Towards a Global Deal on Climate Change Nicholas Stern Delhi, 31st March 2008 1 Part One Risks and Targets 2 Projected impacts of climate change 0°C Food Water Global temperature change (relative to pre-industrial) 1°C 2°C 3°C 4°C 5°C Falling crop yields in many areas, particularly developing regions Falling yields in many Possible rising yields in developed regions some high latitude regions Small mountain glaciers disappear – water supplies threatened in several areas Significant decreases in water availability in many areas, including Mediterranean and Southern Africa Sea level rise threatens major cities Ecosystems Extensive Damage to Coral Reefs Rising number of species face extinction Extreme Rising intensity of storms, forest fires, droughts, flooding and heat waves Weather Events Risk of Abrupt and Increasing risk of dangerous feedbacks and Major Irreversible abrupt, large-scale shifts in the climate system Changes 3 Probabilities (in %) of exceeding a temperature increase at equilibrium Stabilisation level (in ppm CO2e) 2°C 3°C 4°C 5°C 6°C 7°C 450 78 18 3 1 0 0 500 96 44 11 3 1 0 550 99 69 24 7 2 1 650 100 94 58 24 9 4 750 100 99 82 47 22 9 Source: Hadley Centre: From Murphy et al. 2004 Currently at 430ppm, rising at 2.5ppm p.a. and this rate of increase is increasing 4 Structure of argument on global mitigation objectives • Risk of going above 5°C increase are very severe: e.g. would induce massive movements of population including in the sub-continent; thawing of Himalayan glaciers/ snows with floods/torrents in rainy season; dry rivers in dry season and loss of water from run-off; droughts and floods more severe; cyclones more severe; sea-level rise….. • Global deal essential for India • Stabilisation to 550 or 500ppm CO2e ‛buys’ sharp reduction in probabilities of dangerous temperature increases relative to BAU • Global cuts of 30-50% by 2050 required for target of stabilisation range 550- 500ppm CO2e: implied carbon price around $30 per tonne • Cost of action to get in range looks acceptable relative to reduction of risks and damages avoided 5 Part Two Flows and Costs 6 Delaying mitigation is dangerous and costly 100 450ppm CO2e 90 500ppm CO2e (falling to 450ppm CO2e in 2150) Global Emissions (GtCO2e) 80 70 550ppm CO2e 60 50 Business as Usual 40 50GtCO2e 30 65GtCO2e 20 70GtCO2e 10 0 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 Source: Stern Review 7 Reducing emissions requires action across many sectors 8 Cost of action or inaction • Stern Review examined results from bottom-up (Ch 9) & topdown (Ch 10) studies: concluded that world could stabilise below 550ppm CO2e for around 1% of global GDP. Subsequent analyses IEA/IPCC/McKinsey have indicated similar or lower figures • Starting planning now with clear targets and good policies allows measured action and keeps costs down. Delayed decisions/actions (or “slow ramp”), lack of clarity, bad policy will increase costs • Associated co-benefits (energy security, reduced pollution) and opportunities (innovations, new markets) • Review probably under-estimated emission growth (growth of emissions from China particularly) • Probably under-estimated risks of high-temperatures (omitted features in climate science modelling) and damages from high temperatures (implausible ‘overly linear’ extrapolations) • Thus magnitude of avoided damages under-estimated 9 Part Three A Global Deal 10 Basic Criteria for a Global Deal • Effectiveness: the scale must be commensurate with the challenge • Efficiency: we must keep down the costs of emissions reduction • Equity: the rich countries must take the lead 11 Commitments: percentages • G8 Heiligendamm – global 50% by 2050 (consistent with stabilisation around 500ppm C02e) • California (and US under e.g. Obama/Clinton) - 80% from 1990 levels by 2050. McCain 65% target and has sponsored cap-andtrade bill • France – 75% by 2050 (Factor 4), relative to 1990 • EU Spring Council: 60-80% by 2050 and 20-30% by 2020, relative to 1990 • Germany – 40% by 2020, relative to 1990 • India to stay below rich country average per capita 12 Equity and the GHG ‘reservoir’ • Long-term stabilisation at 550ppm CO2e implies that only a further 120ppm CO2e can be ‘allocated’ for emission, given that we start at 430ppm CO2e (or further 70ppm if targeting 500ppm) • Can view the issue as the use of a “collective reservoir” of 270ppm (i.e. 550 minus the 280ppm of 1850) over 200 years. Over half of reservoir already used mainly by rich countries. (i.e. 150ppm CO2e increase from 280 to 430) • Equity requires a discussion of the appropriate use of this reservoir given past history • Thus convergence of flows does not fully capture the equity story, from emissions perspective • Equity issues arise also in adaptation, given responsibilities for past increases 13 Target: stocks, history, flows • Current 40-45 GtCO2e p.a. Current stocks around 430ppm CO2e; pre-industrial stocks 280ppm • The United States and the EU countries combined accounted for over half of cumulative global emissions from 1900 to 2005 • 50% reduction by 2050 requires per capita global GHG emissions of 2-3T/capita (20-25 Gt divided by 9 billion population) • Currently US ~ 20+, Europe ~10+, China ~5+, India ~1.5 T/capita • Thus 80% reductions would bring Europe, but not US, down to world average. Many developing countries would have to cut strongly too if world average of 2-3 T/capita is to be achieved. If one billion people are around 4 – 5 T/capita then (e.g.) another one billion would have to be around 0 – 1 T/capita • Requires close to zero carbon electricity and surface