economic implications of global convergence on emission intensities govinda r. timilsina senior...
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Economic Implications of Global Convergence on Emission Intensities
Govinda R. TimilsinaSenior Economist
The World Bank, Washington, DC
32nd USAEE/IAEE North American ConferenceAnchorage, Alaska
July 28-31, 2013
Disclaimer
The views expressed in this presentation are those of the speaker’s only, and do not necessarily represent the World Bank and its affiliated organizations
Introduction (1/3)
CO2 Emissions in 2010 (Million tons)
Ch
ina
US
A
Ind
ia
Ru
ssia
Jap
an
Ge
rma
ny
Ko
rea
Ca
na
da
Ira
n
UK
S. A
rab
ia
Me
xico
Ind
on
esi
a
Italy
Bra
zil
Au
stra
lia
Fra
nce
S. A
fric
a
Po
lan
d
Ta
iwa
n
Sp
ain
Ukr
ain
e
Tu
rke
y
Th
aila
nd
Ka
zakh
sta
n
Ne
the
rlan
ds
Ma
lays
ia
Ve
ne
zue
la
Eg
ypt
Arg
en
tina
0
2000
4000
6000
8000
(2): 43%
(5): 58%
(20): 81%
(30): 88%
(10): 68%
Introduction (2/3)
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
40
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
US
Qatar
Kuwait
Trinidad & Tobago
UAEBrunei
Russia
India
Germany
Luxembourg
Gibraltar
KazakhstanEstonia
(Finland & Singapore)
(Taiwan, Czech,Netherlands, Turkministan, Belgium)
China
Japan
S. Korea
(Bahrain & Netherlands Antilles)Australia
5 Countries -- 44% of Global Emissions
30 Countries -- 77% of Global Emissions
CanadaSaudi Arabia
Oman
UKPoland
Iran
Countries in terms of absolute emissions and perCapita emissions in 2010
Vertical Axis – Per capita emissions (ton per capita)Horizontal axis – CO2 emissions (Million Tons)
Introduction (3/3) P
er c
apita
CO
2 em
issi
ons
(ton
s)
1990 1995 2000 2005 20100
2
4
6
8
10
12
14 Annex INon-Annex I
14% lower from 1990 level
72% higher from 1990 level
Inte
nsi
ty g
ap
(7
.4)
(11.8 tons)
(10.2 tons)
(1.6 tons)(2.7 tons)
(-20%)
Inte
nsi
ty g
ap
(1
0.3
)
Although, emission intensity gap is decreasing, industrialized countries,on average, still release 3.7 times as high as CO2 emissions per capita than developing countries
The Question
Is stabilization of GHG concentrations to avoid climate change possible while converging the emission intensities between industrialized and developing countries?
Provided that:
To avoid climate change (or avoiding dangerous consequences in the earth’s atmosphere), the earth mean average surface temperature
should not be higher than 2 degree Celsius from the pre-industrialization level
Concentrations of CO2 emissions should be stabilized below 450 PPM
Global emissions to peak before 2020, followed by substantial overall reductions of around 60% below the 2000 level by 2050
Our Approach
We introduced various levels of carbon tax (US$10 to 250 per ton of CO2) to Annex I countries to reduce their fuel consumption and thereby CO2
emissions and emission intensities.
Non-Annex I countries are exempted from carbon taxation, however they are impacted from Annex I countries carbon tax through international
trade.
Since the emission intensities of Annex I countries would decrease in response to the carbon tax while Non-Annex I countries emission intensities would continuously increase, the intensity gap between these two groups of countries drops (i.e., we will be moving towards global convergence of emission intensities).
We used a global CGE model to simulate the effects moving towards global convergence of emission intensities.
