An Environmental Outlook to 2050: focussing on Climate Change

Set-up of the presentation Introduction Baseline projections Pathways for limiting climate change Policy steps for a low-carbon, climate resilient economy 2

Environmental Outlook to 2050 Structure of the Report Executive Summary 1. Introduction 2. Socioeconomic Developments 3. Climate Change 4. Biodiversity 5. Freshwater 6. Health and Environment Annex on the Modelling Framework Environment Directorate 3

Approach and modelling methodology Linking economic and environmental modelling a general equilibrium economic modelling framework (ENV-LINKAGES at the OECD/ENV) a comprehensive environmental modelling framework (IMAGE suite of models at the Netherlands Environmental Assessment Agency) 4

5 Linking economy and environment Population & demographics Capital supply Natural resources Economic growth Fuel prices Energy efficiency Yield efficiency Energy use Bioenergy Land use Local air pollution GHG emissions Deforestation Health & environment Climate change Water stress & water quality Biodiversity 5

Set-up of the presentation Introduction Baseline projections Pathways for limiting climate change Policy steps for a low-carbon, climate resilient economy 6

Billions of USD PPP 2010 Projections for GDP Global GDP is projected to quadruple by 2050; GDP growth is especially high in regions with growing population and that are far from their frontier, i.e. that have large scope for productivity improvements OECD BRIICS ROW USA China India 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2010 2015 2020 2025 2030 2035 2040 2045 2050 7 OECD Environmental Outlook (2012) projection using ENV-Linkages model

Environmental state and pressures (1) GtCO2e GtCO2e 2010 2010 2012 2012 2014 2014 2016 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 Global GHG emissions are expected to grow by 50% between now and 2050, mostly driven by GDP growth in Brazil, Indonesia, India and China and South Africa. 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 OECD CO2 A1 (energy+industrial) (23% 2050) Russia & CO2 rest (Land of A1(7%) use) Rest CH4of BRIICS N2O(44%) HFC+PFC+SF6 ROW (26%) 00 8 OECD Environmental Outlook (2012) projection using ENV-Linkages model

Environmental state and pressures (2) Energy-related CO2 emissions were at an all-time high in 2010 and - despite energy efficiency improvements - energy use and associated emissions are projected to continue to increase CO2 emissions from energy and industry to 2050, baseline GtCO2 60 50 40 Industrial processes power generation energy transf ormation* transport 30 industry 20 residential 10 services Other sectors 0 1980 1990 2000 2010 2020 2030 2040 2050 OECD Environmental Outlook (2012) projection using IMAGE model 9

CO2 concentration (ppm) Environmental state and pressures (3) Temperature increase ( o C) In the Baseline projection, atmospheric concentration of GHGs could reach almost 685 ppm CO 2 equivalent by 2050 (and CO 2 only 530 ppm), and global temperature could increase by 3-6 C above pre-industrial by 2100 We are WAY OFF TRACK CO 2 concentrations Regional temperature increase by 2050 1 000 900 6.0 5.5 5.0 800 4.5 700 4.0 3.5 600 3.0 500 450 ppm 2.5 2.0 2 o C 400 1.5 300 1.0 0.5 200 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 0.0 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 10 OECD Environmental Outlook (2012) projection using ENV-Linkages model

Environmental state and pressures (4) Cost of damages are likely to be high if you miss the target. The world is looking at potentially large scale social, economic and environmental damages Change of annual temperature between 1990-2050 11 OECD Environmental Outlook (2012) projection using ENV-Linkages model

Set-up of the presentation Introduction Baseline projections Pathways for limiting climate change Policy steps for a low-carbon, climate resilient economy 12

Two necessary policies Adaptation Mitigation Adaptation policies are needed to safeguard the well-being of current and future generations worldwide. Integrating adaptation in development co-operation is critical 13

Reverse GHG emission trends 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100 The 450ppm core scenario: start pricing carbon in 2013; least cost timing of action: cheap options first, use low cost technologies, rely on BECCS at the end of the century GtCO 2 e Outlook Baseline 450 ppm Core 130 120 110 100 90 80 70 60 50 40 30 20 10 0 14 OECD Environmental Outlook (2012) projection using ENV-Linkages model

