of projected
fossil-fuel emissions during that period, although there are substantial
uncertainties associated with this estimate. Realization of this potential
depends upon land and water availability as well as the rates of adoption
of land management practices. The largest biological potential for atmospheric
carbon mitigation is in subtropical and tropical regions. Cost estimates
reported to date for biological mitigation vary significantly from US$0.1
to about US$20 per t C in several tropical countries and from US$20 to US$100
per t C in non-tropical countries. Methods of financial analyses and carbon
accounting have not been comparable. Moreover, the cost calculations do
not cover, in many instances, inter alia, costs for infrastructure,
appropriate discounting, monitoring, data collection and implementation
costs, opportunity costs of land and maintenance, or other recurring costs,
which are often excluded or overlooked. The lower end of the range is assessed
to be biased downwards, but understanding and treatment of costs is improving
over time. Biological mitigation options may reduce or increase non-CO2greenhouse
gas emissions. |
Q7.4 & Q7.16 |
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| The cost estimates for Annex B countries
to implement the Kyoto Protocol vary between studies and regions, and depend
strongly, among others, upon the assumptions regarding the use of the Kyoto
mechanisms, and their interactions with domestic measures (see Figure
SPM-8 for comparison of regional Annex II mitigation costs).
The great majority of global studies reporting and comparing these costs
use international energy-economic models. Nine of these studies suggest
the following GDP impacts. In the absence of emissions trade between Annex
B countries, these studies show reductions in projected GDP10
of about 0.2 to 2% in the year 2010 for different Annex II regions. With
full emissions trading between Annex B countries, the estimated reductions
in the year 2010 are between 0.1 and 1.1% of projected GDP. The global modeling
studies reported above show national marginal costs to meet the Kyoto targets
from about US$20 up to US$600 per t C without trading, and a range from
about US$15 up to US$150 per t C with Annex B trading. For most economies-in-transition
countries, GDP effects range from negligible to a several percent increase.
However, for some economies-in-transition countries, implementing the Kyoto
Protocol will have similar impact on GDP as for Annex II countries. At the
time of these studies, most models did not include sinks, non-CO2
greenhouse gases, the Clean Development Mechanism (CDM), negative cost options,
ancillary benefits, or targeted revenue recycling, the inclusion of which
will reduce estimated costs. On the other hand, these models make assumptions
which underestimate costs because they assume full use of emissions trading
without transaction costs, both within and among Annex B countries, and
that mitigation responses would be perfectly efficient and that economies
begin to adjust to the need to meet Kyoto targets between 1990 and 2000.
The cost reductions from Kyoto mechanisms may depend on the details of implementation,
including the compatibility of domestic and international mechanisms, constraints,
and transaction costs. |
Q7.17-18 |
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Figure SPM-8: Projections of GDP losses and marginal costs in Annex
II countries in the year 2010 from global models: (a) GDP losses and (b)
marginal costs. The reductions in projected GDP are for the
year 2010 relative to the models' reference case GDP. These estimates
are based on results from nine modeling teams that participated in an Energy
Modeling Forum study. The projections reported in the figure are for four
regions that constitute Annex II. The models examined two scenarios. In
the first, each region makes the prescribed reduction with only domestic
trading in carbon emissions. In the second, Annex B trading is permitted,
and thereby marginal costs are equal across regions. For each case or region,
the maximum, minimum, and median values across all models of the estimated
marginal costs are shown. For the key factors, assumptions, and uncertainties
underlying the studies, see Table
7-3 and Box 7-1 in the underlying
report.
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Q7.18-19 |
| Emission constraints on Annex I countries
have well-established, albeit varied, "spill-over" effects 11
on non-Annex I countries. Analyses
report reductions in both projected GDP and reductions in projected oil
revenues for oil-exporting, non-Annex I countries. The study reporting
the lowest costs shows reductions of 0.2% of projected GDP with no emissions
trading, and less than 0.05% of projected GDP with Annex B emissions trading
in the year 201012.