Model & Data
Multi-sector, multi-region, global recursive dynamic CGE model
The model is flexible enough to accommodate new regions/countries or sectors and is calibrated with GTAP database
Nested CES and CET functional forms to represent production behavior and land supply, respectively
Representation of bilateral and international trade
Data are coming from the GTAP (Version 7.1)
Per Capita CO2 Emission (tons) under Different Carbon Tax Rates
6.8 tons
2010 2015 2020 2025 20300.0
2.0
4.0
6.0
8.0
10.0
12.0
Annex INon-Annex I
US$10/tCO2
7.5 tons(- 9.4%) (- 36.5%)
2010 2015 2020 2025 20300.0
2.0
4.0
6.0
8.0
10.0
12.0
Annex INon-Annex I
US$50/tCO2
4.8 tons
(- 71.6%)
2010 2015 2020 2025 20300.0
2.0
4.0
6.0
8.0
10.0
12.0
Annex INon-Annex I
US$250/tCO2
2.1 tons(- 51.6%)
2010 2015 2020 2025 20300.0
2.0
4.0
6.0
8.0
10.0
12.0
Annex I
US$100/tCO2
3.6 tons
Impacts on CO2 Emissions
2010 2020 20306,000
9,000
12,000
15,000
18,000 BAU $10 $50 $100 $250
2010 2020 203015,000
18,000
21,000
24,000
27,000
30,000
33,000
BAU $10 $50 $100 $250
2010 2020 203025,000
30,000
35,000
40,000
45,000
50,000 BAU $10 $50 $100 $250
Annex I Non-Annex I
Global
Impacts on CO2 Emissions in 2030Limiting temperature rise below 2°C, CO2 concentrations must be below 450ppm
Global CO2 emissions should be reduced 60% below 2000 level by 2050
Even at the very high carbon tax rate of $250/tCO2, we find that global CO2 emissions in 2030 would be only 18% below from that in the baseline
$10 $50 $100 $250
-11%
-31%
-42%
-57%
0% 1% 2% 3%
-4%
-11%-14%
-18%
Annex I Non Annex I
Global
CO2 Emissions with $250 Carbon Tax Case Compared to 2000 Emission Level
Compared to 2000 emissions level, the emission convergence scenario (72% reduction of intensity gap through $250 carbon tax) would, in 2030,- decrease Annex I emissions by 52%, but- increase Non-Annex I emissions by 3 folds, thereby- increase global emissions by 28%
2010 2020 20300
10,000
20,000
30,000
40,000 Annex I Non Annex I Global
Annex I 2000
Global 2000
Non-Annex I countries emissions would exceed global 2000 level by 2030 if there emissions are not limited
Even if developed countries CO2 emissions are completely wiped out, meeting 2 degree target would be far out of reachunless Non-Annex I countries emissions are limited
Impacts on GDP in 2030
The relationship between the carbon tax level and corresponding GDP loss is exponential
There would be a carbon leakage effect (carbon intensive industries would move to Non-Annex I countries from Annex I countries). Despite the strong international trade linkage between Non-Annex I countries and Annex I countries, the former are not found to be negatively affected by the carbon tax in Annex I countries.
$10 $50 $100 $250
-0.10%
-0.54%
-1.06%
-2.38%
0.01% 0.03% 0.04% 0.04%
-0.06%-0.31%
-0.60%
-1.37%
Annex I Non Annex I
Global
Combining Effects on GDP and CO2 Emissions (2030)
3.65 3.67 3.69 3.71 3.73 3.753573.1
3573.6
3574.1
3574.6
3575.1
3575.6
3575.69648035112
3575.700548936463575.35801729886
3573.1975195924
Non Annex I Countries
Emission intensity (tCO2 per capita)
GD
P P
er C
apita
(Th
ou
san
d 2
004
US
$)
6 7 8 9 10 11 12 13 1438000
38200
38400
38600
38800
39000
39200
39035.1354263444
39007.669174690238888.7872430532
38746.3995089489
38359.0473808276Annex I Countries
Emission intensity (tCO2 per capita)
GD
P p
er
Ca
pit
a (
Th
ou
sa
