Climate Change Mitigation
Climate change mitigation refers to actions to reduce or prevent emissions of greenhouse gases (GHG) causing human-induced climate change. Mitigation can be reached by using new technologies, fostering renewable energies, making older energy systems more efficient, or changing management practices or consumer behavior. According to the Intergovernmental Panel on Climate Change (IPCC 2014), mitigation can be defined as “the effort to control the human sources of climate change and their cumulative impacts, notably the emission of GHGs and other pollutants, such as black carbon particles, that also affect the planet’s energy balance. Mitigation also includes efforts to enhance the processes that remove GHGs from the atmosphere, known as sinks.”
Climate change is a modification in the statistical distribution of weather patterns that lasts for an extended period of time. Climate change may refer to an alteration in average weather conditions or in the time variation of weather within the context of longer-term average conditions. In many regions, temperature changes and sea-level rise are putting ecosystems under stress and affecting human well-being. Because mitigation lowers the anticipated effects of climate change as well as the risks of extreme impacts, it is part of a broader policy strategy that includes adaptation to already happening climate change impacts. Adaptation and mitigation should be considered holistically as two faces of the same effort to combat the negative impacts of climate change.
The most diffused among GHG is carbon dioxide (CO2) that is released in the atmosphere through burning fossil fuels (coal, natural gas, and oil), solid waste, trees, and wood products and also as a result of certain chemical reactions (e.g., manufacture of cement or glass). CO2 is removed (or sequestered) from the atmosphere when it is absorbed by plants as part of the biological carbon cycle. Carbon dioxide remains in the atmosphere for centuries, meaning that each additional tonne of carbon dioxide emitted now will affect the well-being of people for decades and centuries from now. Concentrations in the atmosphere of other greenhouse gases (CH4, N2O, HFCs, PFCs, SF6, NF3) are also increasing steadily, exacerbating the problem.
As a consequence, the atmosphere traps more heat, and the global average surface temperature is increasing. This phenomenon is known as global warming. “Recent estimates indicate that the average surface temperature has increased by about 0.6 degrees Celsius (°C) with respect to 1951-1980, about 0.8 °C with respect to the pre-industrial average. Temperatures will continue to rise for decades because the climate system has a delayed response to the stock of GHG, and equilibrium temperature grows linearly with cumulative emissions of CO2” (Bosetti et al. 2014).
Back in 1972, the CO2 concentration was around 350 ppm and was increasing by around one part per million (ppm) per year (Sachs 2015). Today, the CO2 concentration in the atmosphere is increasing rather steadily at about 2 ppm per year. According to the IPCC (2014) “mitigation scenarios in which it is likely that the temperature change caused by anthropogenic GHG emissions can be kept to less than 2 °C relative to pre-industrial levels are characterized by atmospheric concentrations in 2100 of about 450 ppm CO2eq (equivalent).”
Unlike traditional pollutants, CO2 concentrations can only be stabilized if global emissions peak and in the long term decline toward zero. The lower the concentration at which CO2 is to be stabilized, the sooner and lower the peak should be. The stabilization of GHG concentrations requires fundamental changes in the global energy system relative to a baseline scenario. For example, according to the IPCC (2014) in mitigation scenarios reaching 450 ppm CO2eq concentrations in 2100, CO2 emissions from the energy supply sector decline over the next decades, reach 90% below 2010 levels between 2040 and 2070, and in many scenarios fall below zero thereafter. This concentration level is possible thanks to consistent energy efficiency improvements and almost quadrupling of the share of low and zero carbon energy technologies (from renewables, nuclear energy, and fossil energy with carbon dioxide capture and sequestration – CCS) and of technologies aimed at negative emissions such as bioenergy with CCS (BECCS) by 2050.
