Mitigation options and costs

Necessary decarbonization of the economy to reach the CO2 concentration targets

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Evolution of the technology mix

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Key Findings:

  • First energy efficiency, then decarbonization
  • Climate policy costs are moderate for a 650 ppm CO2-eq
  • Climate policy costs increase but are still reasonable for a 550 ppm CO2-eq scenario
  • No silver bullet. Complex portfolio mix with: nuclear, renewables, coal with CCS
  • Stringent climate policy is unfeasible with delayed (2030) or incomplete action (China, India)
  • Modelling international trade of oil tilts distribution of costs towards oil exporting countries

The role of technological change and innovation

Level of investment in R&D for different scenarios

Effect of backstop technologies on the price of carbon and on the cost of mitigation

Key Findings:

  • Sharp increment of energy R&D (four-fold) is needed
  • R&D investments in backstop technologies play a key role when there are constraints to the development of nuclear and/or renewables
  • Modeling international disembodied R&D spillovers does not change mitigation policy costs
  • Intersectoral R&D spillovers might have a greater influence
  • With directed technical change, overall R&D investments decline with climate policy, and GDP losses increase
  • Human capital is pollution-using (due to the complementarity between labor and energy) and therefore climate policy re-directs investments away from education toward R&D which instead is pollution-saving

A cluster of climate international policy archtectures

Effectiveness of these architectures

Cost expressed in % of GWP losses

BAU obtained as open-loop Nash equilibrium in a cost/benefit analysis

Sensitivity of the cooperative solution to assumptions on damage intensity and discount rate

CBA: Free riding – the case of SSA

Major Findings:

  • Delayed and fragmented participation of developing countries into international climate agreements would raise the global policy costs considerably for serious stabilization targets
  • An international carbon market has the potential to alleviate such detrimental effects, but might involve large financial transfers
  • An agreement that envisions future commitments for some key emerging economies might represent a win-win strategy, since the optimal investment behavior is to anticipate climate policy
  • This is especially relevant for China, whose recent and foreseeable trends of investments in innovation are not incompatible with the adoption of domestic emission reduction obligations in 2030
  • In cost-benefit setting, only the Grand Coalition finds profitable to achieve the 550 ppm CO2-eq target, under very special condition
  • The Grand Coalition is neither stable nor potentially stable