Economics of global warming

Economics of global warming Loose reflections on late news Klaus Mohn, Professor University of Stavanger Business School http://www.uis.no/Mohn Twitte...
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Economics of global warming Loose reflections on late news Klaus Mohn, Professor University of Stavanger Business School http://www.uis.no/Mohn Twitter: @Mohnitor

Rogaland Arbeiderpartis klimapanel, Stavanger, 24 November 2014 1

Economics of global warming… Loose reflections on late news  The global energy situation  IEA’s WEO 2014  Assumptions and scenarios  Climate issues

 New Climate Economy  Drivers of change  Strategy and action plan

 Discussion  Implications for national policies  … and regional policies 2

IEA’s World Energy Outlook ”Signs of stress in the global energy system”  Difficult road ahead  Middle East and oil market  Capital market tension

 Mixed climate signals  Emissions still rising  Cautious optimism for Paris 2015

 Prepare for change  Policy-based…  …or event-based 3 Source: International Energy Agency.

IEA’s World Energy Outlook Three scenarios  New Policies Scenario  Adopted policies and measurs  Announced commitments

 Current Policies Scenario  “Business as usual” baseline  Only measures enacted by 2013  No further commitments

 450 Scenario  Climate policy requirements…  … to limit global warming to 2°C 4 Source: International Energy Agency. 2014. World Energy Outlook 2014. IEA. Paris.

IEA’s World Energy Outlook Oil price assumptions Oil price assumptions

Gas price assumptions

by scenario

New Policies scenario

5 Source: International Energy Agency. 2014. World Energy Outlook 2014. IEA. Paris.

IEA’s World Energy Outlook Price assumptions

6 Source: International Energy Agency. 2014. World Energy Outlook 2014. IEA. Paris.

IEA’s World Energy Outlook World total energy demand by scenario Mtoe

7 Source: International Energy Agency. 2014. World Energy Outlook 2014. IEA. Paris.

IEA’s World Energy Outlook Energy gravity moves to the East (NP Scenario)

8 Source: International Energy Agency. 2014. World Energy Outlook 2014. IEA. Paris.

IEA’s World Energy Outlook Energy demand by scenario (M toe)

5

Energy mix 2012

Energy mix 2040

Total: 13 361 Mtoe

Total: 18 290 Mtoe

19

14

29

24

7 21 31

24

26

Coal Oil Gas Nuclear Renewables 9 Source: International Energy Agency. 2014. World Energy Outlook 2014. IEA. Paris.

IEA’s World Energy Outlook Liftetimes of fossil fuels and uranium resources

10 Source: International Energy Agency. 2014. World Energy Outlook 2014. IEA. Paris.

IEA’s World Energy Outlook 2014 Energy-related CO2 emissions (Giga tonnes) Giga tonnes

11 Source: International Energy Agency. 2014. World Energy Outlook 2014. IEA. Paris.

IEA’s World Energy Outlook Implementation of climate policies and carbon emission costs CO2 price assumptions… … by region and scenario (USD/tonne @2013 prices)

EU CO2 price assumptions by scenario (USD/tonne @2012 prices)

150

120

Current policies New policies 450 Scenario

90

60

30

0 2020

2030

2040 12

Source: International Energy Agency. 2014. World Energy Outlook 2014. IEA. Paris.

IEA’s World Energy Outlook Reduction in CO2 emissions by region (450 scenario vs NP scenario)

Giga tonnes 13

IEA’s World Energy Outlook Reduction in CO2 emissions by sector and region

Giga tonnes 14 Source: International Energy Agency. 2014. World Energy Outlook 2014. IEA. Paris.

IEA’s World Energy Outlook Climate policies: Requirements, policies, and measures Global CO2 emissions 2010-2035 NP scenario and 450 scenario compared (Annual emissions; giga tonnes)

What will it take? CO2 abatement efforts and potential by source (%) 2020

2035

2%

2%

18%

13%

3%

2%

50%

27%

2%

3%

15%

23%

Biofuels

2%

4%

Nuclear

5%

8%

CCS

4%

17%

3.1

15.0

38 36

New Policies Scenario

Activity End‐use efficiency

34

Power plant efficiency

32

Electricity savings

30 28

Fuel and technology switching in  end‐uses

26

Renewables

24

450 Scenario

22 20 2010

2015

2020

2025

2030

2035

Total (Gt CO2)

15 Source: International Energy Agency. 2013. World Energy Outlook 2013. IEA. Paris.

The new climate economy report Three economic systems and key drivers of change  The Global Commision of the Economy and Climate  Commisioned by seven countries  Colombia, Ethiopia, Indonesia, South Korea, Sweden, United Kingdom

 Work programme conducted by eight research institutes

16 Source: GCEC (2014). Better growth, Better climate: The New Climate Economy Report.

The new climate economy report Three economic systems and key drivers of change

17 Source: GCEC (2014). Better growth, Better climate: The New Climate Economy Report.

The new climate economy report Specific actions and measures

18 Source: GCEC (2014). Better growth, Better climate: The New Climate Economy Report.

The new climate economy report Global action plan 1.

Accelerate a low-carbon transformation by integrating climate action and risk into strategic economic decision-making 2. Create the confidence needed for global investment and climate action by entering into strong, lasting, and equitable international climate agreement 3. Phase out subsidies for fossil fuels and agricultural inputs and incentives for urban sprawl 4. Introduce strong, predictable carbon prices as part of good fiscal reform 5. Substantially reduce the capital cost of low-carbon infrastructure investment 6. Scale up innovation in key low-carbon and climate-resilient technologies and remove barriers to entrepreneurship and creativitity 7. Make connected and compact cities the preferred form of urban development 8. Halt the deforestation of natural forests by 2030 9. Restore at least 500 million hectares of lost or degraded forests and agricultural land by 2030 10. Accelerate the shift away from polluting coal-fired power generation 19 Source: GCEC (2014). Better growth, Better climate: The New Climate Economy Report.

The new climate economy report Some critical remarks

20 Source: GCEC (2014). Better growth, Better climate: The New Climate Economy Report.

All opportunities carry a cost Climate challenge and economic activity Stylised picture Economic activity Successful climate policies No climate policies

Time

21

Economics of global warming… Loose reflections on late news  The global energy situation  IEA’s WEO 2014  Assumptions and scenarios  Climate issues

 New Climate Economy  Drivers of change  Strategy and action plan

 Discussion  Implications for national policies  … and regional policies 22