Climate Change Mitigation and Sustainable Development
Climate change has a clear inter-temporal and intergenerational dimension as it heavily affects the ability of each generation to satisfy its own needs. Climate change, therefore, is closely interlinked with the notion of sustainable development as originally defined by the Brundtland Commission (UN 1987), and its mitigation has an impact on the sustainability of the development process. Moreover, climate change has also remarkable intragenerational effects. In fact, climate change entails distributional impacts within each generation because the effects of global warming are spread unevenly across the globe, depending on the variation in regional and local climatic effects and on the differences in vulnerability of different societies.
Sustainable development is based on three dimensions, economic, social, and environmental, and it is conceived as development that preserves the interests of future generations, by preserving the ecosystem services, terrestrial or marine natural resources, and energy and water resources. First, climate change constrains possible development paths and could preclude any prospect for a sustainable future. Second, there are synergies and trade-offs between climate responses and Sustainable Development Goals (SDGs) because some climate responses generate co-benefits for human and economic development, while others can have adverse side effects and generate risks (IPCC 2014).
Climate change mitigation and related sustainable development goals (own elaboration from UN 2015)
1.5: By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social, and environmental shocks and disasters
2.4: By 2030, ensure sustainable food production systems and implement resilient agricultural practices that increase productivity and production, that help maintain ecosystems, that strengthen capacity for adaptation to climate change, extreme weather, drought, flooding, and other disasters, and that progressively improve land and soil quality
6.4: By 2030, substantially increase water-use efficiency across all sectors and ensure sustainable withdrawals and supply of freshwater to address water scarcity and substantially reduce the number of people suffering from water scarcity
6.6: By 2020, protect and restore water-related ecosystems, including mountains, forests, wetlands, rivers, aquifers, and lakes
7.1: By 2030, ensure universal access to affordable, reliable, and modern energy services
7.2: By 2030, increase substantially the share of renewable energy in the global energy mix
7.3: By 2030, double the global rate of improvement in energy efficiency
9.4: By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities
11.B: By 2020, substantially increase the number of cities and human settlements adopting and implementing integrated policies and plans toward inclusion, resource efficiency, mitigation, and adaptation to climate change, resilience to disasters, and develop and implement, in line with the Sendai Framework for Disaster Risk Reduction 2015–2030, holistic disaster risk management at all levels
12.2: By 2030, achieve the sustainable management and efficient use of natural resources
12.4: By 2020, achieve the environmentally sound management of chemicals and all wastes throughout their life cycle, in accordance with agreed international frameworks, and significantly reduce their release to air, water, and soil in order to minimize their adverse impacts on human health and the environment
13.2: Integrate climate change measures into national policies, strategies, and planning
13.3: Improve education, awareness raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning
13A: Implement the commitment undertaken by developed country parties to the UNFCCC to a goal of mobilizing jointly $100 billion annually by 2020 from all sources to address the needs of developing countries in the context of meaningful mitigation actions (…) and fully operationalize the Green Climate Fund (…)
Climate Change Mitigation Options
According to the IPCC, to preserve a 50% chance of limiting global warming to 2 °C, the world can support a maximum carbon dioxide emission level, also known as carbon budget, of 3000 gigatonnes (Gt) (IPCC 2014), of which an estimated 1,970Gt had already been emitted before 2014. Accounting for CO2 emissions from industrial processes and land use, land-use change and forestry (LULUCF) over the rest of the twenty-first century leave the energy sector with a carbon budget of just 980Gt (IEA 2015).
The energy sector is the largest contributor to global GHG, representing roughly two-thirds of all anthropogenic GHG, and CO2 emissions from the sector have risen over the past century to ever higher levels. Climate change mitigation options in the energy supply sector should, therefore, be carefully planned as essential to tackling climate change. Options for climate change mitigation also exist in the energy demand sector, such as through demand side management and energy efficiency at household or business level, or in transport.
Energy supply sector comprises all energy extraction, conversion, storage, transmission, and distribution processes that deliver final energy to the end-use sectors. Options to reduce GHG emissions in the energy supply sector reduce the lifecycle GHG emissions intensity of a unit of final energy (electricity, heat, fuels) supplied to end users. Different available options for climate change mitigation in the energy sector exist. Some are aimed to replace unabated fossil fuel usage with technologies without direct GHG emissions, such as renewable and nuclear energy sources, whereas others aim to mitigate GHG emissions from the extraction, transport, and conversion of fossil fuels through increased efficiency, fuel switching (e.g., from coal to gas), and GHG capture (carbon capture and sequestration or CCS).
