Carbon leakage a concept to quantify an increase in greenhouse gas emissions in one country as a result of an emissions reduction by a second country with stricter climate change mitigation policies. [1] [2] Carbon leakage is one type of spill-over effect. Spill-over effects can be positive or negative; [3] for example, emission reductions policy might lead to technological developments that aid reductions outside of the policy area. Carbon leakage is defined as "the increase in CO2 emissions outside the countries taking domestic mitigation action divided by the reduction in the emissions of these countries." [4] It is expressed as a percentage, and can be greater or less than 100%. There is no consensus over the magnitude of long-term leakage effects. [5]
Carbon leakage may occur for a number of reasons: If the emissions policy of a country raises local costs, then another country with a more relaxed policy may have a trading advantage. If demand for these goods remains the same, production may move offshore to the cheaper country with lower standards, and global emissions will not be reduced.
If environmental policies in one country add a premium to certain fuels or commodities, then the demand may decline and their price may fall. Countries that do not place a premium on those items may then take up the demand and use the same supply, negating any benefit.
The issue of carbon leakage can be interpreted from the perspective of the reliance of society on coal, oil, and alternative (less polluting) technologies, e.g., biomass. This is based on the theory of nonrenewable resources. [5] The potential emissions from coal, oil and gas is limited by the supply of these nonrenewable resources. To a first approximation, the total emissions from oil and gas is fixed,[ clarification needed ] and the total load of carbon in the atmosphere is primarily determined by coal usage.
A policy that sets a carbon tax only in developed countries might lead to leakage of emissions to developing countries. However, a negative leakage (i.e., leakage having the effect of reducing emissions) could also occur due to a lowering in demand and price for oil and gas. One of the negative effects of carbon leakage is the undermining of global emissions reduction efforts. When industries relocate to countries with lower emission standards, it can lead to increased greenhouse gas emissions in those countries.
This might lead coal-rich countries to use less coal and more oil and gas, thus lowering their emissions. [5] While this is of short-term benefit, it reduces the insurance provided by limiting the consumption of oil and gas. The insurance is against the possibility of delayed arrival of backstop technologies. If the arrival of alternative technologies is delayed, the replacement of coal by oil and gas might have no long-term benefit. If the alternative technology arrives earlier, then the issue of substitution becomes unimportant. In terms of climate policy, the issue of substitution means that long-term leakage needs to be considered, and not just short-term leakage. [5] By taking into account the potential delays in alternative technologies and wider substitution effects, policymakers can develop strategies that minimize leakage and promote sustainable emissions reduction.
Estimates of leakage rates for action under the Kyoto Protocol ranged from 5 to 20% as a result of a loss in price competitiveness, but these leakage rates were viewed as being very uncertain. [6] For energy-intensive industries, the beneficial effects of Annex I actions through technological development were viewed as possibly being substantial. This beneficial effect, however, had not been reliably quantified. On the empirical evidence they assessed, Barker et al. (2007) concluded that the competitive losses of then-current mitigation actions, e.g., the EU ETS, were not significant.
Recent North American emissions schemes such as the Regional Greenhouse Gas Initiative and the Western Climate Initiative are looking at ways of measuring and equalising the price of energy 'imports' that enter their trading region [7]
The Kyoto Protocol (Japanese: 京都議定書, Hepburn: Kyōto Giteisho) was an international treaty which extended the 1992 United Nations Framework Convention on Climate Change (UNFCCC) that commits state parties to reduce greenhouse gas emissions, based on the scientific consensus that global warming is occurring and that human-made CO2 emissions are driving it. The Kyoto Protocol was adopted in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005. There were 192 parties (Canada withdrew from the protocol, effective December 2012) to the Protocol in 2020.
The United Nations Framework Convention on Climate Change (UNFCCC) established an international environmental treaty to combat "dangerous human interference with the climate system", in part by stabilizing greenhouse gas concentrations in the atmosphere. It was signed by 154 states at the United Nations Conference on Environment and Development (UNCED), informally known as the Earth Summit, held in Rio de Janeiro from 3 to 14 June 1992. Its original secretariat was in Geneva but relocated to Bonn in 1996. It entered into force on 21 March 1994.
