OECD Environmental Outlook to 2050 - E3G · PDF fileOECD Environmental Outlook to 2050: ......

OECD Environmental Outlook to 2050: The Consequences of Inaction

“Beyond carbon prices”

Virginie Marchal

Policy Analyst

OECD , 3rd April 2012

Linking economy and environment

Health &

environment

Local air

pollution

(under

construction)

Land use

Yie

ld

eff

icie

nc

y

Biodiversity

Energy use

Fu

el p

ric

es

En

erg

y

eff

icie

nc

y

2

Deforestation GHG emissions

Climate

change

Water stress

& water

quality

Economic growth

Population & demographics Capital supply Natural resources

Bioenergy

Agenda

We are way off track!

How to reverse the trend?

Policy steps for a low-carbon, climate resilient economy

3

Note: values using constant 2010 purchasing power parity (PPP) exchange rates. Source: OECD Environmental Outlook Baseline; output from ENV-Linkages.

4

Environmental Outlook to 2050: Socioeconomic Developments

Projections for real gross domestic product: Baseline, 2010-2050

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

2010 2015 2020 2025 2030 2035 2040 2045 2050

Bill

ions o

f consta

nt 2010 U

SD

OECD BRIICS RoW US China India

Environmental state and pressures (1)

5

Global GHG emissions are expected to grow by 50% between now and

2050, mostly driven by GDP growth in BRIICS

Source: Outlook Baseline projection using ENV-Linkages model

0

10

20

30

40

50

60

70

80

90

2010 2015 2020 2025 2030 2035 2040 2045 2050

GtC

O2e

OECD AI Russia & rest of AI Rest of BRIICS ROW


6

CO2 emissions from energy and industry to 2050, baseline

Energy-related CO2 emissions were at an all-time high in 2010 and despite energy

efficiency improvements energy use and associated emissions are projected to

continue to increase

Source: Outlook Baseline projection using IMAGE model suite


7

Global temperature to increase by 3-6°C at the end of

the century. We are WAY OFF TRACK!

Source: Outlook projection using IMAGE model suite

200

300

400

500

600

700

800

900

1 000

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

CO

2c

on

ce

ntr

ati

on

(p

pm

)

450 ppm


8

The world is looking at potentially large scale social, economic and

environmental damages, and particularly in vulnerable countries

Source: Outlook projection using IMAGE model suite

Change of annual temperature between 1990-2050

Agenda




9

How can we avoid the grim prospects?

Reverse GHG emission trends

Source: OECD (2012), OECD Environmental Outlook to 2050, Baseline projection using ENV-Linkages model

10

0

10

20

30

40

50

60

70

80

90

100

110

120

130

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

GtCO2e Outlook Baseline 450 ppm Core

450 ppm Delayed Action 450 ppm Accelerated Action

In the long run, emissions have to go to zero

20

25

30

35

40

45

50

55

60

2010 2015 2020 2025 2030 2035 2040 2045 2050

GtCO2e

UNEP (2010) range Outlook Baseline

450 ppm Core 450 ppm Delayed Action

450 ppm Accelerated Action 550 ppm Core

0-

What does it mean to 2050?


11

Baseline GHG emissions in 2050

= 81 GtCO2e

0

50

100

150

200

250

300

350

400

450

2010 2015 2020 2025 2030 2035 2040 2045 2050

Index 2010=100

Baseline

450 ppm core scenario

The cost of action is still affordable…for now

12

The average GDP growth rate would slow by 0.2 percentage point between 2010 and 2050,

from 3.5% to 3.3% in a context of quadrupling of world GDP.

Benefits of action are not included in GDP projection


GDP -5.5%

GHG emissions -69.5%

GDP

GHG emissions

Act now – because delay is costly

13

Delaying action would increase the global cost of mitigation by nearly 50% by 2050, and could make it unaffordable

Real income in 2050 (% deviation from baseline)

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

Wo

rld

450 ppm Core 450 ppm delayed action

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

Wo

rld

450 ppm Core 450 ppm delayed action

Economic impact of technology choices in 2050

Leaving out any single technology – such as nuclear or carbon capture and storage (CCS) – will make the carbon and macroeconomic costs of the transition higher


14

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

450 scenario (all technologies)

No CCS Nuclear phase-out

Low ef f iciency & renewables

% Im

pact o

n r

eal

inco

me in

2050

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%




% Im

pact o

n r

eal

inco

me in

2050

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%




% Im

pact o

n r

eal

inco

me in

2050

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%




% Im

pact o

n r

eal

inco

me in

2050

Agenda




15

Policy steps to build a low-carbon economy

16

1. Set clear, long-term, more stringent and economy-wide GHG mitigation targets

2. Put a price on carbon, preferably through market-based instruments

3. Reform fossil fuel support policies

Why make CO2 cheaper if you’re trying to make it

scarcer?

17

Source: OECD and IEA analysis see website: www.oecd.org/iea-oecd-ffss

-2

-1

0

1

2

3

4

5

Oil-exporting countries

India China Russia Rest of the World

Non-EU Eastern European Countries

$ 44 billion,

2010, global renewable electricity subsidies

6% less emissions globally from

removal of fossil fuel subsidies

USD $409 billion 2010 , developing country

fossil fuel consumption subsidies

$45-75 billion

2010, in fossil fuel support

in OECD countries

Income gains from unilateral fossil fuel subsidy removal (% change in HH income vs BAU)


18




4. Foster innovation and support new clean technologies in a « technology-neutral » way


19




4. Foster innovation and support new clean technologies in a « technology-neutral » way

5. Complement carbon pricing with well-designed regulations

How to fill the financing gap?

