CHAPTER TWO
Goals for Limiting Future Climate Change

The purpose of this report is to suggest strategies for limiting the magnitude of future climate change. Although limiting climate change is a global issue, our assignment is to recommend domestic strategies and actions. A goal for reducing U.S. greenhouse gas (GHG) emissions is therefore needed as a basis for designing domestic policies, for evaluating their feasibility, and for monitoring their effectiveness. In this chapter, we examine how such goals can be set. We first assess future domestic and global “reference” GHG emission scenarios, that is, scenarios that would result without new policies to limit future emissions. We then outline the key steps involved in formulating goals for policies that limit climate change and recommend that goals be framed in terms of limits on cumulative domestic GHG emissions over a specified time period. In choosing a specific goal for the United States, policy makers will have to deal not only with scientific uncertainties but also with ethical judgments. Because the judgments can be informed but not fully answered by science, we do not attempt to recommend a specific U.S. emissions budget. However, in order to have a basis for identifying and evaluating policy recommendations, we have used recent modeling studies (most notably the EMF22 study1) to suggest a plausible range for a domestic GHG emissions budget. We then examine options for global and U.S. emissions-reduction goals, respectively, and finally we examine some potential economic impacts of these emission reduction goals.

REFERENCE U.S. AND GLOBAL EMISSIONS

The most recent data for U.S. GHG emissions (for the year 2007) show a total of 7,150 million CO2-equivalent tons (Mt CO2-eq).2 Over 85 percent of this total is CO2 emis-

1

Stanford University Energy Modeling Forum (EMF22; see http://emf.stanford.edu/research/emf22/ and Clarke et al., 2009). Although other models can be used, as explained in Box 2.2, we believe that EMF22 is particularly useful for our purposes and that the insights from EMF22 are consistent with the broader literature.

2

A common practice is to compare and aggregate emissions among different GHGs by using global warming potentials (GWPs). Emissions are converted to a CO2 equivalent (CO2-eq) basis using GWPs as published by the Intergovernmental Panel on Climate Change (IPCC). GWPs used here and elsewhere are calculated over a 100-year period, and they vary due to the gases’ ability to trap heat and their atmospheric



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CHAPTER TWO Goals for Limiting Future Climate Change T he purpose of this report is to suggest strategies for limiting the magnitude of future climate change. Although limiting climate change is a global issue, our assignment is to recommend domestic strategies and actions. A goal for reduc- ing U.S. greenhouse gas (GHG) emissions is therefore needed as a basis for designing domestic policies, for evaluating their feasibility, and for monitoring their effectiveness. In this chapter, we examine how such goals can be set. We first assess future domes- tic and global “reference” GHG emission scenarios, that is, scenarios that would result without new policies to limit future emissions. We then outline the key steps involved in formulating goals for policies that limit climate change and recommend that goals be framed in terms of limits on cumulative domestic GHG emissions over a specified time period. In choosing a specific goal for the United States, policy makers will have to deal not only with scientific uncertainties but also with ethical judgments. Because the judgments can be informed but not fully answered by science, we do not attempt to recommend a specific U.S. emissions budget. However, in order to have a basis for identifying and evaluating policy recommendations, we have used recent modeling studies (most notably the EMF22 study1) to suggest a plausible range for a domestic GHG emissions budget. We then examine options for global and U.S. emissions-reduc- tion goals, respectively, and finally we examine some potential economic impacts of these emission reduction goals. REFERENCE U.S. AND GLOBAL EMISSIONS The most recent data for U.S. GHG emissions (for the year 2007) show a total of 7,150 million CO2-equivalent tons (Mt CO2-eq).2 Over 85 percent of this total is CO2 emis- 1 Stanford University Energy Modeling Forum (EMF22; see http://emf.stanford.edu/research/emf22/ and Clarke et al., 2009). Although other models can be used, as explained in Box 2.2, we believe that EMF22 is particularly useful for our purposes and that the insights from EMF22 are consistent with the broader literature. 2 A common practice is to compare and aggregate emissions among different GHGs by using global warming potentials (GWPs). Emissions are converted to a CO2 equivalent (CO2-eq) basis using GWPs as published by the Intergovernmental Panel on Climate Change (IPCC). GWPs used here and elsewhere are calculated over a 100-year period, and they vary due to the gases’ ability to trap heat and their atmospheric 