The Role of Electricity Sector in Climate Change Mitigation
Electrification of the energy system has been a major driver of the historical energy transformation from an originally biomass-dominated energy system in the nineteenth century to a modern system with high reliance on coal and gas. (IPCC 2014). Electricity generation is the largest single sector emitting fossil fuel CO2 at present and in baseline scenarios of the future. A variety of mitigation options exist in the electricity sector, including renewables (solar and wind energy, geothermal, hydro, bioenergy), nuclear, and the possibility of fossil or biomass with CCS. The electricity sector plays a major role in mitigation scenarios with deep cuts of GHG emissions. Mitigation in the electricity sector can be achieved by means of (1) decarbonize electricity generation, (2) substitute fossil fuels with electricity for end use in buildings and industry and as transportation fuel, and (3) reduce aggregate energy demands.
Renewable Energy for Electricity Generation
Renewable energy (RE) is one of the most important among climate mitigation options especially in the electricity sector. The lifecycle GHG emissions normalized per unit of electrical output (g CO2eq/kWh) from technologies powered by RE sources are less than from those powered by fossil fuel-based resources (IPCC 2012). Although consistent estimates for each RE source are not available, the technical potential for solar is shown to be the largest by magnitude, but sizable potential exists for many other forms of renewables. RE technical potentials are not always comparable to those for fossil fuels and nuclear energy due to differing methodologies. Nevertheless, the RE technical potential as a whole is at least 2.6 times as large as the 2007 total primary energy demand globally (IPCC 2012).
However, some constraints in RE sources development exist. The long-term contribution of some individual RE sources to climate change mitigation may be limited by the available technical potential if deep reductions in GHG emissions are sought (e.g., bioenergy), while even RE sources with seemingly higher technical potentials (e.g., solar, wind) will be constrained in certain regions due to changing weather patterns. In other cases, environmental concerns, issues related to public acceptance, and economic factors such as investment in infrastructure required for energy system integration are likely to limit the deployment of individual RE technologies before absolute technical resource potential limits are reached (IPCC 2012). Furthermore, aggregate technical potentials may be affected by competition for land and other resources among different RE sources, as well as by concerns about the carbon footprint and sustainability of the resource (e.g., biomass).
Solar energy technologies for electricity generation can be divided in solar photovoltaics (PV) and concentrated solar power (CSP). PV and CSP are two considerably different technologies. Whereas CSP converts sunlight into electricity through the production of steam and the use of turbines and generators, PV produces its output thanks to special semiconductor materials that transform sunlight into electricity directly. Another important difference is that with CSP, the storage of electricity is possible through special fluids (molten salts), whereas in the case of PV systems, the storage is more difficult and still very expensive. The energy from the sun is abundant although intermittent; therefore, PV solar power systems for generation of electricity need a backup system in order to ensure the continuity in the energy supply during nighttime or in cloudy or rainy days (Neuhoff 2005).
Moreover, CSP technology needs larger areas than PV. Thus, if combined with the need for long days of direct sunlight, CSP would perform better in certain geographical area. PV systems, on the contrary, are scalable and therefore adaptable to different solutions, either off-grid or on-grid, for distributed generation on rooftops of private households and businesses, as well as for concentrated generation in utility-scale PV plants for electricity generation (Alloisio 2012).
Although solar energy provides a relatively small fraction of global energy supply, namely, 18% at the end of 2017 (390,625 MW of capacity as of 2017) (IRENA 2018), it has the largest potential among all energy sources, and given continuous technological improvements and cost reductions, it could see a dramatic deployment in the near- and long-term future. However, the variability of the resource and the need for new transmission and distribution infrastructure will have an impact on the length, type, and cost of solar energy deployment.