nd
20
04
US
$)
Non-Annex I countries are also expected to reduce their GHG emissions, in that case, emission intensity will diverge instead of converge
Impacts on International Trade in 2030
The carbon tax introduced in Annex I countries would cause international trade to shrink (up to 2% in the case of $250/tCO2 carbon tax)
Since domestic production would be more expensive in Annex I countries due to carbon tax exports would get impacted the most
Non-Annex I countries would benefit as their exports increase and imports drop
Import Export Import Export Import ExportAnnex I Non Annex I Global
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
US$10/tCO2US$50/tCO2US$100/tCO2US$250/tCO2
Country Results: CO2 Emissions
Country/Regions Carbon tax rate (US$/tCO2)
10 50 100 250Australia and New Zealand -14.9% -36.0% -46.2% -58.7%Canada -9.4% -26.7% -36.6% -50.8%Germany -6.4% -21.1% -30.5% -43.8%Spain -4.2% -15.2% -23.6% -37.5%France -2.9% -10.8% -17.3% -29.4%UK -12.2% -35.0% -46.2% -58.4%Italy -4.2% -15.0% -23.1% -36.6%Japan -8.0% -18.2% -25.4% -37.1%EFTA Countries & Rest of European Union -8.3% -25.6% -35.9% -50.5%Russia -16.7% -42.8% -55.7% -72.2%United States -10.8% -31.6% -43.1% -57.8%Non Annex I Europe & Central Asia 0.5% 1.9% 3.2% 4.7%Argentina 0.1% 0.3% 0.6% 1.2%Brazil 0.4% 1.6% 2.7% 4.9%Rest of Latin America & Caribbean 0.3% 1.2% 2.1% 4.1%China 0.2% 0.8% 1.3% 2.5%Indonesia 0.3% 1.2% 2.0% 3.7%Rest of East Asia & Pacific 0.5% 1.8% 2.9% 5.0%Malaysia 0.2% 0.8% 1.3% 2.4%Thailand 0.3% 1.2% 2.1% 3.7%India 0.2% 0.8% 1.2% 1.9%Rest of South Asia 0.2% 0.8% 1.4% 2.7%Middle East & North Africa 0.0% 0.2% 0.4% 1.0%South Africa 0.7% 2.2% 2.9% 3.8%Rest of Sub-Saharan Africa 0.2% 0.9% 1.7% 3.4%
Country Results: Emission IntensityCO2 emission per capita CO2 emission per GDP
Carbon tax rate (US$/tCO2)
10 50 100 250 10 50 100 250
Australia and New Zealand -14.9% -36.0% -46.2% -58.7% -14.8% -35.6% -45.5% -57.6%Canada -9.4% -26.7% -36.6% -50.8% -9.3% -26.2% -35.7% -49.2%Germany -6.4% -21.1% -30.5% -43.8% -6.4% -21.0% -30.2% -43.2%Spain -4.2% -15.2% -23.6% -37.5% -4.2% -15.0% -23.2% -36.7%France -2.9% -10.8% -17.3% -29.4% -2.9% -10.7% -17.1% -29.0%UK -12.2% -35.0% -46.2% -58.4% -12.2% -34.9% -45.9% -58.0%Italy -4.2% -15.0% -23.1% -36.6% -4.1% -14.7% -22.7% -35.6%Japan -8.0% -18.2% -25.4% -37.1% -8.0% -18.1% -25.1% -36.4%EFTA Countries & Rest of European Union -8.3% -25.6% -35.9% -50.5% -8.2% -25.2% -35.3% -49.4%Russia -16.7% -42.8% -55.7% -72.2% -16.2% -40.3% -51.7% -65.9%United States -10.8% -31.6% -43.1% -57.8% -10.7% -31.3% -42.5% -56.9%Non Annex I Europe & Central Asia 0.5% 1.9% 3.2% 4.7% 0.4% 1.8% 2.9% 4.3%Argentina 0.1% 0.3% 0.6% 1.2% 0.1% 0.4% 0.7% 1.4%Brazil 0.4% 1.6% 2.7% 4.9% 0.4% 1.6% 2.7% 5.0%Rest of Latin America & Caribbean 0.3% 1.2% 2.1% 4.1% 0.3% 1.3% 2.3% 4.6%China 0.2% 0.8% 1.3% 2.5% 0.2% 0.6% 1.0% 1.9%Indonesia 0.3% 1.2% 2.0% 3.7% 0.3% 1.2% 2.0% 3.5%Rest of East Asia & Pacific 0.5% 1.8% 2.9% 5.0% 0.4% 1.6% 2.6% 4.4%Malaysia 0.2% 0.8% 1.3% 2.4% 0.2% 0.9% 1.5% 2.9%Thailand 0.3% 1.2% 2.1% 3.7% 0.3% 1.0% 1.8% 3.3%India 0.2% 0.8% 1.2% 1.9% 0.2% 0.5% 0.8% 1.1%Rest of South Asia 0.2% 0.8% 1.4% 2.7% 0.2% 0.7% 1.2% 2.3%Middle East & North Africa 0.0% 0.2% 0.4% 1.0% 0.2% 1.1% 2.0% 4.0%South Africa 0.7% 2.2% 2.9% 3.8% 0.8% 2.2% 2.9% 3.7%Rest of Sub-Saharan Africa 0.2% 0.9% 1.7% 3.4% 0.3% 1.4% 2.6% 5.1%
