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The Role of Burden Sharing Regimes
for Reaching a 2˚C Climate Target
Tom Kober, Bob van der Zwaan, Hilke Rösler
Paris
June 20th , 2013
Key messages
• Burden sharing mechanisms are appropriate to compensate for climate policy costs for selected regions, esp. until 2050
• Emerging economies are different with respect to their socio-economic characteristics, and the design of the burden sharing scheme determines which regions are compensated
• Adequate carbon certificate trade is essential, otherwise negative financial impacts for reaching the 2˚C climate target may occur
Agenda
• Introduction and approach – TIAM-ECN energy system model
– Reference GHG mitigation scenario
– Burden sharing schemes
• Resource sharing scheme
• Effort sharing scheme
• Impact of limited certificate trade
• Conclusions
TIAM-ECN model approach
• Global energy system model
• 15 world regions (reporting in this study refers to a set of 10 super-regions)
• Time horizon: 2005 – 2100 (10-year intervalls)
• 6 time slices per year (day/night and seasonal)
• Supply and demand sectors, representing various energy conversion pathways and climate change mitigation measures
• Endogenous trade of energy, emission certificates and captured CO2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
• Study conducted within LIMITS EU-FP 7 project www.ecn.nl/units/ps/themes/energy-and-emission-scenarios/global-european-projections/limits www.feem-project.net/limits
Cost optimal GHG mitigation to
reach 2˚C climate stabilisation
-15-10
-505
10152025303540455055
2005 2020 2040 2060 2080 2100
Gre
enh
ou
se g
as
em
issi
on
s [G
t C
O2e
]
N2O Total CH4 TotalCO2 Land-use CO2 TransportCO2 Households + commercial CO2 IndustryCO2 Electricity production CO2 UpstreamCO2 Total net
-2
0
2
4
6
8
10
12
2000 2020 2040 2060 2080 2100
Gre
enh
ou
se g
as
em
issi
on
[Gt
CO
2e
]
Europe Africa
Pacific OECD China
Latin America Reforming Economies
India Middle East
Other Asia North America
Two burden sharing schemes
• Resource Sharing: Population related regime: – key parameter = GHG emissions per capita
– equalisation of per capita emissions with contraction and convergence until 2050
• Effort Sharing: GHG mitigation cost related regime: – key parameter = policy costs as percentage of GDP
– GHG mitigation efforts to be harmonised
Agenda
• Introduction and approach – TIAM-ECN energy system model
– Reference GHG mitigation scenario
– Burden sharing schemes
• Resource sharing scheme
• Effort sharing scheme
• Impact of limited certificate trade
• Conclusions
Population development
0
0.5
1
1.5
2
2.5
3
2000 2020 2040 2060 2080 2100
Pop
ula
tio
n [
bln
]
Africa
China
Europe
India
Latin America
Middle East
North America
Other Asia
Pacific OECD
Reforming Economies
Source: UN 2011, own calculations
Certificate allocation under
Resource Sharing
-2
0
2
4
6
8
10
12
14
16
18
20
2020 2040 2060 2080 2100
GH
G e
mis
sio
ns
pe
r ca
pit
a
[Mt
CO
2e/c
apit
a]
-2
0
2
4
6
8
10
12
2020 2040 2060 2080 2100A
lloca
tio
n o
f G
HG
em
issi
on
s al
low
ance
s [G
t C
O2e
]Africa Pacific OECD China Latin AmericaReforming Economies India Middle East Other AsiaNorth America Europe World
Certificate trade and GHG market
capital flow under Resource Sharing
L6
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
2020 2040 2060 2080 2100
Ca
rbo
n c
erti
fica
te n
et
selli
ngs
[Mt
CO
2e
]
Europe AfricaPacific OECD ChinaLatin America Reforming EconomiesIndia Middle EastOther Asia North America
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
15,000
20,000
2020 2040 2060 2080 2100
Ca
rbo
n m
ark
et
ne
t re
ven
ue
s[b
ln U
SD(2
00
5)]
Europe AfricaPacific OECD ChinaLatin America Reforming EconomiesIndia Middle EastOther Asia North America
400-600 bln$ p.a.
Agenda
• Introduction and approach – TIAM-ECN energy system model
– Reference GHG mitigation scenario
– Burden sharing schemes
• Resource sharing scheme
• Effort sharing scheme
• Impact of limited certificate trade
• Conclusions
Development of GDP (PPP)
0
20
40
60
80
100
120
140
160
2000 2020 2040 2060 2080 2100
GD
P(P
PP
) [t
rilli
on
US$
20
05 Africa
China
Europe
India
Latin America
Middle East
North America
Other Asia
Pacific OECD
Reforming Economies
Source: IEA 2012, own calculations
Certificate allocation under
Effort Sharing
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2020 2040 2060 2080 2100
Clim
ate
po
licy
cost
s as
pe
rce
nta
ge
of
GD
P (
PP
P)
-2
0
2
4
6
8
10
12
14
2020 2040 2060 2080 2100
Allo
cati
on
of
GH
G e
mis
sio
ns
allo
wan
ces
[Gt
CO
2e
]Africa Pacific OECD China Latin America
Reforming Economies India Middle East Other Asia
North America Europe World average = region's effort-sharing target
2%
-2,500
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
2020 2040 2060 2080 2100
Car
bo
n m
arke
t n
et r
even
ues
[bln
USD
(200
5)]
Europe Africa
Pacific OECD China
Latin America Reforming Economies
India Middle East
Other Asia North America
-1,500
-1,000
-500
0
500
1,000
1,500
2020 2040 2060 2080 2100
Car
bo
n c
erti
fica
te n
et s
ellin
gs[M
t C
O2e
]
Europe Africa
Pacific OECD China
Latin America Reforming Economies
India Middle East
Other Asia North America
Certificate trade and GHG market
capital flow under Effort Sharing
~150 bln$ p.a.