Wind energy offers the potential for significant near-term (2020) and long-term (2030 to 2050) GHG emissions reduction. In 2017, global wind energy capacity reaches 513,936 MW (23% of the global RE capacity) of which the greatest amount is from onshore wind applications (IRENA 2018). A number of different wind energy technologies are available on the market, but the primary use of wind energy which is relevant to climate change mitigation is the utility-scale, grid-connected wind turbines, deployed either onshore or offshore. Given its commercial maturity and the declining cost of onshore wind energy technology, wind energy has a large GHG mitigation potential. Although the wind energy potential is not dependent on technological breakthroughs, further incremental innovation is expected to increase the reliability and efficiency of wind energy. More technology challenges arise for offshore wind which have also the highest potential in terms of electricity output.
Like solar energy, wind energy has some barriers linked to the variability of the resource posing grid stability challenges to electric system operators and planners. Other barriers exist such as environmental and social acceptability issues. If the first – such as wind power plants impacts on wildlife – has been mostly overcome, the second represents the most important challenge in many countries. In Italy, for example, offshore wind power plant developers have met several obstacles from local communities. Other countries in the north of Europe, such as the UK and Denmark, instead, provide best practice examples of a rapid deployment of both onshore and offshore wind energy with no local opposition. In Scotland, for example, local communities have been involved in the ownership of wind energy farms.
Considering its technical potential and likely deployment, geothermal could meet roughly only 3% of global electricity demand by 2050. As of 2017 a capacity of 12,894 MW of geothermal energy exist globally (IRENA 2018).
Geothermal resources consist of thermal energy from Earth’s interior stored in rocks, steam, or liquid water. Technologies for geothermal utilization may be classified under categories for electricity generation, for direct use of the heat (heat pumps), or for combined heat and power in cogeneration plants. The technology for electricity generation from hydrothermal reservoir is mature and has been operating for more than 100 years. However, several prospects exist for technology innovation and improvement especially in enhanced geothermal system (EGS).
Geothermal energy is not dependent on climate conditions, and climate change is not expected to have a significant impact on the resource potential. However, on a local level, some effect of climate change on rainfall distribution may have a long-term impact on geothermal potential. With its natural thermal storage capacity, geothermal energy is suitable for supplying base load electricity and thus useful for the electricity system stability in the presence of intermittent renewable resources (wind and solar).
In 2017, hydroelectric power accounted for the largest share of the global RE capacity (53%, with an installed capacity of 1152 GW (IRENA 2018). Although hydropower’s share of the global electricity supply is foreseen to decrease by 2050 (in a range from 10% to 16%), this RE remains an attractive source within the context of global carbon mitigation scenarios.
Hydroelectric energy uses the energy of water moving from higher to lower elevations to generate electricity. Hydropower encompasses dam projects with reservoirs, run-of-river, and in-stream projects. Hydropower is a mature technology and in many regions is already overexploited. Hydropower projects exploit a resource that varies temporally across seasons and geographically among regions. Hydropower is highly dependent on the volume, variability, and seasonal distribution of the runoff and, therefore, is vulnerable to climate change effects. A shift in winter precipitation from snow to rain due to increased air temperature may lead to a temporal shift in peak flow and winter conditions (Stickler and Alfredsen 2009) in many continental and mountain regions. As glaciers retreat due to warming, river flows would be expected to increase in the short term but decline once the glaciers disappear (IPCC 2008). On the other hand, in sub-Saharan Africa, droughts have caused a reduced hydropower production (e.g., Ghana, Kenya).
Importantly, hydropower is becoming an important source of storage which could contribute to balance electricity systems that have large amounts of variable RE generation (IPCC 2012). As of 2017, up to 118,596 MW of pure pumped storage capacity is available globally (IRENA 2018).
