Monday, October 26, 2015

Who should pay the most to fix the climate?

Despite what many climate sceptics in the UK would like to be the case, the country still does have a Climate Change Act. Under this, the arms length body the Committee on Climate Change (CCC) sets carbon budgets for the country and publishes regular reports on progress report cards. (The Committee is chaired by John Gummer, now known as Lord Deben, once Conservative Prime Minister John Major's Environment Secretary.)

A new report has just been published, which is about the UK's fifth carbon budget. This will set the limit on greenhouse gases emissions from the whole of the country between 2028 and 2032, and marks the halfway point from the first budget (2008-12) to the UK’s 2050.

The report analyses the pledges made by governments around the world in advance of the UN conference in Paris in six weeks where the world will adopt a new, legally binding, agreement that will supplement the existing objective to limit global temperature rise to 2°C.

As usual, the report has been greeted by complaints from some quarters that the brakes the Act allegedly compels the UK to put on industrial activity are unfair.

But are they? But what is fair? How can we decide?

But what is fair?

At every climate conference it always boils down to countries complaining that other countries are not playing fair. This time around the Russian billionaire Oleg Deripaska has urged governments not to sign the Paris accord because China and India are not doing enough. Like, we should really listen to a billionaire, especially a Russian one.

There have been many attempts to figure out what would be a fair way of dividing up the tasks and costs. Below is a summary of seven of them. Each of them addresses a different idea of fairness or combines several ideas. Talk at Paris this year will be around agreeing which model will work best, combining domestic action, trading and other forms of co-operation.

These come from the GLOCAF model using methods described in Averchenkova et al (2014):

1. Equal cumulative emissions: nations are allocated an emissions budget over 1990-2050 on the basis of their share of global population.
2. Brazilian proposal (or “index-based approach”): the share of emissions reduction (relative to a path of no climate action) is determined by contributions to historical emissions during 1990-2020.
3. Contraction and convergence: all nations converge towards equal per capita emissions by 2050.
4. Common but differentiated (CBD) convergence: as above, but using a staged approach in which low emitters can continue to increase emissions until they reach global average per-capita emissions.
5. Equal fraction of GDP: each nation faces the same mitigation cost as a fraction of their national GDP.
6. Income grouping: the amount paid by nations on mitigation is indexed by their GDP so that wealthier countries pay a greater fraction than poorer ones. 'High income” nations' (as decided by the World Bank) are allocated double the fraction of their GDP compared to others.
7. Equal marginal cost: the marginal cost of mitigation (i.e. the carbon price) is set to be the same for all nations.

Analysis of these models has shown that the ones with the chance of creating the greatest reduction by 2030 for the EU and the UK are 'Equal marginal cost' and 'Contraction and convergence', followed by 'Equal fraction of GDP' and 'CBD convergence'.

Anyone fancy taking bets on which one will come out the winner at the talks?

Who's really to blame?

Maybe we should be looking at who is ready to blame for global warming and get them to pay the most. But this is not as simple as it seems either. It depends and what criteria you use. Check out these figures on total final energy consumption per capita of the G7 and BRIC countries from 2012. You can see that under this criteria Canada is by far the worst performer.

Country toe = tonne of oil equivalent/capita
United States
Russian Federation
United Kingdom
South Africa
Source: Federal Statistical Office, G7 in Figures, 2015

But if you use energy intensity as a criteria, which is a measure of how efficiently energy is used, particularly by industry (including power generation), the Russian Federation comes out worst by far:

This is supported by this graph comparing energy intensity, GDP and population:

Yet again, the G20 ranked by percentage of global emissions, puts China worst (though not per capita).  (But look at the last column – who is the most vulnerable to sea level rise amongst these countries – perhaps this should be another way of viewing fairness?):

Carbon dioxide emissions
Average annual deforestation (+) / afforestation (–)
Population living in areas where elevation is below 5 metres
% of global emissions
tonnes per capita
kg per 1,000 int. US$ GDP
% change on 1990
% of total forest area
% of total population
United States
European Union (EU28)
Russian Federation
Republic of Korea
Brazil 1.5 2.6 99 134.2 0.5 4.9
Indonesia 1.4 2 100 207.6 0.51 11.2
Saudi Arabia 1.4 16.6 151 189.3 0 1
United Kingdom 1.3 7.5 254 −19.2 −0.31 8.6
Mexico 1.3 3.9 168 52.8 0.3 2.7
Italy 1.1 6.4 215 −8.4 −0.90 7.5
Australia 1.1 16.9 314 43.9 0.37 7.2
France 1 5.7 169 –6.3 –0.39 4
South Africa 0.9 6.2 464 22.6 0 0.5
Turkey 0.9 4.4 138 121.5 −1.11 2.4
Argentina 0.5 4.5 213 74 0.81 4.5

Cumulative emissions

But what about cumulative, historical emissions, the ones that got us into this mess? Would it be fair for the countries responsible for that to pay the most?