• The financing gap needs to be filled by the private sector…

– Investment flows increasing in 2009 but not enough

– Engaging the private sector is key

– How to shift investments from “brown” to “green”?

20

RETURN RISK

• …But significant barriers still exist today

– Investors and project developers have choices to deploy their capital

– LCCR infrastructure projects less attractive than other alternatives

– Double challenge: infrastructure and climate market failures

Barriers on private sector investment

How can policy improve risk-adjusted returns for LCCR infrastructure projects?

Develop a policy framework to LCCR investment

21

Goals of a policy framework to green infrastructure investment

Design policies to ensure timely investment in necessary infrastructure to support economic development and enhance

human well-being, while protecting the global climate and limiting impacts of inevitable climate change.

Attract private sector investment to climate-resilient infrastructure by:

1. Boosting opportunities

2. Reducing investment risks

3. Increasing return on investment

Investment

Policy

Framework

Elements of a Policy Framework to Green Infrastructure Investment

Climate

Change

Policy

Framework

1. Strategic goal setting and alignment for a green economy

Clear, long-term vision and targets for infrastructure and climate change; policy alignment and multilevel governance, including stakeholder engagement

2. Enabling policies for competitive, open markets and greening infrastructure investment

Sound investment policies; market based and regulatory policies to “put a price on carbon”, remove harmful subsidies and correct for environmental externalities

3. Financial policies and instruments to attract private sector participation

Financial reforms to support long-term investment and insurance markets; innovative financial mechanisms for risk-sharing such as green bonds; transitional direct support for LCCR investment

4. Build public and private capacity and resources for a green economy

R&D, human and institutional capacity building to support LCCR innovation, monitoring and enforcement, climate risk and vulnerability assessment capacity

5. Promote green business conduct and consumer engagement in inclusive green growth

Corporate and consumer awareness programmes, corporate reporting, information policies, outreach

6. Think “holistically”

• Integrate environmental objectives in economic and sectoral policies

• Contradictory policies need to be carefully monitored and address

• Explore co-benefits of policies

22

Health

Water

Climate

Biodiv.

Challenges are so big that we can’t afford expensive solutions

Environmental Outlook to 2050

Thank you!

All Outlook information available on:

www.oecd.org/environment/outlookto2050

For further information:

[email protected] (Climate Change Chapter)

[email protected] (Climate Change Chapter, Modelling)

[email protected] (Environmental Outlook)

24

mailto:[email protected]



0

10

20

30

40

50

60

70

0 1 2 3 4 5 6 7 8 9 10

Population (billions)

WORLD

GDP per capita ('000 USD)

RoW OECD

OECD

RoW

BRIICS

WORLD


BRIICS

0

10

20

30

40

50

60

70

0 1 2 3 4 5 6 7 8 9 10


WORLD


RoW OECD

OECD

RoW

BRIICS

WORLD


BRIICS

0

10

20

30

40

50

60

70

0 1 2 3 4 5 6 7 8 9 10


WORLD


RoW OECD

OECD

RoW

BRIICS

WORLD


BRIICS

0

10

20

30

40

50

60

70

0 1 2 3 4 5 6 7 8 9 10


WORLD


RoW OECD

OECD

RoW

BRIICS

WORLD


BRIICS

0

10

20

30

40

50

60

70

0 1 2 3 4 5 6 7 8 9 10

Population (billions) WORLD


RoW OECD

OECD

RoW

BRIICS

WORLD


BRIICS

GDP +124%

GDP +478%

GDP +458%

GDP +295%


4. Foster innovation and support new clean

technologies in a « technology-neutral » way

26 0

2

4

6

8

10

12

0

4

8

12

16

20

24

1975 1980 1985 1990 1995 2000 2005

PercentUSD Billion (2009 prices and PPP1) Energy efficiency

Fossil fuel (e.g. CCS and clean coal)

Renewable energy sources

Hydrogen and fuel cells

Nuclear

Other

Share of energy R&D in total R&D (right axis)

Except in 2009 for the green stimulus, public RD&D on energy as share of total R&D budgets has declined in real terms over the last 35 years (IEA).

Develop a policy framework to LCCR investment

27

PUBLIC CONSTRAINTS

Increase revenue/

decrease op. cost

Decrease cost of

capital

Market-based instrument,

reform harmful subsidies

Open and competitive markets

Financial regulations

conducive to long-term

investmentInnovative financial

tools and instruments

4.Scale-up public and

private ressources for a

green economy

Monitoring and assessment

capacity

Administrative capacity

builidng, human

ressources

Transitional direct

support for LCCR

investment (FiT, tax

exemptions)

Promote corporate

Education, information

tools

5.Promoting green

business and consumer

conduct

PRIVATE BENEFITS

1.Strategic goal setting

and alignment for a

green economy

2.Enabling policies for

competitive, open

markets and greening

infrastructure

investment

3.Financial policies

and instruments to

attract private sector

participation

Levelling the playing field with carbon-Boost opportunities

Credible, transparent and

stable strategic goals

Engage key stakeholders

in the process

Transparency, property

protection, non-

discrimination and policy

coherence

Put a price on carbon,

reform fossil fuels

subsidies

Policy coherence to align

climate, sector and public

goals across levels of

governance

Environmental regulatory

policies (standards,

regulations)

Provision of environmental,

social and economic public

goals at the least cost

CHECK-LIST FOR

ACTION

Foster innovation with

R&D policies

Create stable market

opportunities

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