Emissions Pricing to Stabilize Global Climate

Abstract

In the absence of significant greenhouse gas (GHG) mitigation, many analysts project that atmospheric concentrations of species identified for control in the Kyoto protocol could exceed 1000 ppm (carbon-dioxide-equivalent) by 2100 from the current levels of about 435 ppm. This could lead to global average temperature increases of between 2.5 and 6°C by the end of the century. There are risks of even greater warming given that underlying uncertainties in emissions projections and climate response are substantial. Stabilization of GHG concentrations that would have a reasonable chance of meeting temperature targets identified in international negotiations would require significant reductions in GHG emissions below “business-as-usual” levels, and indeed from present emissions levels. Nearly universal participation of countries is required, and the needed investments in efficiency and alternative energy sources would entail significant costs. Resolving how these additional costs might be shared among countries is critical to facilitating a wide participation of large-emitting countries in a climate stabilization policy. The 2°C target is very ambitious given current atmospheric concentrations and inertia in the energy and climate system. The Copenhagen pledges for 2020 still keep the 2°C target within reach, but very aggressive actions would be needed immediately after that.

Keywords: Emissions Pricing, Climate Stabilization

JEL Classification: Q54, Q58