GISPRI No. 15, 1997

Conference on Policies and Measures
of Climate Change Mitigation
Issue and IPCC

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The consumption of expendable resources continues to rise as the developed countries pursue wealth while rapid economic growth and population increase continue in developing countries. Especially, there is a concern that the increase In fossil fuel consumption will raise the atmospheric concentration of CO2, and thus cause climate change due to the global warming effect.

In December of this year, the 3rd Conference of Parties (COP3) for UN Framework Convention on Climate Change (UNFCCC) will be he]d In Kyoto, Japan. As a precedent for COP3, Global Industrial and Social Progress Research Institute (GISPRI) held the captioned conference with thc Ministry of International Trade and Industry (MITI) and the New Energy and Industrial Technology Development Organization (NEDO). The invitee for this conference included the policy-makers and relevant parties concerned in the policies and measures of greenhouse gas emission reduction.

The keynote address was delivered by Dr. R. Watson, a Chair-Elect of Intergovernmental Panel on Climate Change (IPCC) on the subject of "Technical Paper-Technology, Policies, and Measures, and the prospect of IPCC activities."

Schedule :
28 Jan. 1997, Tue., 11 :O00- 17:00
29 Jan. 1997, Wed., 10:00 - 17:10
Place:
Keio Plaza Hotel, Tokyo, Japan
Host organizations:
Ministry of International Trade and Industry
The New Energy and Industrial Technology Development Organization
Global Industrial and Social Progress Research Institute
Participating countries:
Australia, China, France, Germany, Indonesia, Thailand, UK, USA, and Japan

Program:
January 28th, Tuesday
Keynote address:
"Technical Paper-Technology, Policies. and Measures. and the prospect of IPCC activities" (Dr. Robert Watson, IPCC Chair-elect)
Session-1 : "Technology Transfer"
"Current status of and the requests and expectation for, Technology Transfer concerning greenhouse gas (GHG) emission reduction"
presentations, and comments from participating countries and discussion


January 29th Wednesday
Session-2A: "Tradable Permits/Quotas"
"Emission trading proposed by USA"
"Concept and mechanism of Tradable Permits/Quotas"
Session-2B :"Tradable Permits/Quotas"
Comments and discussion by participating countries
Session-3: "National Policies and Measures"
Comments by participating countries

Language: English and Japanese (simultaneous interpretaion available)

Keynote address

"Technical Paper-Technology, Policies, and Measures, and the prospect of IPCC activities"

(by Dr. Robert Watson, Chalr-Elect, IPCC)

1 . Principal activities and purposes of IPCC

First, I would like to report on the key results of IPCC's study on Technologies, Policies and Measures, then present my thoughts of how to proceed in IPCC.

The objective of the Convention is to stabilize the atmospheric concentration of greenhouse gas at a level that would prevent dangerous anthropogenic perturbation with the climate system. Furthermore, we need to allow ecosystems to adapt naturally, not to threaten food production, and to proceed with economic development in a sustainable manner. For this, some in IPCC believe that we scientists should define what is the right stabilization level of GHG concentration in atmosphere.

It is recognized that the lack of scientific knowledge should not be used as a reason for postponing measures. There are still key uncertainties in the understanding of climate change, but we should not use It as an excuse for Inaction. The Convention also recognizes the need to derive global benefit at the lowest costs. The topic of emissions trading is one of key points to be dis-cussed here.

There is no doubt that the human activlties are Increasing the atmospheric concentration of GHGs, particularly CO2, methane, and nitrous oxide. CO2, especially, is the single most important anthropogenic green~house gas, emitted by the combustion of fossil fuels, coal, oil and natural gas, and from deforestation. Beside CO2, however, the combustion of fossil fuels emits sulfur dioxide that tends to cool the atmosphere and offset the green-house effect. It is important over the areas of the largest combustion of fossil fuels, such as Europe, North America, and Asia Nonetheless, the earth's mean surface temperature has definitely warmed in the last one hundred years, making this century the warmest century since 1400. There is no question that the earth is warming.