The contribution of ocean energy to climate change mitigation is rather minor considering that – as of 2017 – it reaches, globally, 529 MW of capacity (IRENA 2018). Ocean energy comes from the kinetic, thermal, and chemical energy of seawater, which can be transformed into electricity and thermal energy. A large range of technologies exist depending on the different possible sources of ocean energy: waves, ocean currents, and tides. These range from barrages for tidal range, submarine turbines for tidal and ocean currents, heat exchangers for ocean thermal energy conversion, and a variety of devices to harness the energy of salinity gradient and waves. With the exception of tidal barrages, ocean energy technology is at the demonstration phase and requires additional R&D. Some of the technologies have variable energy output profiles with differing levels of predictability (e.g., wave, tidal range, and current), while others may be capable of near constant or even controllable operation (e.g., salinity gradient and ocean thermal) (IPCC 2012). To better understand the possible role of ocean energy in climate change mitigation, not only improvements in the various technologies will be necessary but also a clearer vision of when and if it will become commercially available at attractive costs.
Nuclear energy has the potential to make an increasing contribution to low-carbon energy supply; it is a mature technology and a source of base load power. Its emissions are very low and below 100 g CO2eq per kWh on a lifecycle basis, and nuclear electricity represented 11% of the world’s electricity generation in 2012 with a total generation of 2346 TWh (IAEA 2013). Nuclear energy is utilized for electricity generation in 30 countries around the world with more than 400 nuclear facilities and a total installed capacity of 371 GWp as of September 2013 (IAEA 2013). However, a variety of barriers and risks exist ranging from social acceptability issues to nuclear waste management concerns. Due to these reasons and on the wake of major nuclear accidents (Chernobyl Ukraine 1986 and Fukushima Japan, 2011) since 1993, nuclear energy share of global electricity generation has been declining (IPCC 2014).
Energy efficiency is a fundamental option for climate change mitigation. According to the first law of efficiency, it can be defined as the ratio of the desired energy output for a specific task or service to the energy input for the given energy conversion process (Nakićenović et al. 1996). Other approaches often define energy efficiency in relative terms, such as the ratio of minimum energy required by the current best practice technology to actual energy use, everything else being constant (Stern 2012).
Economic studies often use energy intensity – the ratio of energy use per dollar of GDP – as an indicator of how effectively energy is used to produce goods and services. However, energy intensity depends on many factors other than technical efficiencies and is not an appropriate proxy of actual energy efficiency (Filippini and Hunt 2011; Stern 2012).
Finally, it is worth mentioning the European Union principle “energy efficiency first” raised within the communication on Energy Union in 2015 (COM (2015) 80 final) and now become a pillar of the EU energy policy. It means that where efficiency improvements prove to be the most cost-effective, taking full account of their co-benefits, energy efficiency should be prioritized over any other investment in new power generation and transmission.
Carbon Capture and Storage (CCS)
Carbon capture and storage or sequestration (CCS) technologies could reduce the lifecycle GHG emissions of fossil fuel power plants. CCS separates and captures CO2 from power and industrial sources and then transports the CO2 to a suitable site for injection into deep underground formations for permanent storage. CCS makes possible the strong reduction of net CO2 emissions from fossil-fueled power plants and industrial processes, providing a protection strategy for power plants that would otherwise be decommissioned or become stranded.
While all components of integrated CCS systems exist and are in use today by the fossil fuel industry, CCS has not yet been applied at large scale. A variety of pilot projects have led to critical advances in the CCS technology. CCS is an expensive technology and would need substantial cost reductions or economic incentives to become viable and contribute to GHG emission reduction. Beyond economic incentives, a well-framed regulation and coherent emission reduction policy scenarios are essential for a large-scale future deployment of CCS.
Furthermore, barriers exist for large-scale deployment of CCS including safety and environmental concerns, especially on uncertainty on long-term integrity of CO2 storage as well as transport risks. Also, there is a limited evidence of the potential consequences of a pressure buildup within a geologic formation caused by CO2 storage (such as induced seismicity) and on the potential human health impacts from CO2 that migrates out of the primary injection zone (IPCC 2014).
