What’s a “Fair Share” of Emissions Reductions Under the Paris Climate Process?
This December, at COP 28 in Dubai, countries will consider the results of the first “global stocktake,” which is a global report card that compares real climate commitments and actions with the level that’s in fact needed to achieve global net zero and avoid the worst of climate outcomes. Following COP, countries will be expected to intensify their efforts to reduce their climate impacts and keep the targets of the Paris Climate Agreement in sight.
As they consider their future commitments, countries will grapple with their capacity to reduce emissions, whether that level is “fair” in a global sense, and what the climate implications may be.
Roberto Schaeffer, a professor of energy economics at the Federal University of Rio de Janeiro in Brazil, explores paths to deliver the dual imperatives of fairness, and maximum carbon reductions, in the global climate context. Schaeffer is a lead author for the Intergovernmental Panel on Climate Change Assessment Reports, and a co-recipient of the Nobel Prize. His work focuses on frameworks to maximize individual country contributions to the global climate effort.
Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone. 2023 is a critical year in the global effort to address climate change. This December, the world’s countries will meet in Dubai at COP 28 to discuss progress to date in lowering greenhouse gas emissions under the Paris Climate Agreement. At COP, countries will consider the results of the first global stocktake, which is a global report card that compares real climate commitments and actions with the level that is, in fact, needed to achieve global net zero and avoid the worst of climate outcomes. Following COP, countries will be expected to intensify their efforts to reduce their climate impacts and keep the targets of the Paris Climate Agreement in sight. Yet in considering their future commitments, countries will grapple with the extent to which they are capable of reducing emissions, whether that level is, in fact, fair in a global sense and what the implications for the climate may be of the commitments they make.
On today’s podcast, we are going to explore paths to deliver the dual imperatives of fairness and maximum carbon reductions in the global climate context. My guest is Roberto Schaeffer, a Professor of Energy Economics at the Federal University of Rio de Janeiro in Brazil. Roberto is a lead author for the intergovernmental panel on climate change assessment reports and a co-recipient of the Nobel Prize. His work focuses on the study of frameworks to maximize individual country contributions to the global climate effort. Roberto, welcome to the podcast.
Roberto Schaeffer: Thank you.
Stone: So the results of the first global stocktake were published in early September, and broadly what they show is not surprising, right? In essence, the global effort to reduce greenhouse gas emissions is lagging with what we need to keep within the limits established under the Paris Climate agreement. Could you, to start us out, introduce the stocktake and how it is meant to reorient global emissions reduction efforts?
Schaeffer: Okay, what’s the idea behind this global stocktake? It is because it is different from the Kyoto Protocol, which is a document that was produced back in 1997, where countries were supposed to have dedicated quotas to emit carbon emissions, which is a very much a kind of top-down approach. In the case of the Paris Agreement from 2015, the idea is to invite all countries of the world to pledge what they think is fair for them. And then, this first global stocktake that we’re having now is precisely the idea of looking at what all countries have pledged, add things up, and see whether or not what they’re proposing is enough to meet the Paris Agreement, which aims to limit the temperature or warming below 2 degrees by 2100 and ideally, below 1.5 degrees.
The problem is that, as of today, 2023, temperature rise has already reached 1.2 degrees, meaning that the temperature space that you still have available for our countries is not that great. So as you said, it did not come as a surprise that what countries have already pledged is not enough to reach this target of 2 degrees, or even 1.5. So the idea is, once we have this stocktake done, we basically go back to the countries and say, “Thank you very much for all your pledges, but this is not enough.” The idea is to go back to them and see what else they can do, to see whether or not we can reach this Paris Agreement, which is to stay at temperatures well below 2 degrees, ideally — even below 1.5 by the end of this century.
Stone: Give us a sense here. What is the emissions gap that that global stocktake report shows? And how dramatically will countries need to increase their efforts or “ambitions” in Paris Climate Agreement speak — how much more ambition will they need?
Schaeffer: That is not an easy question to answer, but basically we have to split the problem into two categories here. There is an emissions gap, meaning that what countries are pledging is not enough to reach those targets, but more than that, that is what we call an “implementation gap,” meaning that even what countries have pledged, which is not enough, are not being implemented. At the moment we have two challenges, at least. As of today, if countries do what they are promising to do, the expectation is that by the end of this century, the world is going to be between 2.6, 2.7, or 2.8 degrees warmer than it was at the beginning of the Industrial Revolution.