A carbon tax is a tax levied on the carbon emissions required to produce goods and services. Carbon taxes are intended to make visible the "hidden" social costs of carbon emissions, which are otherwise felt only in indirect ways like more severe weather events. In this way, they are designed to reduce greenhouse gas emissions by increasing prices of the fossil fuels that emit them when burned. This both decreases demand for goods and services that produce high emissions and incentivizes making them less carbon-intensive. In its simplest form, a carbon tax covers only CO2 emissions; however, it could also cover other greenhouse gases, such as methane or nitrous oxide, by taxing such emissions based on their CO2-equivalent global warming potential. When a hydrocarbon fuel such as coal, petroleum, or natural gas is burned, most or all of its carbon is converted to CO2. Greenhouse gas emissions cause climate change, which damages the environment and human health. This negative externality can be reduced by taxing carbon content at any point in the product cycle. Carbon taxes are thus a type of Pigovian tax.
The Special Report on Emissions Scenarios (SRES) is a report by the Intergovernmental Panel on Climate Change (IPCC) that was published in 2000. The greenhouse gas emissions scenarios described in the Report have been used to make projections of possible future climate change. The SRES scenarios, as they are often called, were used in the IPCC Third Assessment Report (TAR), published in 2001, and in the IPCC Fourth Assessment Report (AR4), published in 2007. The SRES scenarios were designed to improve upon some aspects of the IS92 scenarios, which had been used in the earlier IPCC Second Assessment Report of 1995. The SRES scenarios are "baseline" scenarios, which means that they do not take into account any current or future measures to limit greenhouse gas (GHG) emissions.
Climate change mitigation is action to limit climate change. This action either reduces emissions of greenhouse gases or removes those gases from the atmosphere. The recent rise in global temperature is mostly due to emissions from burning fossil fuels such as coal, oil, and natural gas. There are various ways that mitigation can reduce emissions. These are transitioning to sustainable energy sources, conserving energy, and increasing efficiency. It is possible to remove carbon dioxide from the atmosphere. This can be done by enlarging forests, restoring wetlands and using other natural and technical processes. The name for these processes is carbon sequestration. Governments and companies have pledged to reduce emissions to prevent dangerous climate change. These pledges are in line with international negotiations to limit warming.
The Clean Development Mechanism (CDM) is a United Nations-run carbon offset scheme allowing countries to fund greenhouse gas emissions-reducing projects in other countries and claim the saved emissions as part of their own efforts to meet international emissions targets. It is one of the three Flexible Mechanisms defined in the Kyoto Protocol. The CDM, defined in Article 12 of the Protocol, was intended to meet two objectives: (1) to assist non-Annex I countries achieve sustainable development and reduce their carbon footprints; and (2) to assist Annex I countries in achieving compliance with their emissions reduction commitments.
The economic analysis of climate change explains how economic thinking, tools and techniques are applied to calculate the magnitude and distribution of damage caused by climate change. It also informs the policies and approaches for mitigation and adaptation to climate change from global to household scales. This topic is also inclusive of alternative economic approaches, including ecological economics and degrowth. In a cost–benefit analysis, the trade offs between climate change impacts, adaptation, and mitigation are made explicit. Cost–benefit analyses of climate change are produced using integrated assessment models (IAMs), which incorporate aspects of the natural, social, and economic sciences. The total economic impacts from climate change are difficult to estimate, but increase for higher temperature changes.
Flexible mechanisms, also sometimes known as Flexibility Mechanisms or Kyoto Mechanisms, refers to emissions trading, the Clean Development Mechanism and Joint Implementation. These are mechanisms defined under the Kyoto Protocol intended to lower the overall costs of achieving its emissions targets. These mechanisms enable Parties to achieve emission reductions or to remove carbon from the atmosphere cost-effectively in other countries. While the cost of limiting emissions varies considerably from region to region, the benefit for the atmosphere is in principle the same, wherever the action is taken.
Biomass, in the context of energy production, is matter from recently living organisms which is used for bioenergy production. Examples include wood, wood residues, energy crops, agricultural residues including straw, and organic waste from industry and households. Wood and wood residues is the largest biomass energy source today. Wood can be used as a fuel directly or processed into pellet fuel or other forms of fuels. Other plants can also be used as fuel, for instance maize, switchgrass, miscanthus and bamboo. The main waste feedstocks are wood waste, agricultural waste, municipal solid waste, and manufacturing waste. Upgrading raw biomass to higher grade fuels can be achieved by different methods, broadly classified as thermal, chemical, or biochemical.