The cost of action is affordable for now The average GDP growth rate would slow by 0.2 percentage point between 2010 and 2050, from 3.5% to 3.3% in a context of quadrupling of world GDP. Benefits of action are not included in GDP projection Index 2010=100 450 400 350 Baseline scenario 450 ppm core scenario GDP -5.5% 300 250 200 150 100 GHG emissions -69.5% 50 0 2010 2015 2020 2025 2030 2035 2040 2045 2050 15 OECD Environmental Outlook (2012) projection using ENV-Linkages model

2010 There are other pathways 2015 2020 2025 2030 2035 2040 2045 2050 Three scenarios for the same objective: The 450ppm core scenario, based on least cost timing of action «Delayed action», based on Copenhagen pledges «Accelerated action», implying reduced reliance on new technologies Outlook Baseline 450 ppm Core GtCO 2 e Outlook Baseline Outlook Baseline 450 ppm Core 450 450 ppm ppm Core Delayed Action 450 ppm Delayed Action 450 ppm Accelerated Action 90 80 70 60 50 40 30 20 10 0 16 OECD Environmental Outlook (2012) projection using ENV-Linkages model

World Canada Act now, delay is costly USA Oceania EU27 & EFTA Japan & Korea Brazil South Africa India Indonesia China Rest of Annex I Russia Mexico M.East & N.Africa Delaying action would increase the global cost of mitigation by nearly 50% by 2050, and could make it unaffordable 5% 0% -5% -10% -15% -20% -25% 450 ppm Core 450 ppm delayed action -30% 17 OECD Environmental Outlook (2012) projection using ENV-Linkages model

Set-up of the presentation Introduction Baseline projections Pathways for limiting climate change Policy steps for a low-carbon, climate resilient economy 18

Why make CO2 cheaper if you re trying to make it scarcer? USD $409 billion 2010, developing country fossil fuel consumption subsidies $45-75 billion 2010, in fossil fuel support in OECD countries $ 44 billion, 2010, global renewable electricity subsidies 5 4 3 2 1 0-1 -2 Income gains from unilateral removal of fossil fuel consumer subsidies in emerging and developing countries (% change in HH income vs BAU) Oil-exporting countries 6% less emissions globally from removal of these fossil fuel subsidies India China Russia Rest of the World Non-EU Eastern European Countries OECD Environmental Outlook (2012) projection using ENV-Linkages model based on IEA data; OECD and IEA analysis see website: www.oecd.org/iea-oecd-ffs 20

Policy steps to build a low-carbon economy 1. Set clear, long-term, more stringent and economy-wide GHG mitigation targets 2. Put a price on carbon, preferably through market-based instruments 3. Reform fossil fuel support policies 4. Foster innovation and support new clean technologies in a «technology-neutral» way 21

4. Foster innovation and support new clean technologies in a «neutral» way Except in 2009 for the green stimulus, public RD&D on energy as share of total R&D budgets has declined in real terms over the last 35 years (IEA). USD Billion (2009 prices and PPP1) 24 20 16 Energy efficiency Fossil fuel (e.g. CCS and clean coal) Renewable energy sources Hydrogen and fuel cells Nuclear Other Share of energy R&D in total R&D (right axis) Percent 12 10 8 12 6 8 4 4 2 0 1975 1980 1985 1990 1995 2000 2005 0 22

% Impact on real income in 2050 4. Foster innovation and support new clean technologies in a «neutral» way Leaving out any single technology such as nuclear or carbon capture and storage (CCS) will make the costs of the transition higher 450 scenario (all technologies) 0% No CCS Nuclear phase-out Restricted Energy Efficiency & renewables -5% -10% -15% -20% -25% -30% World OECD A1 RestA1 BIICS RoW 23 OECD Environmental Outlook (2012) projection using ENV-Linkages model

An Environmental Outlook to 2050 Thank you! More information on the OECD Environmental Outlook to 2050: www.oecd.org/environment/outlookto2050 More information on the OECD modelling work: www.oecd.org/environment/modelling Directly contact me at: Rob.Dellink@oecd.org 25