Country Results: GDP
Country/Regions Carbon tax rate (US$/tCO2)
10 50 100 250Australia and New Zealand -0.2% -0.7% -1.2% -2.6%Canada -0.1% -0.7% -1.3% -3.1%Germany 0.0% -0.2% -0.4% -1.1%Spain 0.0% -0.3% -0.6% -1.4%France 0.0% -0.1% -0.2% -0.6%UK 0.0% -0.2% -0.4% -1.0%Italy -0.1% -0.3% -0.6% -1.4%Japan 0.0% -0.2% -0.5% -1.1%EFTA Countries & Rest of EU -0.1% -0.4% -0.9% -2.1%Russia -0.7% -4.1% -8.2% -18.5%United States -0.1% -0.5% -1.0% -2.1%NAI Europe & Central Asia 0.0% 0.2% 0.3% 0.4%Argentina 0.0% -0.1% -0.1% -0.2%Brazil 0.0% 0.0% 0.0% -0.1%Rest of LAC 0.0% -0.1% -0.2% -0.5%China 0.0% 0.2% 0.3% 0.6%Indonesia 0.0% 0.0% 0.1% 0.2%Rest of East Asia & Pacific 0.0% 0.2% 0.3% 0.5%Malaysia 0.0% -0.1% -0.2% -0.5%Thailand 0.0% 0.2% 0.3% 0.4%India 0.1% 0.3% 0.4% 0.8%Rest of South Asia 0.0% 0.1% 0.2% 0.4%Middle East & North Africa -0.2% -0.9% -1.6% -2.9%South Africa 0.0% 0.0% 0.0% 0.0%Rest of Sub-Saharan Africa -0.1% -0.5% -0.8% -1.6%
Country Results: International TradeExports Imports
Carbon tax rate (US$/tCO2)
10 50 100 250 10 50 100 250Australia and New Zealand -0.4% -1.5% -2.6% -5.1% -0.1% -0.5% -0.9% -1.7%Canada -0.2% -1.1% -2.0% -4.1% -0.2% -1.1% -2.0% -4.4%Germany -0.2% -0.7% -1.2% -2.5% -0.1% -0.2% -0.5% -1.1%Spain -0.3% -1.4% -2.4% -4.8% 0.0% -0.2% -0.5% -1.3%France -0.1% -0.7% -1.3% -2.6% 0.0% -0.1% -0.3% -0.7%UK -0.1% -0.5% -0.9% -2.0% -0.1% -0.3% -0.6% -1.3%Italy -0.2% -1.1% -1.9% -4.0% -0.1% -0.4% -0.7% -1.8%Japan -0.4% -1.5% -2.7% -5.3% 0.0% -0.2% -0.4% -1.1%EFTA Countries & Rest of European Union -0.2% -1.0% -1.9% -4.1% -0.1% -0.6% -1.1% -2.6%Russia -1.7% -6.6% -10.4% -17.1% -0.5% -2.1% -3.5% -7.1%United States -0.6% -2.5% -4.3% -8.0% 0.0% -0.1% -0.2% -0.6%Non Annex I Europe & Central Asia 0.0% 0.0% 0.0% -0.5% -0.1% -0.3% -0.5% -1.3%Argentina 0.2% 0.9% 1.6% 2.8% -0.2% -0.8% -1.3% -2.5%Brazil 0.1% 0.3% 0.4% 0.6% -0.2% -0.7% -1.3% -2.7%Rest of Latin America & Caribbean 0.2% 1.0% 1.6% 2.9% -0.2% -1.0% -1.8% -3.3%China 0.0% 0.1% 0.2% 0.2% 0.0% 0.0% -0.1% -0.4%Indonesia 0.1% 0.6% 0.9% 1.6% 0.0% 0.1% 0.1% 0.0%Rest of East Asia & Pacific 0.0% 0.1% 0.2% 0.0% 0.0% 0.1% 0.1% 0.0%Malaysia 0.1% 0.2% 0.3% 0.4% 0.0% -0.2% -0.4% -0.9%Thailand 0.0% 0.1% 0.2% 0.1% 0.1% 0.1% 0.2% -0.1%India 0.0% 0.0% -0.1% -0.4% 0.0% 0.1% 0.1% -0.2%Rest of South Asia 0.1% 0.3% 0.4% 0.7% 0.1% 0.2% 0.2% 0.2%Middle East & North Africa 0.5% 2.3% 4.0% 7.7% -0.7% -3.0% -5.1% -9.2%South Africa 0.0% -0.2% -0.4% -0.8% -0.1% -0.3% -0.4% -0.8%Rest of Sub-Saharan Africa 0.2% 0.9% 1.5% 2.6% -0.3% -1.1% -2.0% -3.8%
Conclusions
Developing countries’ argument to converge global CO2 emission
intensity could be reasonable from the equity perspective
However, their demand could not be realized in practice if global CO2 emissions are to be reduced to stabilize CO2 concentration to meet the ultimate objective of the UNFCCC
Limitations of GHG emissions is necessary in developing countries to avoid climate change; the 2 degree target can not be realized even if developed countries CO2 emissions are completely wiped out as long as developing countries’ CO2 emissions increase at the current trend
THANK YOU
Govinda R. Timilsina
Sr. Research Economist (Climate Change & Clean Energy)
Development Research Group
The World Bank
1818 H Street, NW
Washington, DC 20433, USA
Tel: 1 202 473 2767
Fax: 1 202 522 1151
E-mail: [email protected]