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L I M I T I N G T H E M A G N I T U D E O F F U T U R E C L I M AT E C H A N G E 8,000 7,000 6,000 5,000 Fluorinated gases (HFCs, PFCs, SF6) 4,000 Nitrous Oxide (N2O) MtCO2 Eq Methane (CH4) 3,000 CO2: Energy, Industry, Cement CO2: Land Use, Land-Use Change, and Forestry 2,000 1,000 0 -1,000 -2,000 1990 1995 2000 2005 Year FIGURE 2.1 Historic U.S. greenhouse gas emissions and sinks. CO2 is the dominant GHG, but the contribu- tions from other GHGs are not insignificant. SOURCE: EPA (2009). sions, and roughly 94 2.1 editable CO2 emissions comes from combustion of fossil Figure percent of the fuel (with most of the rest arising from industrial processes such as cement manu- facturing). Methane (CH4) makes up about 8 percent of total emissions, nitrous oxide (N2O) about 4 percent, and the fluorinated gases (hydrofluorocarbons [HFCs], perfluo- rocarbons [PFCs], SF6) about 2 percent. There is also a net CO2 sink (removal from the atmosphere) from land-use and forestry activities, estimated at 1,063 Mt CO2 in 2007. Between 1990 and 2007, total U.S. GHG emissions have risen by 17 percent, with a rela- tively steady annual average growth of 1 percent per year. Figure 2.1 illustrates these trends (EPA, 2009). The main drivers of GHG emissions include population growth and economic activ- ity, coupled with the intensity of energy use per capita and per unit of economic output. Figure 2.2 shows that U.S. primary energy use has continued to grow over the lifetime, compared to an equivalent mass of CO2. Although GWPs were updated in IPCC (2007b), emission estimates in this report continue to use GWPs from IPCC (1995), to be consistent with international reporting standards under the United Nations Framework Convention on Climate Change (UNFCCC). 

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Goals for Limiting Future Climate Change 120 100 Energy Consumption (quadrillion BTU) 80 60 40 Renewable excluding Hydro Hydropower 20 Nuclear Coal Natural Gas Liquids 0 1990 1995 2000 2005 2010 Year FIGURE 2.2 U.S. primary energy use, 1990 to 2010. Fossil fuels are the dominant energy source over this period. “Liquids” refers petroleum products including gasoline, natural gas plant liquids, and crude oil burned as fuel, but it does not include the fuel ethanol portion of motor gasoline. SOURCE: EIA (2009). period of 1990 to 2010, although at a decreasing rate: Total energy consumption has Figure 2.2 editable grown at a slower pace than economic output and population. This slower growth in energy consumption stems from structural changes in the U.S. economy (e.g., the shift to a more service-oriented economy) as well as increasing energy efficiency per unit of economic output. Trends in GHG emissions are closely associated with energy consumption. Figure 2.3 compares growth in GHG emissions with growth in primary energy use, population, and economic output in the United States. Since 1990, the U.S. economy has doubled in size while the population has grown about 20 percent and energy use and GHG emissions have grown 10 to 15 percent (EPA, 2009). Recent gov- ernment projections out to 2030 are for economic growth to continue along historic rates, outpacing growth in energy use and GHG emissions because of the reduced energy intensity of the economy. 