So we want to go to 2 degrees, ideally to 1.5 only, but if countries limit to do what they are pledging, and they are not even doing what they are pledging, this temperature rise will be at least 2.6 or 2.7 degrees, which is too much. And that’s why I stress the idea that the countries have to dramatically reduce their emissions over time so as to guarantee that we can reach these Paris Agreement targets, 2 degrees, or ideally even 1.5 only.
Stone: So much more ambition is going to be needed going forward. This brings up a critical question. I think it’s the central question of our conversation today, and that is: What is optimal in terms of global emissions reductions on a country-by-country basis? And what is equitable or fair on that same country-by-country basis? And these two concepts — optimal and equitable — can really be in tension with each other. I wonder if you could explain.
Schaeffer: Yes, this is the big issue here. Basically what’s optimal for the globe will be to find a solution that would be a least cost solution for the globe; for example, having a single carbon tax being applied to all countries. So by doing that, if you say, “Okay, I’m going to have a carbon tax that you apply to all activities that burn fossil fuels, that would naturally lead to countries with lower abatement costs to do more. For example, if a country has a lot of coal power plants, and if you have a carbon tax that’s high enough, that country will go in the direction of shutting down those coal power plants, moving into natural gas for their plants, or solar or wind, et cetera. So this is the least cost solution for the globe. The problem is that a least cost solution for the globe, from a climate point of view, it doesn’t mean that it is the least cost solution for individual countries from a perspective, for example, of development, because we know that many countries or all countries have specific sectors of their economies relying upon fossil fuels, emissions, and things like that. Even if it’s cheaper for the globe to shut down some of those activities in specific countries, for sure this is not the best solution for those countries. So this is the difficulty. How do we do something that is the best solution for the globe, with national priorities? And that’s why once you have these optimal solutions for the globe, you have to find the proper financial mechanisms to eventually finance those countries which, for them, that solution is not the least cost or not the best solution. And then it comes to this issue of, “Okay, what’s a fair way to share the burden?” There are many possibilities here. This is the tension that we have — what is best for the globe not mandatorily is best for individual countries when it comes to climate and job creation, economic growth, and things like that.
Stone: We’ve been talking about these different approaches and the “cost-optimal approach,” that’s how it is termed, is the approach that kind of overlooks the individual country’s circumstances and says, “How, as a globe, can we do this least expensively?” In your research and the research that you and colleagues have done, you’ve said this a little bit, that there are a couple of major shortcomings in the cost-optimal approach. One is that undue economic burden on developing countries, and the second is that, as I understood it reading some of this research, there is a disproportionate fraction of what’s called “the remaining carbon budget” that would be available to developed countries under this cost-optimal approach. Can you talk about that problem?
Schaeffer: Yes, in fact when we talk about climate change, basically we are talking about how much carbon the globe can [UNINTEL], because basically scientists already know very well that there’s a perfect correlation between the amount of carbon that’s stored in the atmosphere and temperature increase. What’s the problem here? Carbon or CO2, carbon dioxide, basically has almost an infinite life in the atmosphere. Once you have burned gas in your car or diesel in your truck, or kerosene for aviation in your plane, basically that CO2 will remain in the atmosphere almost forever.
So basically we know that if you want to limit global warming to 1.5 or 2 degrees, and if the world is already 1.2 degrees warmer, there is a remaining amount of carbon that still can be emitted so that this temperature will not be exceeding 1.5 or 2 degrees. This remaining carbon that we can emit is not that great. Typically the world emits today roughly 50 billion tons of CO2 every year. If you want to limit global warming to 1.5 degrees, the remaining carbon budget we have is not much more than 300 billion tons of CO2 to meet that.
Stone: So we have six years?