The United States is responsible for 20 per cent of global warming experienced over the industrial period, more than twice the emissions of China in second place. But when you look at emissions per person, the UK beats the US into first place. The biggest emitters – US, China, Russia, Brazil, India, Germany and the UK – are together responsible for 63 per cent of total cumulative emissions. The researchers say highlights the huge disparity between rich and poor countries with respect to per person emissions.

This approach must not just examine countries' greenhouse gas emissions from fossil fuel burning and land use change, methane, nitrous oxide and sulphate aerosol emissions. A study published in Environmental Research Letters by researchers from Canada's Concordia University does this, for emissions between 1750 and 2005.

Historical contribution to climate warming by country. US leads the table with 0.15 degrees warming by 2005, with the UK coming in seventh. Source: Matthews et al., ( 2013)

Some less developed countries like Brazil sit quite high up in this scale because they have been turning large amounts of forest into cropland. 

Countries’ climate contributions relative to geographic area. Red indicates countries with very high relative climate contributions, green indicates countries with very small relative climate contribution. UK comes top here. Source: Matthews et al., ( 2013)

Carbon pricing anyone?

Regardless of who is to blame, where is the money going to come from? Who is going to pay the price of the changes in infrastructure that are required, especially in developing countries?

This is known as the north-south finance gap – the money that should flow from developed countries, who are the most to blame, to developing ones, who need it to get their lifestyles up to the same as ours, which, after all, is only fair.

Many business leaders, for example Shell, are calling for a global price on carbon as a way of providing this cash. Environmental NGOs like Greenpeace suggest that this is a delaying tactic that would permit business as usual to continue for longer.

In 2013 (latest figures) 18% of global emissions are already covered by carbon pricing schemes.

Also, 76% of global surface transport emissions are covered by emission/fuel efficiency standards (2015 figures). These are constantly improving, but, as we have seen with the Volkswagen diesel emissions scandal, compliance is not always guaranteed.

So, if carbon pricing doesn't work, I repeat:

Who's going to pay?

Recent research on bridging this finance gap puts the cost of fixing the climate at between US$400 billion and $2 trillion by 2050. That doesn't seem an awful lot compared to what has been paid out as a result of the banking crisis over the last eight years.

In fact, it seems like a bargain given that much money is already needing to be spent our new infrastructure in developing countries.

Still, it needs to come from somewhere. So where?

The researchers say that most of the currently deployed means of attempting to bridge this gap – public aid, private investment, development banks, and special climate-related facilities – are insufficient and the barriers "appear particularly hard to overcome".

The researchers conclude that "expanding private finance, either in the form of Foreign Direct Investment or through the issuance of ‘green bonds’, appears to be a more promising direction".

Maybe that's the answer.

This year, so far (9 months) there have been around $21 billion worth of green bonds issued, according to Climate Bonds. Over 14.3 years at the same rate it would in fact be US$400 billion, the bottom estimate figure above, and that just takes us to 2030.

So dare we think that we could do it?

The chief lenders are: Bank of America Merrill Lynch, JP Morgan, CITI, Morgan Stanley, Credite Agricole, CIB, HSBC and MEB. But there are many more smaller ones.

If these people at the heart of capitalism see a profit to be made from climate change, who am I to argue?

I suppose the question is: is it going to the right place? I don't know the answer yet.

So, what do you think would be the fairest way to spread the cost and challenges?

And what is the progress so far? Should we be hopeful or despairing?

Europe's position

EU’s Member States are generally agreed to be leading the world in tackling climate change with an agreed 2030 target for EU emissions of at least 40% below 1990 levels. Some say they shouldn't be taking a lead if other countries don't pull their weight.

EU emissions are already on the road to beat the EU’s 2020 target of a 20% reduction below 1990 levels, ending up between 24% and 30%. This raises the 43-52% possibility of a cost-effective attainment by 2030 of 48% below 1990 levels.

The CCC estimates that within this agreement, the UK will contribute emissions reductions between 51% and 57%. The EU and UK together have target of at least an 80% reduction compared to 1990 by 2050.  By the way, this excludes international shipping and aviation emissions.

The world's position

The CCC also estimates that current pledges by nations globally are not sufficient to set us on a cost-effective path to the agreed 2°C limitation. However they believe that it might be reduced by "remaining pledges, increasing ambition in pledges and further commitments to reduce emissions beyond 2030".

As has always been said, the longer action is delayed, the more expensive it gets. It also forces us to become reliant on technologies that are not yet proven, for example carbon capture.

Median estimates of business-as-usual global emissions in 2030 are 68 GtCO2e. Analysis of nations' submitted proposals in advance of Paris talks suggests that global emissions would reach 53-55 GtCO2e in 2030. These would limit warming to around 2.7°C instead of 4°C by 2010. We need to be at around 40 GtCO2e by that year.

There is therefore a 6-13GtCO2e gap that needs filling. Around 50 countries still have to submit their pledges so there is a slim chance that this can be met that way. There's also a chance that negotiations leading up to and including Paris will make an attempt.

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