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L I M I T I N G T H E M A G N I T U D E O F F U T U R E C L I M AT E C H A N G E 4 3.5 GDP 3.5 Population Relative Change (Normalized to 1990 = 1) GHG Emissions 3 Primary Energy Use 2.7 2.5 2.0 2 1.7 1.5 1.5 1.3 1.2 1.1 1.3 1.0 1.2 1.2 1.1 1 1990 1995 2000 2005 2010 2015 2020 2025 2030 Year FIGURE 2.3 Historical trends and projected future trends in U.S. GHG emissions (including CO2, CH4, N2O, HFCs, PFCs, and SF6, but excluding net land-use emissions) and indices of key emission drivers: popula- tion, primary energy use, and economic growth (gross domestic product [GDP]). GHG emissions have risen roughly in concert with growth in energy use and population, but substantially slower than the rate of overall economic growth. The base year for calculating the indices is 1990. GDP estimates used to calcu- late the GDP index are based on real 2005 U.S. dollars. SOURCES: Historic data are from EPA (2009) and CEA (2009); projected data are from the ADAGE model (EPA, 2009). Figure 2-3 editable Figure 2.4 provides a range of recent GHG emission scenarios from various models (EIA, 2009; Fawcett et al., 2009) assuming no mitigation policies are in place. The chart shows that emissions in 2030 range from 7,100 to 8,400 Mt CO2-eq and in 2050 range from 8,100 to 10,900 Mt CO2-eq. Variations in projections are the result of varying assump- tions of economic growth, energy efficiency, and the deployment of energy technolo- gies (all in the absence of national GHG emissions-reduction policies). For example, MIT’s EPPA model assumes an annual GDP growth rate of 2.5 percent per year from 2005 to 2050 (Paltsev et al., 2009), while the Electric Power Research Institute’s (EPRI’s) MERGE model assumes lower annual growth rates starting at 2.2 percent through 2020 and declining to 1.3 percent through 2050 (Blanford et al., 2009). In addition, the MERGE model assumes a movement away from oil and toward more electric generation as a 

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Goals for Limiting Future Climate Change 11,000 EPPA MRN-NEEM 10,000 ADAGE IGEM EIA Emissions (Mt CO2-eq) 9,000 MiniCAM MERGE 8,000 7,000 6,000 2000 2010 2020 2030 2040 2050 Year FIGURE 2.4 Reference (“no policy”) GHG emission scenarios including CO2, CH4, N2O, HFCs, PFCs, and SF6. These scenarios include source emissions across many sectors but exclude net emissions from land use–related carbon sequestration. Despite the wide range of outcomes among the different projections, they all show increasing emissions over time. The Applied Dynamic Analysis of the Global Economy (AD- AGE) model results are the same as the GHG emissions line used in Figure 2.3. SOURCES: Adapted from Fawcett et al. (2009) and EIA (2009). 2-4 editable share of energy use. The combined assumptions of lower economic growth and less carbon-intensive energy use produce lower GHG emissions in the MERGE reference projection. Recognizing the inherent uncertainty associated with making long-term projections, two key insights emerge from the reference projections: • In the absence of emission mitigation policies, annual U.S. GHG emissions will continue to increase out to 2050 (even as the energy intensity of the economy declines). • The earlier that measures are taken to influence the trajectory of emissions, the more long-term emissions can be reduced. 

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L I M I T I N G T H E M A G N I T U D E O F F U T U R E C L I M AT E C H A N G E Similar to U.S. projections, global projections of GHG emissions are determined by the dynamic interaction of key emissions drivers, most notably population and eco- nomic growth, as well as the intensity of energy use (per capita and per unit of eco- nomic output) and technological change. Projections of GHG drivers, emissions, and concentrations are taken from the recent EMF22 study (Clarke et al., 2009). Figure 2.5 provides recent population projections from models participating in the EMF22 study. The mean of the global population estimates for 2010 is about 7 billion people. Global population projections for 2050 have a mean of about 9 billion people. In all of the employed reference models, population growth rates are projected to slow toward the end of the 21st century, producing a mean projection of 9.5 billion people in 2100 but a wide variability among the models (from 8.7 to 10.5 billion people). Such variabil- ity among models can be expected, since long-range global population projections embody different assumptions about regional population trends. For example, trends 11 FUND MESSAGE 10 ETSAP-TIAM MERGE POLES Population (in billions) GTEM 9 WITCH IMAGE SGM MiniCAM 8 7 6 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 Year FIGURE 2.5 Reference global population projections from the models used in the EMF22 study. The divergence among the different model projections grows over time. SOURCE: L. Clarke, Pacific Northwest National Laboratory (PNNL).  Figure 2-5 editable