The sea level is also rising and glaciers are retreating globally. In other words, the earth's climate system is changing. The question is, is this due to natural phenomena or due to human actlvities? Comparing the observational record with our theoretical calculations, the conclusion Is that the climate change cannot be explained by natural phenomena. Not only the mean surface temperature of the globe, but the latitudinal and longitudinal changes in temperatures are consistent with what predicted from the theory when simultaneous increases in greenhouse gases and sulfate aerosols are allowed. Therefore, the key conclusion of IPCC was that the discernible human influence is evident on earth' s environment.

Next, a crucial point is that, without global policies to mitigate greenhouse gases, the earth's temperature will increase in the next century prlmarlly due to population Increases, increases in economic wealth, changes In technology, and changes in energy prices.

The plausible carbon dioxide emission level In the year 2100 could be in the range of 6 billlon tons/year to 36 billion tons/year, depending on the assumptions of populations, GNP and other factors. The mean surface temperature of the earth could have increased by 6.5 degrees Fahrenheit wlthin the next lOO years. This change Is faster than anything we have seen in the last ten thousand years.

Global warming is occurring, and to reverse it will take hundreds of years, because of the atmospheric residence time of carbon dioxide. In fact, once sea level rise occurs, it is many hundreds of years before you can slow It down. The good news is that there is a large range of cost-effective technologies and policies, that can be used in both developed and developing countries and markedly reduce their emission of greenhouse gases. What we must look at is both international and inter-generational equity issues. In this sense, there is justification for going beyond the no-regret strategy. Concerning the dependence on fossil fuels, it will also have significant Impact for local alr quality and regional quality.

What are the major challenges to the Convention? First of all, we have to find the right choice for the stabilization level. This is a political choice, not a scientific one. To get to a stabilization level, while effectively protecting the environment but minimizing the costs, the right choice of technologies and policies will be regionally specific. The best technologies and policles in one part of the world are not necessarily being so in another.

To explain the climate change issue, the environmental people believe that 450 parts per million should be the stabilization level of CO2. Others may agree that climate change is very serious, but believe the stabilization should be somewhere between 450 and 650 ppm. Then, others who don't believe this issue at all believe the level could be way up. When I showed this figure to some environmentalists, they were surprised and said "450 to 650 is outrageous." Clearly different groups have different views as to the stabilization level.

Concerning the mitigation measures, IPCC finds that, while we may need to remove subsidies, short term subsidies may be placed as an incentive to encourage the diffusion of new energy-efficient technologies into the marketplace during the build-up phase. The issue of education and training is quite crucial, too. One of the questions we have to ask is, if we believe climate change is a serious environmental issue, and we want to move in the direction of less dependence on fossil fuels - Iet's even argue by the middle to the end of next century completely fossil free - , then the question is, are the research development, and demonstration (RD&D) programs can bring those technologies to market? The investment in RD&D, in both the private sector and the public sector, is decreasing significantly, and hence we are going in the wrong direction.

2. Will it be possible to decrease CO2 ?

The overall conclusion of the IPCC is that significant reductions are possible. It can be done without the premature retirement of capital stock, so far as some policy measures are taken in the next hundred years. When we think about Investments in energy supply or energy demand, we should take climate change into account. It needs both technology and policy measures.

After the Second Assessment Report (SAR), the IPCC was asked by the government to come up with a new Technical Paper to make the SAR more user-friendly. The focus was still on the Annex I countries of UNFCCC, while noting the Iniformation that could be used by non-Annex I countries. The Technical Paper is based on the SAR and all previous assessments, and differentiated technologies and measures that can be used in a short term. The short term is defined as between now and the year 2010, medium-term up to 2020, and the longer term to 2050, and beyond, which Is more like guessing than working on the real substance.

The Technical Paper was consisted of the sections for energy demand, energy supply, agriculture, forestry, solid waste disposal and waste water treatment, and economic instruments or cross-sectoral instruments.

First we examined the market-based programs, such as carbon or energy taxes, internalization of externalities, phase-out subsidies, and tradable emission permits and quotas. Also examined were voluntary agreements, regulatory measures, the importance of RD&D, and the importance of information.

