From Cutting
Emissions to
Generating Technology
October 9, 2013
Finance and Climate Change: Outdated
Premises
• International finance is important
• Finance is to compensate countries for
emissions reductions
– Finance as North-South Flow
• Finance is about finance
• Private finance to substitute for public
finance
Addressing the Three Problems
Narrative
Who has the greatest stake in
mitigation/prevention?
Adding-Up
Technology, Technology,
Technology
New World
Contributions calibrated to
economic situation
Where We Need to Get to? Technology,
Technology, Technology
Global emissions/global GDP
(kgs/dollar of GDP in 2000 prices)
2.5
2
Low and middle
income countries
1.5
Averting runaway
climate change
World
100 plus gtons
1
Business-as-usual
High income
countries
0.5
Target (15 gtons, CO2)
0
1960
1968
1976
1984
1992
2000
2008
2016
2024
2032
2040
2048
New World Problem
Cash for cuts
New World Problem
But debt-addled rich have no cash for the poor
and not likely to transfer to the Chinas and Indias
General government debt ratios,
2000-2014, in percent of GDP
advanced G20
economies
emerging G20
economies
Finance for Technology
• More rich country spending on technology generation
internally or on compensating for carbon price
actions domestically
– If consequence is less international finance, fine
• Allowing more developing country spending on green
technologies—
– Need to revisit trade rules (Mattoo and Subramanian, 2013)
– Need to change ideology on government interventions
(industrial policy, research)
• International green fund for technology generation
and dissemination with contributions by ALL
• Finance for Adaptation: NO, NO, NO!
Generating a Technological Revolution:
Who Does What?
How does the Rest facilitate?
What does the
West do?
Key step: Raise
carbon price
Carbon
price-related
actions
Progressively eliminate consumer
subsidies
Commit to commit: “For every one dollar
increase in carbon price at T, we will raise
carbon price by $X by T+Y”
Trade-related
actions
Allow limited border tax adjustments
TechnologyRelated
Actions
Contribute to global technology fund
Eliminate constraints on green subsidies
Raise protection of IPRs related to green
energy and technology
Role reversal: The Rest Leads and
Facilitates West’s Contribution
Carbon
price-related
actions
Trade-related
actions
TechnologyRelated
Actions
Progressively eliminate consumer
subsidies
Commit to commit: “For every one dollar
increase in carbon price at T, we will raise
carbon price by $X by T+Y”
Allow limited border tax adjustments
Eliminate constraints on green subsidies
Contribute to global technology fund
Raise protection of IPRs related to green
energy and technology
Key step: Raising
carbon price in
industrial countries
Political Economy/Plausibility?
Carbon price-related
Actions
Progressively eliminate consumer subsidies
Begun in India
and China
Commit to commit: “For every one dollar
increase in carbon price at T, we will raise
carbon price by $X by T+Y”:
China Started
Allow limited border tax adjustments
WTO Rules
almost there
Eliminate constraints on green subsidies
West that
must Agree
Trade-related actions
Contribute to global technology fund
Technology-related
actions
Ensure strong protection of IPRs related to
green energy and technology
Broaden
Green Fund
???
Not There Yet: Little more
domestic imperative for action
Narrative Problem
Rest: Focusing on past
4
West: Focusing on future
ARE
3
KWT
SGP
AUS USA
CAN
NLD
BEL
HKG
KOR
DEU
CZE
ISR
JPN
GRC
GBR
ESP AUT
ITA
FRA
SAU
KAZ
RUS
ZAF
POL
IRNBLR
VEN
MYS
CHN
ROM
ARG
MEX
CHL
THA
TUR
DZA
2
UKR
UZB
1
IRQ
IDN
0
IND
MAR
VNM
PAK PHL
EGY
BRA
COL
NGA
7
8
9
10
Log of GDP (PPP) per capita, 2008
11
The Adding-Up Problem
Business-as-usual
CO2 needs
Global CO2 budget
Gtons (2005 to 2050)
Developing
countries =
900
Allocate budget to
high income
Gtons (2005 to 2050)
High
income
countries
= 580
Developing country
emissions will satisfy
only 20% of their
emission needs
1
2
Allocate budget to
developing
Global total = 750
1
Total =1480
Developing countries
will satisfy only 85% of
their emission needs,
and
High income countries
cannot consume any
energy!
Unilateral Alternatives to Failed Cooperation:
EU Unilateral Action
US Unilateral Action
Are We Making Progress?
Global emissions/global GDP
(kgs/dollar of GDP in 2000 prices)
2.5
2
Low and middle
income countries
1.5
World
The Stall / Reversal
1
High income countries
0.5
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010