1 Vom Preis des Klimaschutzes und vom Wert der ErdeKosten-Nutzen-Analyse und das Konzept der ‘starken’ Nachhaltigkeit in der Klimapolitik Mittwoch, 18. April 2007 ETH Zürich Dr. Ottmar Edenhofer

2 Cost-Benefit-Analysis

3 Mitigation Costs with ITCSource: Edenhofer, Lessmann et al. 2006

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5 The Economist September 9th 2006, p. 9Economists trying to guess the ultimate costs of limiting carbon-dioxide concentrations…most estimates are at the low end – below 1 %. The Economist September 9th 2006, p. 9 Sir Nicholas has tried to assess the future costs of climate change…and has set them against the costs of cutting fossil-fuel usage enough to stabilise carbon-dioxide concentration in the atmosphere. His answer to the second part of his calculation is fairly uncontroversial. The Economist November 4th 2006, p. 14

6 Economic Damages in % of GDPTemperature Increase In % of GDP Nordhaus Natural Scientists Kemfert-high Stern Review Environmental Scientists Tol Kemfert-low Social Scientists Source: OECD (2003) and Kemfert (2004)

7 Economic Damages in % of GDPTemperature Increase In % of GDP Nordhaus Natural Scientists Kemfert-high Stern Review Environmental Scientists Tol Kemfert-low Social Scientists Source: OECD (2003) and Kemfert (2004)

8 Cost-Benefit AnalysisLosses BAU: GWP % / 8.5% ( ) Losses CBA: GWP - 0.8% / 1.8% (2050) ; Cons % / 3.3%(2050)

9 Stern‘s Welfare Function= Consumption = Intragenerational Equity = Pure Rate of Time Preference

10 Stern‘s Welfare Function= Consumption = Intragenerational Equity = Pure Rate of Time Preference

11 Stern‘s Welfare Function= Consumption = Intragenerational Equity = Pure Time Preference Rate

12 Comment: Ethical DualityBoth parameters determine the overall investment rate i in a simple Ramsey model: = Labour Productivity = Capital Income Share = Population Growth

13 Investment Rate and Ethical DualityIntergenerational Inequality 0.1 % 1 % 5 % 2 18 % 16 % 12 % 1 36 % 30 % 0.5 70 % 51 % 24 % Inequality between Rich and Poor a = 5 %, n = 1 %, = 30 %

14 Investment Rate and Ethical DualityIntergenerational Inequality 0.1 % 1 % 5 % 2 18 % 16 % 12 % 1 36 % 30 % 0.5 70 % 51 % 24 % Inequality between Rich and Poor Equality a = 5 %, n = 1 %, = 30 % Inequality

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17 The Mitigation Gap ‘Business as Usual’ Emissions Reduction

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19 Mitigation Costs and Induced Technological Change

20 What is an Energy System?

21 Electricity production(business as usual scenario) EJ/a Biomass Combined Heat-power Natural Gas NGCC Solar energy Wind energy Hydropower Nuclear LWR Geothermal energy Coal PC Source: Edenhofer/Lueken 2007

22 Global Distribution of Reserves & ResourcesHard Coal: Global Distribution of Reserves & Resources 2,078 Gt = scaling factor 1 Global Reserves: 728 Gt Source: BGR (2005), Reserves, Resources and Availability of Energy Resources 2005

23 Global Distribution of Reserves & ResourcesBrown Coal: Global Distribution of Reserves & Resources 434 Gt = scaling factor 1 Global Reserves: 207 Gt Source: BGR (2005), Reserves, Resources and Availability of Energy Resources 2005

24 Extraction Costs for Fossil Fuels

25 Extraction Costs for Uranium

26 Extraction Costs for Uranium

27 The Nuclear Energy Sector in REMINDUranium Ore TNR Fresh fuel TNR fuel production Thermal Reactor Electricity TNR Spent fuel TNR direct disposal TNR Spent fuel TNR reprocessing ILW t&s ILW ILW Depleted uranium Recycled uranium Plutonium conditioning HLW t&s Plutonium HLW HLW LLW T&s LLW LLW FNR reprocessing intermediate storage FNR Spent fuel FNR Spent fuel FNR direct disposal Terminal storage FNR Fresh fuel FNR fuel production Fast Reactor Electricity