transport 14 Key elements of a global deal / framework (I) Targets and Trade • Confirm Heiligendamm 50% cuts in world emissions by 2050 with rich country cuts at least 80% • Rich country reductions and trading schemes designed to be open to trade with other countries, including developing countries • Supply side from developing countries simplified to allow much bigger markets for emissions reductions: ‘carbon flows’ from rich to developing countries to rise to $50$100bn p.a. by 2030. Reform CDM to operate on wholesale level. No aggregate targets until rich countries prove credibility 15 Key elements of a global deal / framework (II) Funding Issues (flows from rich to developing) • Strong initiatives, with public funding, on deforestation to prepare for inclusion in trading. For $10-15 bn p.a. could have a programme which might halve deforestation. Importance of global action and involvement of IFIs • Demonstration and sharing of technologies: e.g. $5 bn p.a. commitment to feed-in tariffs for CCS coal would lead to 30+ new commercial size plants in the next 7-8 years • Rich countries have caused most of the problem. Poor countries suffer earliest and hardest. Rich countries to deliver on Monterrey and Gleneagles commitments on ODA in context of extra costs of development arising from climate change: potential extra cost of development with climate change upwards of $80bn p.a. by 2015 16 Implications for India of an effective, efficient and equitable global deal • Sharp reduction of risks (economic, security, climate) for India • Cleaner, safer, more biodiverse and more sustainable development • Substantial inflows of funding for move to low carbon economy (possibly tens of billions of dollars) • Major transfers of technology • Substantial resources for adaptation to more hostile climate, in context of past rich country responsibility for rise in stocks of GHGs 17 Part Four Possible Role for India 18 India: steering toward a global deal I • Insist rich country cuts are at least 80% by 2050 and they have credible interim targets for 2020 • Explain that proposing equality in flows by 2050 is a very weak demand given the history • Explain that those countries (including USA) around or above 20 tonnes per capita should be cutting by 90% • At the same time the rich countries must recognise that they must demonstrate (i) low carbon growth (ii) credible mechanisms, including carbon trading, for helping finance developing country investments (iii) credible mechanisms for transferring technology (iv) funding for extra challenge for developing countries in more hostile climate (adaptation) 19 India: steering toward a global deal II • Explain significance of Merkel/Heiligendamm offer by PM Manmohan Singh: lays down clear challenges to rich countries • Show actions India is taking and planning including Feb. 2008 budget statement (para. 109) and Climate Change Action Plan (June 2008) • Propose that developing countries create their own credible action plans: including energy efficiency; deforestation; facilitating carbon trading; alternative fuels and technologies • Design the successor to Clean Development Mechanism (do not wait for rich countries to propose) capable of operating on scale • Design incentive mechanisms for promoting the transfer of technology 20 Foundations of Strategy for India • Steer international community towards an equitable global deal • Act in self-interest to reduce energy costs and dependence on hydrocarbons in a world of high energy prices and energy insecurity. • Explore India’s natural advantages of sun, wind, gas, tropical forests • Harness India’s entrepreneurship, technical skills and diversity • Leveraging the country’s decentralisation strategy 21 Possible Policy Measures in India - 1 These possible measures not only show action in India which will promote the global deal India and the world urgently need for sustainability, they are also in the short and medium term in India’s self-interest. Challenge is to align individual incentives with India’s self-interest. Revenue raising • Taxes on pollutants including in power and transport, or quota trading with auctioned permits • Reform power sector, particularly reduce T & D losses • Reduce energy subsidies New incentives & technologies • Zero tariffs for imports of cleaner technologies and reduced taxes on cleaner technology • Emissions regulations • Public transport; sustainable cities; electric vehicles • Promote and demonstrate: CCS for coal; solar; nuclear; gas; hydro; CHP; 2nd generation bio-fuels; etc. • Technology challenge fund 22 Possible Policy Measures in India - 2 Institutional • Carbon monitor and regulator • Climate change committee to assess progress and promote policies • World class emissions trading platform: demonstrate for trade within and outside India • Reform grid to promote decentralisation and selling as well as buying • Institutions to encourage afforestation and arrest deforestation Adaptation: CRUCIAL CHALLENGE • Information base – meteorology/ science • Infrastructure: irrigation, transport, flood defence… • Agriculture: new crops; techniques; insurance/early warning … 23 Illustrative growth for India Income/ capita 1600 tonnes/ capita 6 3 2 100 1 2010 2020 2030 2040 2050 2008 • • • • • Rich world followed emission path close to income path One example only: many simulations and possible paths should be examined, together with associated policies Europe likely to be down to 7 or 8 tonnes/capita by 2030 India will require fundamental change to energy strategy Negotiate payment for difference between curves 24