Bioenergy with Carbon Capture and Storage (BECCS)
As well as fossil fuels, CCS may also be used in combination with sustainable biomass, resulting in the so-called negative emissions. This technology is known as BECCS and plays an important role in many low stabilization scenarios. However, it entails some challenges and risks including those associated with the CCS technology and those linked to the upstream provision of the biomass that is used in the CCS facility. BECCS faces also large financial challenges, being still in a R&D phase and still not tested at scale.
Climate Change Mitigation Policies
The nature of climate change challenge requires that mitigation policies be pursued over long-term horizon, and this implies that they may change over time as a result of technological innovation and economic development. Long-term decisions are required in order to achieve levels of mitigation needed to limit its adverse effects.
Climate change mitigation outcomes depend on the extent to which explicit efforts are taken to implement climate change policies and measures (IPCC 2014). These efforts depend on the mitigation capacity of different countries which differ according to their economic development level. This is the main reason why the issue of burden sharing among countries is very relevant with respect to international cooperation on climate change (IPCC 2014).
Architectures for mitigation of international emissions can be distinguished according to the possible approaches (bottom-up versus top-down) and the different instruments (market-based instruments versus command-and-control regulations) being adopted (Aldy and Stavins 2007). The top-down approach is typical of international climate agreements (i.e., the Kyoto Protocol and the Paris Agreement), whereas an example of bottom-up approach is linking independent national and regional tradable permit systems (Jaffe and Stavins 2009). Market-based instruments are subsidies, taxes, and/or emission trading systems (e.g., cap-and-trade systems), whereas command-and-control regulations set specific limits for emissions and/or mandates on pollution control technologies to be used. The following paragraphs will focus on the international legal framework, as a top-down approach, and the cap-and trade system that has been increasingly used as a climate change mitigation instrument.
The International Legal Framework
The current top-down climate policy architecture has evolved since 1992 with the signature of the United Nations Framework Convention on Climate Change (UNFCCC). The UNFCCC entered into force in 1994. Today, 197 countries have ratified it and are called Parties to the Convention. The UNFCCC recognized the long-term impacts of GHG emissions by setting long-term environmental goal and a near-term goal for industrialized countries (the so-called Annex I countries as opposed to non-Annex I countries). Annex I countries agreed to a non-binding quantitative emission target aimed at stabilizing their GHG emissions at 1990 levels starting in 2000 (Aldy and Stavins 2007).
The Kyoto Protocol
Every year a Conference of the Parties (COP) to the UNFCCC takes place to progress on the international negotiations on climate change mitigation and adaptation. In 1997, at the third COP in Kyoto, Japan, 192 parties agreed on the terms of the Kyoto Protocol (KP). The KP entered into force in 2005, although the United States – one of the countries with highest GHG emissions – did not ratify it. This agreement established emission commitments for 37 industrialized countries and the European Community. Within the first commitment period (2008–2012), they were required to reduce their collective GHG emissions to an average of 5% below 1990 levels. In the second commitment period (2013–2020), they committed to reduce GHG emissions by at least 18% below 1990 levels. The second commitment period bridges the gap between the end of the first period and the start of the implementation of the Paris Agreement in 2020.
The KP establishes that industrialized countries’ emission reduction targets are legally binding and provide a compliance mechanism to ensure implementation. The Protocol recognizes the UNFCCC principle of “common but differentiated responsibilities” (articles 3 and 4 UNFCCC) calling on those countries responsible for most of the anthropogenic GHG emissions to adopt first emission commitments. However, emerging economies with growing emission pathways such as China and India, being non-Annex I countries to UNFCCC, do not have quantitative emission targets.
The KP created the tradable emission allowances for industrialized countries with quantitative emission targets that would have become the basis for an international emission trading system. The Clean Development Mechanism (CDM) was introduced allowing developed countries (Annex I Parties) to generate emission reductions in developing countries that could be used as credits (certified emission reductions, CERs) to satisfy their own targets. At the end of 2006, industrialized countries had financed nearly 500 CDM projects (Aldy and Stavins 2007). Similarly, joint implementation (JI) provides for Annex I Parties to implement projects in the territory of other Annex I Parties to generate emission reduction units (ERUs). Like all KP units, CERs and ERUs could be used by Annex I Parties to meet their Kyoto targets. They can also be traded on international carbon markets under the third flexibility mechanism, namely, international emissions trading. The KP and the UNFCCC served as milestones for future climate change mitigation policy and led the foundations on which the today climate policy regime is based.