28 Electricity production(450 ppm Scenario) EJ/a Coal PC Biomass Combined Heat-power Natural Gas NGCC with CCS Solar energy Natural Gas NGCC Wind energy Hydropower Nuclear LWR Geothermal energy

29 Electricity production(450 ppm scenario with nuclear power phase-out) EJ/a Energy costs due to nuclear power phase-out will increase by 4.6 % Coal PC Biomass Combined Heat-power Natural Gas NGCC with CCS Solar energy Natural Gas NGCC Wind energy Hydropower Nuclear LWR Geothermal energy

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31 Additional costs due to nuclear phase-out(mitigation costs with nuclear phase-out minus mitigation costs without nuclear phase-out ) relative cost increase (%) learning rate of solar energy floor costs of solar energy ($/kW) Default values for solar energy: learning rate 0,2 – floor costs 1000 $/kW

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34 Biomasse: Potential and its utilisation

35 Menschliche Eingriffe in die Biosphäre Gegenwärtige Aneignung der globalen Netto-Primärproduktion (HANPP) Haberl et al. (2006) Natürl. Veget. (GtC/yr) Aktuelle Vegetation Veränderte Vegetation Ernte / Entnahme Feuer HANPP Total Rückflüsse 65.5 59.2 6.3 7.2 1.1 14.7 1.5 100% 90% 10% 11% 2% 23% Menschliche Eingriffe = 270 EJ/yr (kalorisch) (inkl EJ/yr Bioenergie) Bioenergie-Projektionen bis 2100: 400 EJ/yr = 7-9 GtC/yr

36 Comparative Advantage of Renewables

37 Bioenergy Potential of Europe (15% of Primary Energy Consumption in 2030)EEA, 2006

38 Anteil der Emissionen nach Sektoren im Jahr 2000Stern Review, 2006

39 Stabilise Energy ImportsEU Commission: An Energy Policy for Europe Climate Protection 2° C - 450ppm Security of Supply Competitiveness Curb Emissions 20% reduction EU emissions by 2020 30% reduction industrialised nations and EU 2020, if negotiatable 60-80% reduction target for industrialised nations until 2050 20% share renewables in EU primary energy by 2020 20% improvement in energy efficiency 2020 10% share biofuels 2020 12 large CCS plants in EU 2015 Reform and extend EU ETS A European Strategic Energy Plan (SET-Plan) Diversify and Stabilise Energy Imports Liberalize EU Energy Markets Ownership unbundling energy transmission Stronger regulation energy markets Expand trans-european energy grids Energy Charter EU-Russia Launch North-Africa-EU energy partnership Establish EU strategic gas reserve

40 Source: IEA

41 The Carbon Market Cap: Reduced Emissions CO2-Emissions CO2 MarketAuction CO2 Certificates CO2 Market CO2 Certificates Grand- fathering! buy sell Fossil Power Plant Fossil Power Plant CO2 Price Electricity Grid Efficiency Carbon Capturing and Sequestration Renewable Energy Households Industry

42 Verkehrssektor in den Emissionshandel!

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44 A Bretton Woods Carbon MarketCO2-Emissions EU ETS RGGI Global CO2 Market Carbon Central Bank CO2 Price Efficiency Renewable Energy CCS (Global) Technology Initiative California

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46 EUA Closing Prices, historicalThe graph shows daily bid-offer close EUA Dec 2007 prices from December 2004 (blue line) in the OTC market, and EUA Dec 2008 from Sept 2005 (red line). The data was updated 15 March 2007 32€ 28€ 24€ 20€ 16€ 12€ 8€ 4€ 0€ Dec 05 Feb 05 Apr 05 Jun 05 Aug 05 Oct 05 Dec 05 Feb 06 Apr 06 Jun 06 Aug 06 Oct 06 Dec 06 Feb 07 Source: Point Carbon