Australia s emissions target: what is an adequate commitment, and how to achieve it? Frank Jotzo Peter J Wood Centre for Climate Economics & Policy Crawford School of Economics & Government, ANU
Copenhagen: non-binding commitments to actions and targets >100 countries, >80% of global emissions Country Type of emissions target 2020 emissions target Base year / nature of target United States Absolute reduction -17% 2005 EU Absolute reduction -20% to -30% 1990 Japan Absolute reduction -25% 1990 Russia Absolute reduction -15% to -25% 1990 Canada Absolute reduction -17% 2005 Australia Absolute reduction -5% to -25% 2000 China Intensity reduction -40% to -45% Emissions intensity change 2005-2020 India Intensity reduction -20% to -25% Emissions intensity change 2005-2020 Indonesia Reduction below BAU -26% Reduction below BAU at 2020 Brazil Reduction below BAU -36% to -39% Reduction below BAU at 2020 Mexico Reduction below BAU -30% Reduction below BAU at 2020 Korea Reduction below BAU -30% Reduction below BAU at 2020 South Africa Reduction below BAU -34% Reduction below BAU at 2020
Putting targets on a common footing, and comparing them across different metrics How do the pledges compare? 1. Absolute emissions 2. Per capita emissions 3. Emissions intensity 4. Relative to business-as-usual
Absolute emissions Targeted change, % from 2005 to 2020 120% 100% 80% 60% 40% 20% 0% 20% 40% 60% United States EU 27 Japan Russia Canada Australia China India Indonesia Brazil Mexico South Korea South Africa Annex I Non Annex I For mid-point of target ranges where applicable. Central scenario assumptions.
Framing: the base year matters Targeted absolute emissions change, from year x to 2020 240% 200% 160% 120% 80% 40% 0% 40% 2005 base 2000 base 1990 base US EU Australia China India What about a 2010 base year?! For mid-point of target ranges where applicable. Central scenario assumptions.
Per-capita changes differ greatly from absolute changes Targeted change, from 2005 to 2020 120% 100% 80% 60% 40% 20% 0% 20% 40% Absolute emissions Per capita emissions United States EU 27 Japan Russia Canada Australia China India Indonesia Brazil Mexico Korea South Africa For mid-point of target ranges where applicable. Central scenario assumptions.
Convergence? Per capita targets versus per capita emissions levels 80% 60% India China Change in emissions per capita, 2005-2020 40% 20% 0% -20% -40% -60% Logarithmic regression line 0 5 10 15 20 25 30 35 Mexico S.Africa, Indo EU S.Korea Japan Russia Brazil USA Per capita emissions level, 2005 Canada Australia
Emissions intensity Targeted change, % from 2005 to 2020 0% 10% 20% 30% 40% 50% 60% 70% United States EU 27 Japan Russia Canada Australia China India Indonesia Brazil Mexico Korea South Africa Annex I avg Non Annex I avg For mid-point of target ranges where applicable. Central scenario assumptions.
Targeted change rel to business-as-usual % difference at 2020 0% 5% 10% 15% 20% 25% 30% 35% 40% United States EU Japan Russia Canada Australia China India Indonesia Brazil Mexico Korea South Africa Annex I avg Non Annex I avg For mid-point of target ranges where applicable. Central scenario assumptions. BAU assumptions contestable
Australia s Copenhagen commitment (reduction in national emissions at 2020 relative to 2000) 25% if the world agrees to an ambitious global deal capable of stabilising [...] at 450 ppm CO 2 eq or lower (but post 2020 ramp up not impossible?) up to 15% if there is a global agreement which falls short of [450] and under which major developing countries commit to substantially restrain emissions and advanced economies take on commitments comparable to Australia s 5% Unconditional n/a
-15% justified on basis of other countries Copenhagen pledges
The carbon pricing debate, 2010-11 Emitters want predictability (and freebies) Gov t sees c-pricing as necessary, but has been stung Greens want c-price, but want to leave target open A fixed price permit scheme Govt sells unlimited amount of permits at fixed price Price rises by x% pa Can convert to market-based system at any time
Price floors and price ceilings under cap-and-trade Price floor Minimum price, emissions < cap All permits are auctioned at a minimum reserve price; or Emitters required to pay an extra fee/tax Price ceiling Maximum price, emissions > cap govt issues unlimited extra permits at threshold price; a limited amount of extra permits are auctioned at a higher reserve price ( allowance reserve )
$/tco2 70 60 price ceiling 50 40 market price 30 20 fixed price price floor 10 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 15
Additional slides
Methodology for converting targets Form of country target: Metric for comparison: Absolute change in emissions Change in percapita emissions Change in emissions intensity Reduction in emissions relative to BAU Absolute emissions target (no assumptions needed, as target framed in this metric only conversion to common base year necessary) Emissions intensity target Assume GDP growth rate Target relative to BAU Assume BAU emissions trajectory Assume population growth rate, apply to absolute change in emissions Assume GDP growth rate Assume BAU emissions trajectory (no assumptions needed, as target framed in this metric) Assume BAU emissions trajectory and GDP growth rate Assume BAU emissions trajectory and GDP growth rate (no assumptions needed, as target framed in this metric)
Absolute emissions - developed Targeted change, % from 2005 to 2020 80% 60% 40% 20% 0% 20% 40% US EU Japan Russia Canada Australia Weighted average Central scenario assumptions.
Emissions intensity targets vs level of emissions intensity 0% -10% Change in emissions intensity, 2005-2020 -20% -30% -40% -50% -60% EU USA Japan Mexico S.Korea India Canada Australia S.Africa Russia China Brazil Indonesia -70% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Emissions intensity level, 2005 (kgco2-eq/$ppp)
Emissions intensity targets vs GDP growth rate 0% Targeted change in emissions intensity, 2005-2020 -10% -20% -30% -40% -50% -60% -70% Japan EU Canada USA Australia Russia Mexico S.Korea S.Africa Brazil India Indonesia 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% Projected annual average GDP growth rate, 2005-2020 China
Uncertain estimates Complexity and uncertainty of estimates Economic costs (need BAU plus assumptions on abatement options and costs, in CGE modelling framework) Relative to BAU (need assumptions on BAU emissions intensity and GDP projections) Emissions intensity (need GDP projections) Absolute targets Per capita (need population projections) Comparability of effort
Targeted change relative to BAU % difference at 2020 10% 0% 10% 20% 30% 40% 50% 60% This study McKibbin, Morris & Wilcoxen 2010 US EU Japan Australia China India For mid-point of target ranges where applicable.
Targeted change relative to BAU Quantity difference at 2020 China 43% Brazil 10% other developed 9% EU 11% For mid-point of target ranges where applicable. US 17% Indonesia 5% other developing 5% BAU assumptions contestable
2% 1% 0% 1% 2% 3% 4% 5% 6% 7% China: can the big gains in emissions intensity be repeated? Annual change in emissions intensity 2002 2007 China's target 2005 2020 BAU this study BAU McKibbin ea Stern&Jotzo IEA ref scenario EIA ref case Definition of BAU critical 1997 2002 1992 1997 1987 1992
Australia s commitment: the fine print Press release Minister Wong, 27 Jan 2010: The Government will not increase Australia s emissions reduction target above 5 per cent until: the level of global ambition becomes sufficiently clear, including both the specific targets of advanced economies and the verifiable emissions reduction actions of China and India; the credibility of those commitments and actions is established, for example, by way of a robust global agreement at the next United Nations Climate Change Conference in Mexico, or commitment to verifiable domestic action on the part of major emitters including the United States, India and China; and there is clarity on the assumptions for emissions accounting and access to markets