The Paris Agreement
Adopted in Paris by the 21st Conference of the Parties (COP 21) to the UNFCCC in December 2015, the Paris Agreement (PA) entered into force, sooner than expected, on November 4, 2016. The PA calls on countries to contrast climate change and to accelerate and intensify actions and investments needed for a sustainable low-carbon future and to adapt to the increasing impacts of climate change. It represents a significantly more ambitious shift in the recognition that the long-term temperature goal should be to “hold […] the increase in the global average temperature to well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels” (UNFCCC 2015).
In the framework of the implementation of the Paris Agreement, 165 parties submitted their Nationally Determined Contributions (NDCs), which are national plans for GHG emissions reduction. The new approach characterized by the NDCs is particularly innovative for UN climate negotiations. These are voluntary-based pledges by which each country – based on its natural and financial resources, its technological know-how, and its economic and governance structure – commits to reduce GHG emissions through a national climate mitigation strategy.
However, it is acknowledged that current efforts as enshrined in the Nationally Determined Contributions (NDCs) fall far short of holding global warming below 2 °C, not to mention 1.5 °C. The Paris Agreement features a voluntary global stocktake of how national pledges are contributing to a long-term target in 2018 and a voluntary revisiting of pledges in 2020. However, a first binding stocktake is only foreseen for 2023, with a binding revisiting of pledges in 2025 toward a more stringent GHG emissions reduction.
The PA has set an institutional framework for engaging developing countries in climate change mitigation through the financial contributions from developed countries. Article 9 designates the Green Climate Fund (GCF) and the Global Environment Facility (GEF) as the operating entities that shall serve as the financial mechanism of the PA. Target 13.A of SDG 13 (Table 1) calls for developed countries to mobilize jointly USD 100 billion annually by 2020 to address the needs of developing countries in the context of mitigation actions. Another relevant aspect of the PA relates to Article 6 which encourages voluntary cooperation between countries with carbon pricing mechanisms by establishing the Internationally Transferred Mitigation Outcomes (ITMOs). They can be used to fulfill the NDC of another party (Marcu 2016), thus advancing key carbon offsetting mechanisms.
In view of the KP first commitment period (2008–2012), some industrialized countries started to consider or to implement cap-and-trade systems to abate their GHG emissions. In 2005, the European Union (EU) launched its Emissions Trading Scheme (EU ETS); Japan promoted emission abatement in 1997 through the implementation of the Keidanren Voluntary Action Plans on the Environment, aimed to limit CO2 emissions to their 1990 levels by 2010.
To date, 21 distinct Emissions Trading Systems (ETS) exist worldwide, and other 16 are under consideration (ICAP 2018). China started its ETS in 2013 with pilot projects at the regional level and launched its nationwide emissions trading system in 2018, which is intended to cover one half of China’s energy-related carbon emissions by 2025. Outside of the KP framework, it is worth mentioning the California-Québec joint cap-and-trade program, whose first joint auction was held in November 2014. Finally, the RGGI (Regional Greenhouse Gas Initiative) the first mandatory market-based program in the United States is operational since 2012. It aims to cap and reduce CO2 emissions from the power sector among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. All these instruments took inspiration from the EU ETS that is one of the most prominent examples of marked-based environmental regulation using cap-and-trade system as climate mitigation instrument.
The EU Emission Trading System (EU ETS)
In 2005, the EU launched the world’s largest emission trading market (EU ETS) to cover about 45% of the EU’s CO2 emissions and around 11,000 installations in the energy-intensive industrial sectors. Aviation entered as a regulated sector only in 2012. The scope of the EU ETS has changed over time, as more countries have joined either by becoming EU members (Croatia, Bulgaria, and Romania) or by linking their national systems with the EU ETS (Norway, Liechtenstein, Iceland, and Switzerland).
