Timing Of Emission Reductions Research Articles

Environmental protection, public finance requirements and the timing of emission reductions

AbstractThe effects of four environmental policy options for the reduction of pollution emissions, i.e. taxes, emission standards, auctioned permits and freely allocated permits, are analyzed. The setup is a real option model where the amount of emissions is determined by solving the firm's profit maximization problem under each policy instrument. The regulator solves an optimal stopping problem in order to find the critical threshold for policy adoptions taking into account revenues from taxes and auctioned permits and government spending. In this framework we find the ranking of the alternative policy options in terms of their adoption lag and social welfare. We show that when the output demand is elastic, emission standards are preferred to freely allocated permits. Taxes and auctioned permits are always equivalent in terms of their adoption lag and social welfare, and also equivalent to emission standards when the regulator redistributes revenues.

Copenhagen Accord Pledges imply higher costs for staying below 2°C warming

This study compares emission pathways aimed at limiting temperature increase to 2°C under varying constraints. In a first set of pathways, the timing of emission reductions is such that over the 2010–2100 period, assuming full participation from 2013 onwards, mitigation costs are minimized. In a second set of pathways, we set emissions in 2020 at a level based on the pledges of the Copenhagen Accord. In the ‘Copenhagen Potential’ scenario, climate talks result in satisfying conditions linked by countries to their ‘most ambitious’ proposals. Contrasting, in the ‘Copenhagen Current’ scenario, climate talks fall short of satisfying the conditions to move beyond current unilateral pledges. We include scenarios with and without the availability of bio-energy in combination with carbon capture and storage. We find that for a ‘Copenhagen Potential’ scenario, emissions by 2020 are higher (47 GtCO2eq/yr) than for a least-cost pathway for 2°C (43 GtCO2eq/yr with a 40–46 GtCO2eq/yr literature range). In the ‘Copenhagen Potential’ scenario the 2°C target can still be met with a likely chance, although discounted mitigation costs over 2010–2100 could be 10 to 15 % higher, and up to 60 % in the 2040–2050s, than for least-cost pathways. For the ‘Current Copenhagen’ scenario, maintaining an equally low probability of exceeding 2°C becomes infeasible in our model, implying higher costs due to higher climate risks. We conclude that there is some flexibility in terms of 2020 emissions compared to the optimal pathways but this is limited. The 2020 emission level represents a trade-off between short-term emission reductions and long-term dependence on rapid reductions through specific technologies (like negative emission reductions). Higher 2020 emissions lead to higher overall costs and reduced long-term flexibility, both leading to a higher risk of failing to hold warming below 2°C.

Environmental policies, public abatement spending and the timing of emission reductions

Four environmental policy options for the reduction of pollution emissions, i.e. taxes, emission standards, auctioned permits and freely allocated permits, are analyzed in a real option model. The amount of emissions is determined by solving the firm's profit maximization problem under each policy instrument. The regulator solves an optimal stopping problem in order to find the critical threshold for policy adoptions taking into account revenues from taxes and auctioned permits and government abatement spending. We find that standards are preferred to freely allocated permits if the output demand is elastic. Taxes and auctioned permits are equivalent in terms of their adoption lag and social welfare; however, through simulations, we show that these are less preferred than emission standards and freely allocated permits.

The architecture of climate economics: Designing a global agreement on global warming

The natural sciences are doing an admirable job of describing the geophysical aspects of climate change. The science behind global warming is well established. But designing an effective political and economic strategy to control climate change will require the second culture—the social sciences—to analyze how to harness our economic and political systems to achieve our climate goals effectively and at low cost. This second task requires examining questions such as the impacts on the economy and on non-market activities, the costs of slowing or mitigating climate change, the strength and timing of emissions reductions with an eye to the costs and benefits of slowing climate change, the risks of asymmetric and irreversible damages, and the policy instruments for implementing such emissions reductions. The author addresses this final question: how to devise policy instruments. The 2009 United Nations Climate Change Conference in Copenhagen meeting failed to reach a consensus on a successor agreement to the Kyoto Protocol, the global agreement that provides for emissions reductions for participating countries. This agreement has not resulted in global emissions reductions; its model creates inefficient and opaque mechanisms, akin to mortgage-backed securities, that have to date produced minimal emissions reductions. Only a harmonized global price on carbon—most easily implemented by a carbon tax—can achieve significant emissions reductions by sending a consistent signal to the governments, innovators, corporations, and individual consumers across all sectors and geographic boundaries.

Population, uncertainty, and learning in climate change decision analysis

The prospect of learning about various uncertainties relevant to analyses of the climate change issue is important because it can affect estimates of the costs of both damages and mitigation, and it can influence the optimal timing of emissions reductions. Baseline scenarios representing future emissions in the absence of mitigation are one of the major sources of uncertainty. Here we investigate how fast we might realistically expect to learn about the outlook for long-term population growth, as one determinant of future baseline emissions. That is, we estimate how long it might take to substantially revise current estimates of the likelihood of various population size outcomes over the twenty-first century. We draw on recent work showing that, because population growth is path dependent, we can learn about the long term outlook by waiting to observe how population changes in the short term. We then explore the implications of uncertainty and of this learning potential for mitigation costs and for optimal emissions. Using a simple model, we show that uncertainty in population growth translates into an uncertainty in the optimal tax rate of about $200/tC by 2050 for a range of stabilization levels. When learning is taken into account, it allows for mitigation strategies to change in response to new information, leading to a slight reduction in the expected value of mitigation costs, and a substantial reduction in the likelihood of high cost outcomes. We also find that while learning can lead to large revisions over the next few decades in anticipated population growth, this potential does not imply large changes in near-term optimal emissions reductions. Results suggest that further work on the potential for learning about other determinants of emissions could have larger effects on expected mitigation costs.