Schaeffer: If you keep emissions at the level we have today, we have six years to emit and basically shut down the world. It’s almost like that. That’s why, even when we talk about the 1.5 degrees warmer, or 2 degrees, now we have to introduce a new concept, which is with or without overshooting the temperature, as of today, if you want to limit temperature 1.5 degrees, we will not be able to emit only 300 gigatons of CO2 after 2100. Chances are we are going to emit more than that, meaning the temperature will go above 1.5 degrees, and later on, at some point in time — hopefully not too late, 2050, 2060 — we will have to have what you call “net negative emissions,” meaning that we will have to have the possibility of capturing CO2 from the atmosphere to compensate for this excess of CO2 that we have put into the atmosphere so the temperature can go higher than 1.5 degrees, and then later in the century, eventually go back to 1.5.
So you said it well. We have six years of emissions at today’s level, and chances are that we are going to overshoot, so what can we do? How do we share this budget that we have among the different nations? In a least cost solution, what happens is that the carbon budget that’s allocated in the optimal solution is much, much smaller for developing countries than for the developed world. Why? Because from an economic point of view, it’s cheaper to reduce emissions in developing countries. There are many reasons for that. One cheap way to reduce emissions is to invest more in renewables — solar, wind, eventually biomass, et cetera — because developing countries normally have better conditions for wind and solar, because developing countries normally have more space for biofuel production, because developing countries in most cases are still building their infrastructure. So it’s much easier to build right than to build wrong. Just try that, which is the tension between developing and developed countries.
Stone: So Roberto, let me ask you about this. In some of the reading I’ve done, my understanding is that the nationally determined contribution, for example for the United States, would allow us to burn and put into the atmosphere much more carbon than our portion of a global carbon budget would allow us. Is that correct?
Schaeffer: It’s correct. The idea behind that is that somehow the U.S. sees bigger opportunities in harder places to reduce emissions at a much, much higher level and at much lower cost than those emissions could be reduced in the US. And this is exactly the tension here. For sure, it’s much cheaper to plant forests in places where you don’t have a forest or where we have the space. It is much easier to build a power sector based on wind and solar in a place where you don’t even have a power sector yet, as opposed to the US, for an example, which still has a heavy reliance on coal power plants, which still have a useful life for many years, a country where the transportation sector is very much based on private mobility, cars, trucks, et cetera. So the infrastructure is here. To change that infrastructure to something else is very expensive. In a developing country where you don’t even have that infrastructure, if you build right from the beginning, maybe it’s going to be cheaper and emissions are going to be very low. But again, this is the tension here. Is this fair for developing countries? If you ask something from developing countries, without providing the means for those countries to do that, because as of today, it’s not a coincidence that the global economy still relies heavily on fossil fuels. Roughly 80% of all energy produced in the world comes from coal, oil, and gas. Why? Because it’s cheaper.
So going renewable, with a few exceptions, is more expensive than using traditional fuels like coal, oil, and gas. But in a least cost solution for the globe, basically these mathematical models see the possibilities of developing countries going renewable, which is good for the globe but is not the least cost solution for them, because they are not only looking at climate warming or global warming, but they are looking at their national agendas for developing their natural resources. Lots of oil, coal, and natural gas resources are still available in developing countries. And in this least cost solution, those resources will not be developed. So you have a huge reserve of oil, gas and coal which, in this least cost solution will not be produced because for the globe, it’s not a least cost solution.
But how to deal with that issue? Some countries, developing countries in particular, have great expectations for their development plans, based on fossil fuels which now with these very limited carbon budgets, will not be allowed to be produced anymore. This is the tension that we’re discussing here.
Stone: So it sounds like this is not a new conversation. It sounds like financial assistance from developed countries, emitting countries to more developing countries, is going to be central to this. They’re going to have to be paid to keep the oil in the ground, for example. They’re going to have to be paid to preserve the rainforests, for example, in Brazil, or develop renewable energies that might, on a capital basis, be more expensive.
Schaeffer: Yes, this is the model. If, in the past, there is already some pressure from developing countries to get international aid for them to develop. In this case here, it’s different. They will need these financial resources to do what they have to do or should do, but those countries which will finance that, will profit from that. Why will they profit from that? Because when you talk about the least cost solution, it means that it’s cheaper for the U.S. to help a particular developing country to build a renewable infrastructure, as opposed to that country going its own way and forcing the U.S. to reduce domestically those emissions that have been needed to be reduced because the carbon budget is global, meaning that if the U.S. does not reduce its carbon emissions, someone else has to do that. If someone else can do that at a cost that’s lower than the cost the U.S. would have to do that, that makes sense for the U.S. to pay for that, because it’s cheaper for the U.S. to pay someone to do what, if someone does not do, the U.S. would have to do by itself, and it’s going to be more expensive.
