Equity, international trade and climate policy

The literature of welfare-maximising greenhouse gas emission reduction strategies pays remarkably little attention to equity. This paper introduces various ways to consider efficiency and equity simultaneously. Lower (higher) discount rates lead to higher (lower) emission reduction. Higher (lower) inequity aversion leads to higher (lower) emission abatement, unless one also considers the negative effects of OECD emission reduction on the exports of developing countries; in that case, the effect of inequity aversion is ambiguous. In the absence of international co-operation, higher (lower) risk aversion leads to lower (higher) emission abatement. With international co-operation, the effect of risk aversion is ambiguous because the higher risk aversion gives more weight to poorer regions and poorer generations. We analyse four ways to introduce compassion in a nonco-operative setting. If observed development aid is a guide, international altruism is small and has little impact on optimal emission control. If countries act as if they ‘feel ’ but not ‘physically experience’ the climate impact of the most vulnerable country, optimal emission reduction increases, but not substantially so. However, if countries actually have to pay for the damage done, they would prefer to reduce their emissions to much lower levels. Finally, if countries pay as much for emission reduction as other countries suffer from climate change, (that is, if climate policy restores the income distribution to what it would have been without climate change), emissions are rapidly cut to very low levels

Induced Technological Change: Exploring its Implications for the Economics of Atmospheric Stabilization: Synthesis Report from the Innovation Modeling Comparison Project

This paper summarizes results from ten global economy-energy-environment models implementing mechanisms of endogenous technological change (ETC). Climate policy goals represented as different CO2 stabilization levels are imposed, and the contribution of induced technological change (ITC) to meeting the goals is assessed. Findings indicate that climate policy induces additional technological change, in some models substantially. Its effect is a reduction of abatement costs in all participating models. The majority of models calculate abatement costs below 1 percent of present value aggregate gross world product for the period 2000-2100. The models predict different dynamics for rising carbon costs, with some showing a decline in carbon costs towards the end of the century. There are a number of reasons for differences in results between models; however four major drivers of differences are identified. First, the extent of the necessary CO2 reduction which depends mainly on predicted baseline emissions, determines how much a model is challenged to comply with climate policy. Second, when climate policy can offset market distortions, some models show that not costs but benefits accrue from climate policy. Third, assumptions about long-term investment behavior, e.g. foresight of actors and number of available investment options, exert a major influence. Finally, whether and how options for carbon-free energy are implemented (backstop and end-of-the-pipe technologies) strongly affects both the mitigation strategy and the abatement costs

European Power Sovereignty through Renewables by 2030. Executive Summary

Europe has the potential to become self-sufficient in energy by 2040 with the renewable energy technologies we already have at hand, a new report based on a meta-study and led by researchers from the Potsdam Institute for Climate Impact Research (PIK) has found. This energy system based on 100 % renewable energies would come with a drop in energy costs for consumers, reduced vulnerability in times of geopolitical tensions, and would boost European competitiveness on the world stage. It urges politicians across the continent to develop a ‘common will’ and achieve power sovereignty by utilising existing technologies and spearheading a massive but affordable expansion of renewable energy – particularly wind and solar. The report states that by using complementary European energy resources led by the sun in the South of the continent and wind in the colder North, together with a consolidated power grid, the European energy system could free itself from imports of gas and oil and from reliance on volatile nations such as Russia

GJETC report 2018 : intensified German-Japanese cooperation in energy research ; key results and policy recommendations

The challenges and also potentials of the energy transition are tremendous in Germany, as well as in Japan. Sometimes, structures of the old energy world need "creative destruction" to clear the way for innovations for a decarbonized, low-risk energy system. In these times of disruptive changes, a constructive and sometimes controversial dialog within leading industrial nation as Japan and Germany over the energy transition is even more important. The German-Japanese Energy Transition Council (GJETC) released a summarizing report for the first project phase 2016-2018. It includes jointly formulated recommendations for politics as well as a controversial dialogue part. The Council jointly states and recommends that: Ambitious long-term targets and strategies for a low-carbon energy system must be defined and ambitiously implemented; Germany and Japan as high technology countries need to take the leadership. Both countries will have to restructure their energy systems substantially until 2050 while maintaining their competitiveness and securing energy supply. Highest priority is given to the forced implementation of efficiency technologies and renewable energies, despite different views on nuclear energy. In both countries all relevant stakeholders - but above all the decision-makers on all levels of energy policy - need to increase their efforts for a successful implementation of the energy transition. Design of the electricity market needs more incentives for flexibility options and for the extensive expansion of variable power generation, alongside with strategies for cost reduction for electricity from photovoltaic and wind energy. The implementation gap of the energy efficiency needs to be closed by an innovative energy policy package to promote the principle of "Energy Efficiency First". Synergies and co-benefits of an enhanced energy and resource efficiency policy need to be realized. Co-existence of central infrastructure and the growing diversity of the activities for decentralization (citizens funding, energy cooperatives, establishment of public utility companies) should be supported. Scientific cooperation can be intensified by a joint working group for scenarios and by the establishment of an academic exchange program