The Timing of National Greenhouse Gas Emission Reductions in the Presence of Other Environmental Policies

This paper shows in an empirical context that substantial cost reductions can be achieved in the implementation of Dutch national climate policy by (i) targeting the policy at the stock of greenhouse gases, thus allowing polluters flexibility in their timing of emission reductions; and (ii) integrating climate policy with other policies, thereby optimising the restructuring of the economy needed to achieve environmental policy targets. A dynamic applied general equilibrium model with bottom-up information on abatement techniques is used to show that the optimal timing of GHG emission reductions tends to follow the timing for the other environmental themes with an additional emphasis on emission reductions in the later periods. The optimal mix of technical measures and economic restructuring as source of emission reductions is affected by the strictness of environmental policy targets for all themes and hence can only be derived from an integrated analysis of these policies.

ITC in a Global Growth-Climate Model with CCS: The Value of Induced Technical Change for Climate Stabilization

We assess the effect of ITC in a global growth model, - DEMETER-1CCS - with learning-by-doing, where energy savings, energy transition and carbon capturing and sequestration (CCS) are the three main options for emissions reductions. The model accounts for technological change based on learning by doing, embodied in capital installed in previous periods. We run five scenarios: one baseline scenario with no climate change policy and four stabilization scenarios in which atmospheric CO2 concentrations are stabilized at 550, 500, 450, and 400 ppmv. We find that the timing of emissions reductions and the investment strategy is relatively independent of the endogeneity of technological change. More important is the vintages’ structure of production. ITC does reduce costs by approximately a factor of 2, however, these benefits only materialize after some decades.

The Value of ITC under Climate Stabilization

We assess the effect of ITC in a global growth model, DEMETER-1CCS, with learning by doing where energy savings, an energy transition, and carbon capturing and sequestration (CCS) are the main options for emissions reductions. The model accounts for technology based on learning by doing embodied in capital installed in previous periods. We have run five scenarios, one baseline scenario in which climate change policy is assumed absent, and four stabilization scenarios in which atmospheric CO2 concentrations are stabilized at 550, 500, 450, and 400 ppmv. We find that the timing of emission reductions and the investment strategy is relatively independent of the endogeneity of technological change. The vintages structure of production is more important. But ITC reduces costs by about factor 2, though these benefits only materialize after some decades.

Evasion of CO 2 injected into the ocean in the context of CO 2 stabilization

The eventual evasion of injected CO 2 to the atmosphere is one consideration when assessing deep-sea disposal of CO 2 as a potential response option to climate change concerns. Evasion estimated using an ocean carbon cycle model is compared to long-term trajectories for future CO 2 emissions, including illustrative cases leading to stabilization of CO 2 concentration at various levels. Modeled residence time for CO 2 injected into the deep ocean exceeds the 100-year time-scale usually considered in scenarios for future emissions, and the potential impacts of climate change. Illustrative cases leading monotonically to constant CO 2 concentration have been highlighted by the Intergovernmental Panel on Climate Change to give guidance on possible timing of emission reductions that may be required to stabilize greenhouse gas concentrations at various levels. For stabilization cases considered, significant modeled evasion does not occur until long after CO 2 emissions have reached a maximum and begun to decline. Illustrative cases can also lead to a maximum in CO 2 concentration followed by a decline to slowly decreasing concentrations. In such cases, future injection of emissions into the deep ocean leads to lower maximum CO 2 concentration, with less effect on concentration later on in time.

Evasion of CO2 injected into the ocean in the context of CO2 stabilization

Research on marine CO 2 disposal is in progress to better understand its potential role as a response option to global climate change. One characteristic of marine CO 2 disposal is that sequestration is not permanent; CO 2 injected into the deep ocean eventually evades to the atmosphere. Alternative illustrative cases leading to stabilization of CO 2 concentration provide a perspective to view evasion of injected CO 2 in relation to emissions from technologies in the distant future. Modeled residence time for CO 2 injected into the deep ocean exceeds the 100-year time scale usually considered in scenarios for future emissions, and the potential impacts of climate change. Illustrative cases leading monotonically to constant CO 2 concentration have been highlighted by the Intergovernmental Panel on Climate Change to give guidance on possible timing of emission reductions that may be required to stabilize greenhouse gasconcentrations at various levels. For stabilization cases considered, significant modeled evasion does not occur until long after CO 2 emissions have reached a maximum and begun to decline. Illustrative cases can also lead to a maximum in CO 2 concentration followed by a decline to slowly decreasing concentrations. In such cases, future injection of emissions into the deep ocean leads to lower maximum CO 2 concentration, with less effect on concentration later on in time.

The IPCC energy assessment

The author discusses three major policy insights : timing of emission reductions, international cooperation in controlling emissions, hedging against low probability high consequence climate events and three underlying technical issues : top-down versus bottom-up modeling, revenue recycling and the control of R and D as a climate change policy option