Unlike the SAR, we tried to do better this time in defining the technical potential, the economic potential and the market potential. The technical potential is simply the potential to reduce greenhouse gas emissions, or improve energy efficiency, without the consideration on costs and practical feasibility. The economic potential is the portion of technical potential effectively realizable in a cost-effective manner when no market barriers are present. What is cost-effective? In the Technical Paper, we defined that the technology was cost-effective if the rate of return was within five years. People could argue that It should be ten years, but we just tried to define In most places it would be five years. Lastly, the market potential is what portion of the economic potential that could be realized with current policies and market conditions, recognizing the existence of many market barriers .

Table. 1: Total reported IEA government R & D budgets (columns 1-7 ; US$ billion at 1994 prices and exchange rates) and GDP (column 8 ; USS trillion at 1993 prices).

When looking at the rate of Investment in RD&D from 1983 to 1994, over 12 billion dollars spent in 1983 was dropped significantly in 1994. To me, even worse though is the percentage of the investment in renewable energies or In energy conservation, though the investment for the research into nuclear fission or fusion did not change much. If we really believe we need to move away from fossil fuels to renewable energies, we must activate more Investment in this fleld.

So the overall challenge is how we can capture all of the win-win solutions. If we can make the system more economically efficient, we can capture energy efficiency, potentially reducing the CO2 emission by 20%, at little or no cost to the consumer. We believe there is a wide range of low-cost solutions such as clean coal technologies, and renewable energies. By not only focusing on the straight economic efficiency, but also internallzing local and regional environmental externalities, we can expand economlc win-win situation.

Another challenge is how do we bring the price down. The point I want to make here is that the significant investment in RD&D will be the only way. With this, we can start to bring the price down. So, the challenge to us at the moment is to capture as many of the win-win and low-cost solutions as possible, while investing in RD&D to bring the overall cost down.

3. Future of IPCC

Now, where do we go from here with respect to IPCC? The SAR was approved in December of 1995. Included were the Synthesis Report and three Working Group Reports. The Synthesis Report is really not a synthesis, but a cut and paste of few sentences and paragraphs in various Working Group Reports, that were considered relevant to interpret in Article 2 of the Convention.

Working Group 2 was a science assessment as the Working Group I. and it looked at the impact of climate change on human health, and ecological systems, and the potential to adapt, though I believe the adaptation study was covered only weakly. We also looked at the mitigation measures at the Working Group 2.

Working Group 3 tended to look at the macro economic perspective and some social dimensions of climate change.

I would like to talk about some of the limitations that I saw In the SAR. The main limitation of the SAR was an artificial separation of the social and economic sciences from the natural and technological sciences. That is to say, the social economic sciences were primarily in Working Group 3. Also there was an artificial separatlon of the ecological sciences which was in Working Group 1 , away from the impact's work. Most of the work in Working Group 2 was done at the sectoral level and did not look very much at cross-sectoral issues. For example, when looking at the effect of climate change on water, agriculture, and biomass, we never simultaneously looked at them from cross-sectoral viewpoints. So, we need to look at far more cross-sectoral issues by integrating assessments. The integrated assessment models will start to become quite valuable.

Also, we took rather global perspective than regional perspective. So we would like to introduce more of regional perspective in the Third Assessment Report, i.e., regions such as Africa, Asia, North America, Latin America, etc. We need to integrate , energy supply and energy demand, and to provide a regional perspective of the applicability of those technologies and measures. There were a number of overlap areas between the various Working Groups, on issues such as oceans, sea level rise, cryosphere, forestry, etc. Especially the economic issues were over-lapped between Working Group 2 and Working Group 3. These need to be considered while planning the structure of working groups for the Third Assessment Report (TAR).

When to have the TAR will depend on many factors incuding the outcome of the Kyoto Conference. My suggestion at the moment is that the Working Group Reports would be finished and approved In the year 2000. And the Synthesis Report built upon the Working Group Reports would be adopted In the year 2001 .

In summary, there is a wide range of cost-effective technologies and policies that would reduce greenhouse gas emissions, that can be applied to both in developed and developing countries. What the IPCC identifies are approaches that make good economic sense independent of climate change, and that can lead to multiple benefits for local pollution. What we need now is to design a new IPCC,that is transparent and fair. In this way, we can strive for the formulation of the TAR, and thereby actually serving the needs of the policy community.

Thank you.