So this is the issue here. The least cost solution is the optimal solution for the globe, provided that those countries that benefit from that will be able to transfer technology, will be able to transfer the funds so that in the end, it’s the least cost solution for the globe and also a least cost solution for developed countries which would have a way to reduce emissions at a lower cost than if they had to do that domestically.
Stone: So this is an economic development opportunity, clearly, that goes along with this? What I’m hearing here also implies that we’re going to have substantial negative emissions, I would imagine, if the United States or any oil-producing country continues to produce oil, because on a global basis, it’s the least cost thing to do.
Schaeffer: This is one of the implications of this least cost solution. Basically, some countries that are already very much dependent on fossil fuels will be able to depend for more time on fossil fuels because some nations have the possibility of producing negative emissions. What is negative emissions, basically? A kind of technology or a way to operate that, instead of putting X of carbon in the atmosphere, in fact you bring or you capture carbon from the atmosphere. For example, reforestation backs what we call “biomass capture.” What does that mean? For example, you should produce ethanol in a sugar distillery to produce ethanol. In the fermentation process of producing ethanol, you emit CO2. This CO2, which because it’s anthropogenic, meaning that that same CO2 that’s emitted in a distillery is the CO2 that the sugar cane when it grew, to have taken out of the atmosphere. So you have a net zero balance. But if you can absorb or capture that CO2 that’s being emitted from the fermentation process and put it somewhere else, let’s say in depleted oil fields or produce some good with them. Then you have negative emissions. So you’re totally right. In order to limit temperature to 1.5 degrees only, we are going to need to have negative emissions at some point in time, and this some point in time is roughly by 2050 to 2060, to compensate for the excess of CO2 emissions that by that time would have gone into the atmosphere.
So we’re going to exceed the carbon budget, and hopefully we’ll be able to have negative emissions later on. Most of these negative emissions will come from developing countries. But what’s the incentive for a developing country to have these nature-based solutions or other solutions to capture CO2 from the atmosphere, if they do not get paid to do that? So this is the mechanism, and you have to think about how to pay someone to do a service that’s good for the world but where there’s no incentive to do it if you’re not paid to do that.
Stone: What’s interesting, this effort-sharing approach that you’re describing is extremely complex. In a system such as under Paris, where we’re looking at a bottom-up approach to reducing emissions, this implies, as I’m listening to you talk, a coordination, almost a Kyoto-style, top-down approach. How does effort-sharing work in the real world, again when there is so much coordination needed amongst countries to make this happen, and there is no guiding hand to coordinate everybody from up high?
Schaeffer: Yes, this stocktake that’s taking place this year is in fact the first trial to put on paper, what are the numbers? What do these pledges by the different countries mean? And then once we show that this is not enough, then you have to think about what kind of coordination will be needed? What kind of financial incentives will be needed so that we can fill this gap with negative emissions or renewable energy technology that would lead us to zero emissions, but which will only be possible if the proper financial mechanisms are in place? Otherwise, if you allow for each individual country to do what least costs for this individual country, we’re never going to get there.
So this applies not only to developing countries, but also to developed countries. And this, I think, is an important message. Global warming is a problem that affects all countries. Unfortunately, we already know that developing countries will be affected the most, because their infrastructure is not robust enough to deal with this issue of flooding. Major problems are associated with climate change — many problems. So they are going to suffer the most, but even developed countries, they’re already suffering. We’re seeing a lot of fires in Europe and the US, California.
