Climate Change 2001:
Working Group III: Mitigation
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10.4.3 When Should the Response Be Made? Factors Influencing the Relationships between the Near-term and Long-term Mitigation Portfolio

A broad range of mitigation responses can be conceived. However, the bulk of attention, in both the analytical and policy arenas, has been devoted to reducing the emission of GHGs from anthropogenic sources and to removing the CO2 (the most important GHG) already in the atmosphere by enhancing the biophysical processes that capture it. The timing of these efforts depends partly on the climatic constraints to be observed and on the costs of these actions, which are subject to change over time. Even with an exact knowledge of the timing and consequences of the future impacts of climate change, policymakers will still be faced with difficult choices regarding the implementation of response options. This is because the costs, availability, and associated impacts of future mitigation options are uncertain, and the choices involve trade-offs with important competing environmental and other social objectives. Chapter 8 discusses the costs of different pathways towards a fixed stabilization objective, and notes factors which would favour a larger proportion of preparatory activities relative to mitigation per se as well as factors that favour early mitigation. This section considers the wider context relating to climate change risks and damages.

Inertia and Uncertainty
Various attempts have been made over the past few years to explore these questions. Arguments that favour a larger fraction of preparatory activities (developing technologies, building institutions, and the like), rather than emission reductions in the near-term mitigation portfolio, include losses from the early retirement of installed capital stock, technological development, the optimal allocation of resources over time (discounting effect), and the carbon cycle premium (Wigley et al., 1996). See Chapter 8 for a detailed discussion. Table 10.7 summarizes the most important arguments brought forward in favour of modest and stringent emissions reduction in the near term.

Table 10.7: Balancing the near-term mitigation portfolio
Issue Favouring modest early abatement Favouring stringent early abatement
Technology development
  • Energy technologies are changing and improved versions of existing technologies are becoming available, even without policy intervention.
  • Modest early deployment of rapidly improving technologies allows learning-curve cost reductions, without premature lock-in to existing, low-productivity technology.
  • The development of radically advanced technologies will require investment in basic research.
  • Availability of low-cost measures may have substantial impact on emissions rajectories.
  • Endogenous (market-induced) change could accelerate development of low-cost solutions (learning-by-doing).
  • Clustering effects highlight the importance of moving to lower emission trajectories.
  • Induces early switch of corporate energy R&D from fossil frontier developments to low carbon technologies.
Capital stock and inertia
  • Beginning with initially modest emissions limits avoids premature retirement of existing capital stocks and takes advantage of the natural rate of capital stock turnover.
  • It also reduces the switching cost of existing capital and prevents rising prices of investments caused by crowding out effects.
  • Exploit more fully natural stock turnover by influencing new investments from the present onwards.
  • By limiting emissions to levels consistent with low CO2 concentrations, preserves an option to limit CO2 concentrations to low levels using current technology.
  • Reduces the risks from uncertainties in stabilization constraints and hence the risk of being forced into very rapid reductions that would require premature capital retirement later.
Social effects and inertia
  • Gradual emission reduction reduces the extent of induced sectoral unemployment by giving more time to retrain the workforce and for structural shifts in the labour market and education.
  • Reduces welfare losses associated with the need for fast changes in people’s lifestyles and living arrangements.
  • Especially if lower stabilization targets would be ultimately required, stronger early action reduces the maximum rate of emissions abatement required subsequently and reduces associated transitional problems, disruption and the welfare losses associated with the need for faster later changes in people’s lifestyles and living arrangements.
Discounting and intergenerational equity
  • Reduces the present value of future abatement costs (ceteris paribus), but possibly reduces future relative costs by furnishing cheap technologies and increasing future income levels.
  • Reduces impacts and (ceteris paribus) reduces their present value.
Carbon cycle and radiative change
  • Small increase in near-term, transient CO2 concentration.
  • More early emissions absorbed, thus enabling higher total carbon emissions this century under a given stabilization constraint (to be compensated by lower emissions thereafter).
  • Small decrease in near-term, transient CO2 concentration.
  • Reduces peak rates in temperature change.
Climate change impacts
  • Little evidence about damages from multidecade episodes of relatively rapid change in the past.
  • Avoids possibly higher damages caused by faster rates of climate change.

In addition to those emphasized by Wigley et al. (1996; see above), other arguments are proposed that support less stringent near-term emission reductions as well. Most refer to the significant inertia in economic systems. The first argument below is related to the economic lifetime of already installed capital stock. The second points to the possibility of low-cost mitigation technologies becoming available in the future.

Wigley et al. (1996) refer to the inertia of the capital stock. Researchers also identified other fields of inertia such as technological developments and lifestyles. The essential point of inertia in economic structures and processes is that it incurs costs to deviate from it and these costs rise with the speed of deviation. Such changes are often irreversible. The costs stem from premature retirement of the capital stock, sectoral unemployment, switching cost of existing capital, and rising prices of scarce investment goods. Emissions reduction in the present influences the marginal abatement cost in the future. The inertia of technological development arises from the path dependence. The capital stock can be divided into three parts. First, end-use equipment with a relatively short lifetime can be replaced within a few years. Second, infrastructure, buildings, and production processes can be replaced in up to 50 years. Structures of urban form and urban land-use can only be changed over 100 years. The demand and supply of goods and services in these three domains are interrelated in a complex way (Grubb et al., 1995; Grubb, 1997; Jaccard et al., 1997).

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