Agenda
• Introduction and approach – TIAM-ECN energy system model
– Reference GHG mitigation scenario
– Burden sharing schemes
• Resource sharing scheme
• Effort sharing scheme
• Impact of limited certificate trade
• Conclusions
Timing effects of limited
certificate trade
Resource-sharing Effort-sharing
20-30% trade 30-40% trade 40-60% trade 60-80% trade 80-100% trademin. trade full trade
0
1000
2000
3000
4000
5000
6000
2020 2040 2060 2080 2100
Car
bo
n c
ert
ific
ate
s tr
ade
d
[M
tCO
2]
0
1000
2000
3000
4000
5000
6000
2020 2040 2060 2080 2100
Certificate price effects
Resource-sharing Effort-sharing
0
100
200
300
400
500
600
700
800
900
1000
2030 2040 2050 2060 2070
range of CO2 price decrease for certificate buying countries
range of CO2 price increase for certificate selling countries
0
100
200
300
400
500
600
700
800
900
1000
2030 2040 2050 2060 2070
Reg
ion
al s
ecto
r-av
erag
e C
O2
cert
ific
ate
pri
ce
[USD
(200
5)/t
CO
2]
minimum among selling regions at 40% trade level full trademaximum among selling regions at 40% trade level
buyer's price range buyer's price range
seller's price range
seller's price range
Resource-sharing Effort-sharing
31 195
521,011
20 570
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
full
trad
e
80%
tra
de
40%
tra
de
full
trad
e
80%
tra
de
40%
tra
de
full
trad
e
80%
tra
de
40%
tra
de
2030 2050 2070
An
nu
al e
ner
gy s
yste
m c
ost
s
un
dis
cou
nte
d [
bln
USD
(200
5)/y
r]
Climate policy costs at full trade Additional policy costs at reduced carbon certificate trade
8 78
74
38 532
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
full
trad
e
80%
tra
de
40%
tra
de
full
trad
e
80%
tra
de
40%
tra
de
full
trad
e
80%
tra
de
40%
tra
de
2030 2050 2070
Effects on policy costs
+20%
+23%
+4%
+8%
+1%
+4%
Conclusions
• Design of burden sharing scheme determines which regions are compensated for their costs for climate change mitigation
• 70% less certificate trade under effort sharing (GDP related) than under resource sharing scheme (population related)
• Until 2050, compensation of regions with high population growth (Africa, India, Other Asia) under resource sharing scheme, and regions with strong economic growth (China) under effort sharing scheme
• Well functioning certificate trade mechanism is required, otherwise additional policy costs to reach climate target up to +20% of policy costs in the medium term (2030)
• Limited opportunities to trade permits influence carbon certificate price in selling and buying regions (2030: up to 120 USD/tCO2)
Thank you!
Tom Kober
Policy Studies | Global Sustainability
T: +31 88 515 4105 | F: +31 224 56 83 38 Radarweg 60, 1043 NT Amsterdam, The Netherlands
References
Hendriks, C., W. Graus, F. v. Bergen, 2004, Global carbon dioxide storage potential and costs, Ecofys in cooperation with TNO, EEP-02001, Utrecht, the Netherlands
IEA, 2012, Energy Technology Perspectives 2012 – Scenarios & Strategies to 2050, International Energy Agency, Paris.
UNFCCC, 2012, Work programme on long-term finance, COP 18, Doha
United Nations (UN), World Population Prospects: The 2010 Revision, 2011
Regional effects of limited
trade under Resource Sharing
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
full
trad
e8
0%
tra
de
60
% t
rad
e4
0%
tra
de
20
% t
rad
e
full
trad
e8
0%
tra
de
60
% t
rad
e4
0%
tra
de
20
% t
rad
e
full
trad
e8
0%
tra
de
60
% t
rad
e4
0%
tra
de
20
% t
rad
e
full
trad
e8
0%
tra
de
60
% t
rad
e4
0%
tra
de
20
% t
rad
e
2030 2050 2070 2100
Car
bo
n c
erti
fica
te n
et s
ellin
gs[M
t C
O2/y
r]
Europe
North America
Other Asia
Middle East
India
ReformingEconomiesLatin America
China
Pacific OECD
Africa
Regional effects of limited
trade under Effort Sharing
-2,500
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
full
trad
e8
0%
tra
de
60
% t
rad
e4
0%
tra
de
full
trad
e8
0%
tra
de
60
% t
rad
e4
0%
tra
de
full
trad
e8
0%
tra
de
60
% t
rad
e4
0%
tra
de
full
trad
e8
0%
tra
de
60
% t
rad
e4
0%
tra
de
full
trad
e8
0%
tra
de
60
% t
rad
e4
0%
tra
de
2020 2030 2050 2070 2100
Car
bo
n c
erti
fica
te n
et s
ellin
gs[M
t C
O2/y
r]
Europe
North America
Other Asia
Middle East
India
ReformingEconomies
Latin America
China
Pacific OECD
Africa
CO2 storage potential
87
121
131
138
449189
77
44
61
366
Europe
North America
Latin America
Africa
Middle East
China
Other Asia
India
Pacific OECD
Reforming Economies
Source: Hendriks et al. 2004
∑ = 1663 GtCO2