The market currency is the EU allowance (EUA) which gives the holder the right to emit one ton of CO2 or other GHGs (N2O and PFCs) with an equivalent heating potential. The total number of allowances – the cap – is determined at the EU level. The institutional rules governing the market have been revised over time to address new emerging issues. Now the EU ETS has reached the third phase (2013–2020) and is preparing to enter its fourth phase (2021–2030). In phase III, the cap decreases each year by a linear factor of 1.74% compared to 2010 reaching in 2020 a level 21% below 2005 emissions. This trajectory is consistent with the 2020 target for the EU’s overall GHG emissions reduction.
The market participants are regulated firms that “can trade allowances freely within the EU bilaterally, through brokers, or directly on a few commodity exchanges” (Gronwald and Hintermann 2015). CO2 price has decreased from a maximum of 30€/tCO2 at the beginning of phase I in 2005 to 7€/tCO2 on the wake of the economic crisis and to as low as below 3€/tCO2 in 2013. Today, carbon price has increased to above 20€/tCO2 also as a result of the new ETS Directive (EU/2018/410) for the fourth phase (EEX 2018).
When originally conceived, the EU ETS was designed to comply with the KP targets. Now the KP has been replaced by a new global climate regime, which has radically changed the design and governance of global GHG emission reduction. The introduction of the NDCs has given the UNFCCC parties (both Annex I and non-Annex I countries) the possibility of voluntarily committing to GHG emission reduction targets. The PA is key not only for its innovative design, but also because it generated very high expectations in terms of climate change mitigation.
However, the voluntary nature of the commitment underlying NDCs brought to a trade-off between scope and ambition of the mitigation efforts under the PA. Voluntary commitments reduced the ambition of the targets but helped to largely increase the scope of the PA that includes countries accounting for 97% of global emissions – compared to the KP – which covered only 14% in the second commitment period. Within this framework and in the context of Article 6 of the PA, the EU ETS can play a potentially important role in fostering international climate cooperation (so as to further extending the scope of the PA) while raising climate mitigation ambition, thus contributing to reduce the trade-off described above.
The energy sector is the largest contributor to global GHG, representing roughly two-thirds of all anthropogenic GHG. Electricity generation is the largest single sector emitting fossil fuel CO2 at present and in the future, and, therefore, the electricity sector plays a major role in mitigation scenarios with deep cuts of GHG emissions. A variety of mitigation options exist in the electricity sector, both at the demand and supply sides, for transitioning to a low-carbon energy system, through enhancing the use of new technologies, fostering renewable energies, reducing energy consumption, and making older energy systems more efficient. Climate change has an inter-temporal and intergenerational dimension and is closely interlinked with the notion of sustainable development. Synergies and trade-offs between climate responses and SDGs exist, and interlinkages between climate change mitigation objectives and most of SDGs are evident.
Climate change mitigation policies encompass bottom-up versus top-down approaches, market-based instruments, and command-and-control regulations. The top-down approach is typical of international climate agreements, namely, the Kyoto Protocol and the Paris Agreement, whereas the bottom-up approach is any climate initiative undertaken by a national or regional entity, such as linking independent national and regional tradable permit systems. Command-and-control regulations set specific limits for emissions and/or mandates on pollution control technologies, whereas market-based instruments are subsidies, taxes, and/or emission trading or cap-and-trade systems. The most prominent and world’s largest emission trading market is the EU ETS launched in 2005 and soon become the reference for any cap-and-trade system. The EU ETS cover about 45% of the EU’s CO2 emissions and around 11,000 installations in the energy-intensive industrial sectors. China started its ETS in 2013 at the regional level and in 2018 launched its nationwide emissions trading system aimed to cover one half of China’s energy-related carbon emissions by 2025. Within the United States, the RGGI (Regional Greenhouse Gas Initiative) was the first mandatory market-based program, and it is operational since 2012, followed by the California-Québec joint cap-and-trade program in 2014.
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