Beyond Paris, Part 4: Putting an Asterisk on Climate Change Mitigation Cost Projections
By Matthew Stepp and Amanda Kibbe, Center for Clean Energy Innovation
In 2012, Jesse Jenkins and Matthew Stepp took stock of the global climate policy challenge in an online series titled The Future of Global Climate Policy. Since then the Intergovernmental Panel on Climate Change (IPCC) completed its Fifth Assessment and many countries are taking stock of their existing—and some argue, failed—climate policies. Looking to the future, the latest round of international climate negotiations is set to close in Paris at the end of 2015, potentially offering the end of one era of global climate policymaking and the start of something new. With an eye on the long-term impacts of the 2015 negotiations, Amanda Kibbe and Matthew Stepp take an updated look in a five-part series on the state of the climate challenge. Click here for Part 1, Part 2, and Part 3.
In Part 3 of this series, we summarized the monumental task of mitigating climate change, particularly if we run on a “business as usual” track in the short-term and delay carbon reductions. It paints a bleak picture, but even with extreme warning, it has been painfully difficult to move the world towards a low-carbon future because of the economic costs of such a transition.
The IPCC argues that keeping global temperatures within 2°C will incur an annual cost of 0.04 to 0.14 percent of global GDP (approximately $29 billion to $101 billion per year) between now and 2100 (pg. 16). Climate advocates have latched onto this finding as proof that we can address climate change on the “cheap,” particularly when compared to the costs of inaction. But these cost projections need to be taken with a grain of salt—the climate community needs to be realistic about what it’s going to take to mitigate climate change.
In particular, the model scenarios underpinning these cost projection make a number of key assumptions, including:
- The existence of a single global carbon price, gradually increasing over time. For scenarios keeping global emissions to 450 ppm, the average carbon price is greater than $50/ton in 2020, increasing to over $1000/ton by 2100. (estimated from pg. 47, Figure 6.21)
- The full availability of all “key technologies” including carbon capture, carbon removal, bioenergy, and affordable renewable technologies. Scenarios that limit the availability of these technologies greatly increase mitigation costs; therefore the IPCC highlights these separately from the core cost finding.
- The immediate adoption of mitigation efforts in all countries. “Mosaic” adoption of national and regional climate approaches at different times increases mitigation costs, particularly for early policy adopters, though regional differences are important to account for.
As one could imagine, there is significant uncertainty to each of these broad assumptions. In fact, the entire global climate policy debate centers—to a large degree—on these core assumptions.
For instance, it is highly unlikely that a single global carbon price will be agreed upon anytime soon, if ever (and unlikely many individual countries will implement a carbon price), particularly at the “ideal” levels the IPCC recommends. In fact, it is much more likely that countries will continue to implement a hodgepodge of national and regional policies like subsidies and regulations that satisfy their national strengths and interests, rather than coordinating such a cohesive global effort. The IPCC warns that while this “mosaic” approach to climate policy may not cost much more in the near term, it can cause “institutional lock-in” that stifles policy reform in the future and increase costs.
The report does not explicitly assess the increased costs of not implementing carbon pricing. Instead it estimates the cost of delaying action (carbon pricing being an action assumed to be taken), calculating that mitigation costs increase on average 28-44 percent by 2050 if carbon reductions are delayed, depending on how much additional emissions reach the atmosphere.
On the availability of clean energy technologies, the IPCC report is much more nuanced than climate advocates’ general interpretation of the findings. In fact, the IPCC finds that the climate policy literature “broadly confirms that mitigation costs are heavily influenced by the availability, cost, and performance of mitigation technologies.”
The report’s cost estimates of limiting carbon emissions to 450 ppm dramatically increase if any clean energy technology is not widely available and commercially competitive. For example, if solar and wind technology deployment maxes out at 20 percent, total mitigation costs by 2100 increase between 2 and 29 percent. If the world doesn’t get more serious about carbon capture and sequestration technology, costs jump between 29 and 297 percent. And if bioenergy technologies (e.g. biomass, biofuels, etc.) max out at 100 exajoules per year, costs increase 44 to 78 percent.
Ameliorating these potential costs isn’t as simple as “deploying more clean energy.” There are significant technological, cost, performance, infrastructure, and market barriers to deploying these technologies at greater scale. The IPCC finds that even “more technically mature” renewable technologies like solar PV and onshore wind power have “not all reached a state of economic competitiveness.” (pg. 21) And other renewables like advanced geothermal, tidal, off-shore wind, biofuels, energy storage, and concentrated solar power still require research, development, or demonstration. Carbon capture and sequestration has also not properly been demonstrated at commercial scale, even though many technology components of such a system exist. And significant regional and local energy integration challenges exist.
We don’t mean to be the bearer of bad news, but no one should be surprised at the bleak outlook of the IPCC report’s actual cost, policy, and technologies conclusions—after all, if mitigating climate change was going to be cheap and easy, we probably would have figured it out already. But capturing the full implications of the report and being honest upfront about the challenges ahead is important to build recognition and coordination on how to move forward. Ideal cost, technology, and policy scenarios are good for comparative purposes, but if three decades of climate policy debate are any indication, there will be nothing “ideal” about future efforts to cut carbon.
The IPCC scenarios provide indications of which pressure points the climate community should most usefully focus their attention. After decades of failing to implement global and regional carbon pricing schemes and carbon targets, the utility of these policy options may be exhausted. And the study makes clear that technology cost and performance requires much more policy attention, even with the recent, significant improvements in solar PV and wind power. In other words, the climate community needs to attack the enormous costs and challenges of addressing climate change, not hide behind idealized scenarios.
Matthew Stepp is the Executive Director for the Center for Clean Energy Innovation specializing in climate change and clean energy policy. His research interests include clean energy technology development, climate science policy development, transportation policy, and the role innovation has in economic growth.
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