So we have a big problem here. The issue is, again, to solve this global problem, a coordination is important, because we don’t have coordination. In the end, each country will do whatever it thinks is the right thing to do, and this will not lead to a least cost solution. So the coordination is we have to think about, for example — and we mentioned that before — a global carbon tax that would apply to everybody. But a single carbon tax to everybody means that this tax is going to be very expensive in a poor country, not so expensive in the developed countries, because this tax or the price is the same. Richer nations will suffer less because that amount of money is not that much for them. So that’s why you have to discover how to create this global carbon market, this global carbon price. Coordination is needed. Technology transfer is needed. And international flows of money will be needed. If you don’t do that, and you still want to limit the temperature to 1.5 or 2 degrees, in the end we’re going to spend much more money to do that than if you go to the least cost solution. But the least cost solution — let’s just suppose that they have a coordination to do that.
Stone: Something like a global carbon market that you’ve just spoken about — is that something that would be within the purview of the Paris process? Is it something that we might see discussions about at COP 28, we might see as a result of the stocktake? Do you want to talk about it?
Schaeffer: Because, let’s say that things like climate negotiations, they are made at the level of UNFCCC, United Nations Framer Convention on Climate Change. Basically you have to negotiate everything. You don’t have a mandate, to mandate anything. So that’s why we have to negotiate, and that’s why you have to have this architecture. And this architecture is being discussed. What kind of financial mechanisms will be needed to facilitate that the globe goes in the direction of finding a solution for everybody and which is acceptable to everybody?
So again, coordination is needed, but we don’t have the mandate to impose on any countries that they have to be part of this market, that they have to accept a common carbon price. So again, the interesting thing here is that while Kyoto was a top-down approach basically, some countries, what at the time we called “next-one countries,” which were basically developed countries — they accepted, or they negotiated individual carbon budgets for each one. But at that time, developing countries did not accept to be part of this negotiation, simply because there was a feeling, which was correct and is correct today, that once you have emitted CO2, that CO2 will stay forever in the atmosphere. Most of the climate change problem was created by emissions since the Industrial Revolution, meaning that the carbon budget that’s already in the atmosphere mostly came from developed countries.
So how now do you ask someone to do something to solve a problem which was not exactly created by that particular country? And that’s why it’s so difficult to impose a burden on developing countries. And then the Paris Agreement found this interesting, or created architecture. Instead of imposing anything, basically inviting all countries of the world to pledge whatever they think would be acceptable to them. What’s acceptable to a country is very much a function or a perception of that country of what’s fair for them. And what’s fair for them is not the least cost solution for the globe. It’s what’s fair for them, which is probably the least cost solution for them. And again, now this tension, the least cost solution for each individual country, as opposed to the least cost solution for the globe, meaning that we have to think about how to organize this big mess that we have today.
Stone: What’s interesting is this issue of what’s fair for each country. The research that you’ve been involved with has looked at multiple ways of seeing and identifying what actually is fair. Can you talk about those multiple frameworks for determining fairness?
Schaeffer: Yes, there are different frameworks, but there are ones that have been discussed the most. One, for example, you could say equal historical emissions for each country in the world that’s weighted by its population. So let’s assume each person in the world in this approach would have this right to historically have emitted the same amount of carbon, meaning that developing countries, because the amount of carbon which is in the atmosphere did not come from them mostly, they would have a much higher carbon budget now until the end of the century.
Stone: That remaining carbon budget.
Schaeffer: Yes. When you split this remaining carbon budget, 300 [?] you’ve got total CO2, for example, most of these remaining carbon budgets would go to developing countries. Europe would have basically reduced dramatically their emissions. US, the same thing. Japan, the same thing. But then China, India, Brazil, Mexico, on a per capita basis, would have much more spaced limits. It’s one of the proposals, which is from a developed country point of view, is almost unacceptable, meaning that they would have to do most of the job now because they have emitted the most. But they do not like doing that.
Stone: That’s the center of the whole climate negotiation tension.
Schaeffer: Yes, so this is one of the possible approaches. Another approach is not so dramatic. It’s what we call “per capita convergence,” meaning that over time — and we have to agree when is this over time, 2050, 2060 — but basically higher emissions per capita in the U.S. or Europe or Japan are much higher than in developing countries. You have to go down to give some space for emissions on a per capita basis from developing countries to go up at some point in time, until you basically cross each and then stay at that level, and then go down to zero together. So this would be another approach which is a per capita convergence, which is not that difficult to justify. It does make sense.