Greenhouse gas (GHG) emissions from human activities intensify the greenhouse effect. This contributes to climate change. Carbon dioxide, from burning fossil fuels such as coal, oil, and natural gas, is one of the most important factors in causing climate change. The largest emitters are China followed by the United States. The United States has higher emissions per capita. The main producers fueling the emissions globally are large oil and gas companies. Emissions from human activities have increased atmospheric carbon dioxide by about 50% over pre-industrial levels. The growing levels of emissions have varied, but have been consistent among all greenhouse gases. Emissions in the 2010s averaged 56 billion tons a year, higher than any decade before. Total cumulative emissions from 1870 to 2017 were 425±20 GtC from fossil fuels and industry, and 180±60 GtC from land use change. Land-use change, such as deforestation, caused about 31% of cumulative emissions over 1870–2017, coal 32%, oil 25%, and gas 10%.
Carbon pricing is a method for nations to address climate change. The cost is applied to greenhouse gas emissions in order to encourage polluters to reduce the combustion of coal, oil and gas – the main driver of climate change. The method is widely agreed and considered to be efficient. Carbon pricing seeks to address the economic problem that emissions of CO2 and other greenhouse gases (GHG) are a negative externality – a detrimental product that is not charged for by any market.
Carbon emission trading (also called emission trading scheme (ETS) or cap and trade) is a type of emission trading scheme designed for carbon dioxide (CO2) and other greenhouse gases (GHG). It is a form of carbon pricing. Its purpose is to limit climate change by creating a market with limited allowances for emissions. This can lower competitiveness of fossil fuels and accelerate investments into low carbon sources of energy such as wind power and photovoltaics. Fossil fuels are the main driver for climate change. They account for 89% of all CO2 emissions and 68% of all GHG emissions.
The economics of climate change mitigation is a contentious part of climate change mitigation – action aimed to mitigate the dangerous socio-economic and environmental consequences of climate change.
The Kyoto Protocol was an international treaty which extended the 1992 United Nations Framework Convention on Climate Change.
Climate change scenarios or socioeconomic scenarios are projections of future greenhouse gas (GHG) emissions used by analysts to assess future vulnerability to climate change. Scenarios and pathways are created by scientists to survey any long term routes and explore the effectiveness of mitigation and helps us understand what the future may hold. This will allow us to envision the future of human environment system. Producing scenarios requires estimates of future population levels, economic activity, the structure of governance, social values, and patterns of technological change. Economic and energy modelling can be used to analyze and quantify the effects of such drivers.
Co-benefits of climate change mitigation are the benefits related to mitigation measures which reduce greenhouse gas emissions or enhance carbon sinks.
A carbon budget is a concept used in climate policy to help set emissions reduction targets in a fair and effective way. It looks at "the maximum amount of cumulative net global anthropogenic carbon dioxide emissions that would result in limiting global warming to a given level". When expressed relative to the pre-industrial period it is referred to as the total carbon budget, and when expressed from a recent specified date it is referred to as the remaining carbon budget.
Niklas Höhne is a German scientist in the field of national and international climate policy and mitigation of greenhouse gas emissions. He is founder of the NewClimate Institute in Cologne, Germany and professor at Wageningen University.
Sustainable Development Goal 13 is to limit and adapt to climate change. It is one of 17 Sustainable Development Goals established by the United Nations General Assembly in 2015. The official mission statement of this goal is to "Take urgent action to combat climate change and its impacts". SDG 13 and SDG 7 on clean energy are closely related and complementary.
Green recovery packages are proposed environmental, regulatory, and fiscal reforms to rebuild prosperity in the wake of an economic crisis, such as the COVID-19 pandemic or the Global Financial Crisis (GFC). They pertain to fiscal measures that intend to recover economic growth while also positively benefitting the environment, including measures for renewable energy, efficient energy use, nature-based solutions, sustainable transport, green innovation and green jobs, amongst others.
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