The study reporting the highest costs shows reductions of 25% of projected
oil revenues with no emissions trading, and 13% of projected oil revenues
with Annex B emissions trading in the year 2010. These studies do not
consider policies and measures other than Annex B emissions trading, that
could lessen the impacts on non-Annex I, oil-exporting countries. The
effects on these countries can be further reduced by removal of subsidies
for fossil fuels, energy tax restructuring according to carbon content,
increased use of natural gas, and diversification of the economies of
non-Annex I, oil-exporting countries. Other non-Annex I countries may
be adversely affected by reductions in demand for their exports to Organisation
for Economic Cooperation and Development (OECD) nations and by the price
increase of those carbon-intensive and other products they continue to
import. These other non-Annex I countries may benefit from the reduction
in fuel prices, increased exports of carbon-intensive products, and the
transfer of environmentally sound technologies and know-how. The possible
relocation of some carbon-intensive industries to non-Annex I countries
and wider impacts on trade flows in response to changing prices may lead
to carbon leakage13
on the order of 5-20%.
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Q7.19 |
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Technology development and diffusion are important components
of cost-effective stabilization.
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Q7.9-12 & Q7.23 |
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| Development and transfer of environmentally
sound technologies could play a critical role in reducing the cost of stabilizing
greenhouse gas concentrations. Transfer
of technologies between countries and regions could widen the choice of
options at the regional level. Economies of scale and learning will lower
the costs of their adoption. Through sound economic policy and regulatory
frameworks, transparency, and political stability, governments could create
an enabling environment for private- and public-sector technology transfers.
Adequate human and organizational capacity is essential at every stage to
increase the flow, and improve the quality, of technology transfer. In addition,
networking among private and public stakeholders, and focusing on products
and techniques with multiple ancillary benefits, that meet or adapt to local
development needs and priorities, is essential for most effective technology
transfers. |
Q7.9-12 & Q7.23 |
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| Lower emissions scenarios require different
patterns of energy resource development and an increase in energy research
and development to assist accelerating the development and deployment of
advanced environmentally sound energy technologies. Emissions
of CO2 due to fossil-fuel burning are virtually certain to be
the dominant influence on the trend of atmospheric CO2 concentration
during the 21st century. Resource data assessed in the TAR may imply a change
in the energy mix and the introduction of new sources of energy during the
21st century. The choice of energy mix and associated technologies and investments -- either
more in the direction of exploitation of unconventional oil and gas resources,
or in the direction of non-fossil energy sources or fossil energy technology
with carbon capture and storage -- will determine whether, and if so,
at what level and cost, greenhouse concentrations can be stabilized. |
Q7.27 |
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Both the pathway to stabilization and the stabilization
level itself are key determinants of mitigation costs.14
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Q7.24-25 |
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| The pathway to meeting a particular
stabilization target will have an impact on mitigation cost (see Figure
SPM-9). A gradual transition
away from the world's present energy system towards a less carbon-emitting
economy minimizes costs associated with premature retirement of existing
capital stock and provides time for technology development, and avoids premature
lock-in to early versions of rapidly developing low-emission technology.
On the other hand, more rapid near-term action would increase flexibility
in moving towards stabilization, decrease environmental and human risks
and the costs associated with projected changes in climate, may stimulate
more rapid deployment of existing low-emission technologies, and provide
strong near-term incentives to future technological changes. |
Q7.24 |
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Studies show that the costs of stabilizing
CO2 concentrations in the atmosphere increase as the concentration
stabilization level declines. Different baselines can have a strong influence
on absolute costs (see Figure SPM-9).
While there is a moderate increase in the costs when passing
from a 750 to a 550 ppm concentration stabilization level, there is a larger
increase in costs passing from 550 to 450 ppm unless the emissions in the
baseline scenario are very low. Although model projections indicate long-term
global growth paths of GDP are not significantly affected by mitigation
actions towards stabilization, these do not show the larger variations that
occur over some shorter time periods, sectors, or regions. These studies
did not incorporate carbon sequestration and did not examine the possible
effect of more ambitious targets on induced technological change. Also,
the issue of uncertainty takes on increasing importance as the time frame
is expanded.
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Q7.25 |
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Figure SPM-9: Indicative relationship in the year 2050 between
the relative GDP reduction caused by mitigation activities, the SRES scenarios,
and the stabilization level. The reduction in GDP tends to increase
with the stringency of the stabilization level, but the costs are very
sensitive to the choice of the baseline scenario. These projected mitigation
costs do not take into account potential benefits of avoided climate change
(for more information, see the caption for Figure
7-4 of the underlying report).
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Q7.25 |
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