Another approach that is being discussed is what we call “ability to pay,” meaning that depending upon what your GDP per capita is, you’re going to need to do more or less effort to reduce emissions because we can assume that if GDP per capita is higher, meaning that you are a richer nation, you can do more because you have the resources to reduce emissions more rapidly. So this is another way. Let’s split this effort according to your ability to pay for it. So this is another approach.
Another one that is similar to that we call “greenhouse development rights.” Basically it’s related to this ability to pay, but corrected by the inequality of income you see in your own nation. What went in here? Basically let’s assume that you have a very unequal nation that, on a per capita basis, it looks as if emissions are not debts. Let’s say debts are low, or they’re high, but inside that nation you have such inequalities that the rich people are somehow hiding behind the poor people. So they seem to do nothing much on a per capita basis, but they are big emitters. So in that case, it would be related to ability to pay, but corrected by the national inequalities to compensate for it.
So these are basically the things that are being discussed, but again, to remember: Any one of these possibilities is more expensive for the globe than the least cost solution for the globe. But again, if you’re only being able to go to the least cost solution, if you find mechanisms to compensate for these extra costs that developing countries would have if they go this way, as opposed to these other criteria on ability to pay, historical emissions, et cetera, et cetera.
So again, this is what we’re discussing here, and many studies show they can already put a dollar tag on how much more the globe would pay to go to any one of these approaches, which is not the least cost solution. So if you see that this dollar tag is much higher than the least cost solution, you already have a feeling of how much money it would make sense to transfer from developed to developing countries to finance the transition of developing countries to a cleaner energy matrix. But this transfer of funds would be lower than the costs that developing countries would have if they had to do these things by themselves, because they do not have the least cost solution.
Again, it’s not easy for the West to instantaneously change the roads and cars, et cetera, to electricity or something else. It is much easier for a developing country that is still developing, that before building a new infrastructure for a road or a car industry, to think about what kind of road or car industry I want to have, and eventually already go green since the very beginning.
Stone: If I understand this correctly, and if I could sum it up this way, what it sounds like is as costs go up in the developing countries, developing world, they actually go down in the developed world. Is that correct? And that’s a key perspective to keep in point here, I think.
Schaeffer: Yes, because if developing countries can do more, they would be willing to do it, it means that developed countries would be able to do less than they would need to do if they do not have the help of developing countries to do part of the job of reducing emissions. And if developmentally, you’ll be able to do less, they can pay part of the due [?] to help developing countries do more.
Stone: This becomes a very interesting political question because the message here again is that if you, as a rich country, as the United States — if you pay developing countries to have their energy transition, we are sending capital overseas, but at the end of the day, it is a less expensive way for us also to reach that goal that will keep us at the 2 degree limit under Paris.
Schaeffer: Yes. This from an economic point of view, this is exactly the point. The problem is that of course, you should invest more in developing countries. Part of the jobs, part of the revenues of that will end up in developing countries —
Stone: And that’s the politically difficult part.
Schaeffer: If the world was a single nation, then the least cost solution by definition would be the solution. But because the globe is not one single nation but almost 200 nations, each nation not only wants to abate carbon emissions but also have other national priorities. And that’s why eventually transferring funds or promoting renewable energy in developing countries, which may be cheaper than in your own country, sometimes part of the benefit of doing that — jobs and income, et cetera, et cetera — will take place in a different place.
So again, a very complicated issue, but what’s more complicated here is not to deal with climate change. We don’t have an option. It’s not okay. Either I do this, or I don’t do that. It’s not possible anymore. We have to do something because agriculture is being heavily affected all over the world, so we’re going to have problems with food for the globe. Coastal cities are being affected. You can see the case of Florida, for example. Coastal cities are being flooded. Major fires are taking place, even in developed countries, in Greece, Portugal, Spain, the U.S., California, and Canada. So we cannot hide the problem anymore. We have to solve the problem.
So if you were to solve a problem, why not solve it in the least cost way? But again, tension is here.
Stone: And that commitment has to be there, to go all the way with it.
Stone: Roberto, thank you very much for talking.
Schaeffer: My pleasure, Andy.
Stone: Today’s guest has been Roberto Schaeffer, Professor of Energy Economics at the Federal University of Rio de Janeiro in Brazil.