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Goals for Limiting Future Climate Change in sub-Saharan Africa, the Middle East and North Africa, and the East Asia regions are driven by changes in lower-than-expected fertility rates based on recent data. In the Organisation for Economic Co-operation and Development (OECD) region, by con- trast, recent projections are somewhat higher than previous estimates mainly due to changes in assumptions regarding migration and more optimistic projections of future life expectancy. The reference projections for global primary energy consumption from the EMF22 study are shown in Figure 2.6. The range of global energy production in 2050 is be- tween 790 and 1,115 exajoules3 with a mean value of about 890 exajoules. The rates of growth in primary energy consumption are greater than population growth, leading to an even greater per capita energy use out to 2100. By the end of the century, global energy production is projected to be between 2.5 and 3.5 times greater than today’s levels. The key reasons for differences in total primary energy projections include as- sumptions about population and economic growth; improvement in energy intensity, that is, the relationship between energy consumption and economic output over time; the abundance of different fuels and their relative prices; and the availability and de- ployment of energy technologies. For example, a scenario that projects more coal use will result in more CO2 emissions than one where natural gas and renewable energy represent a larger share of total energy consumption. Figure 2.7 shows global projections of fossil and industrial CO2 emissions and the CO2-eq concentrations4 from all Kyoto Protocol gases (CO2, CH4, N2O, HFCs, PFCs, and SF6) from the EMF22 reference (no policy) scenarios (Clarke et al., 2009). Reference projections of global GHG emissions and concentrations highlight the fact that global emissions and concentrations will increase substantially over the century, with atten- dant changes in the global climate. There is a wide spread in emissions projections, resulting from many of the same uncertainties that are reflected in the primary energy projections, along with uncertainties about the development and deployment of low- carbon energy technologies without mitigation policy. Regardless, the projections all indicate upward trends. By the end of the century, the range of CO2-eq concentrations spans from two times to almost four times today’s levels. (That is, concentrations in 3 Primary energy is energy contained in raw fuel that has not been subjected to any conversion or transformation process. One exajoule = 1018 joules. A joule is the work required to continuously produce one watt of power for one second. 4 CO -eq (CO equivalent) concentration is defined as a multi-GHG concentration that would lead to 2 2 the same impact on the Earth’s radiative balance as a concentration of CO2 only (IPCC, 2007b). See Box 2.1 for further discussion. 

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L I M I T I N G T H E M A G N I T U D E O F F U T U R E C L I M AT E C H A N G E 1,800 ETSAP-TIAM 1,600 MiniCAM GTEM Energy Consumption (Exajoules) 1,400 IMAGE MERGE MESSAGE 1,200 POLES SGM 1,000 WITCH 800 600 400 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 Year FIGURE 2.6 Reference global primary energy consumption projections from the models used in the EMF22 study. Note that all estimates project considerable growth in energy production over the course of the century. SOURCE: Adapted from Clarke et al. (2009). 2050 range between 800 and 1,500 ppm5 CO2-eq, in contrast to today’s concentrations of roughly 440 ppm CO2-eq.) Although the high-income (OECD) countries are currently the largest contributors to cumulative GHG emissions, emissions from rapidly growing low- and middle-income countries (e.g., Brazil, China, and India) are projected to grow more quickly than those of high-income countries. Figure 2.8 shows historical and projected contributions to global emissions out to 2100 from several sources. In all the projections, the balance of cumulative GHG contributions shifts from the high-income to the low- and middle-in- come countries through 2050; in second half of the 21st century, the low- and middle- 5 Parts per million (by volume, sometimes abbreviated as ppmv). 

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FIGURE 2.7 Projections of global CO2 emissions (from fossil and industrial sources) and CO2-equivalent concentrations (CO2-eq) in the absence of efforts to address climate change, from the EMF22 study. The left panel shows global (fossil and industrial) CO2 emissions from across models. The right panel shows the CO2-eq concentrations, including all the Kyoto Protocol gases, for the same corresponding scenarios. Model projec- tions vary, but all show increasing emissions and concentrations over time. See Box 2.1 for definition of CO2-eq concentrations. SOURCE: L. Clarke,  PNNL.

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L I M I T I N G T H E M A G N I T U D E O F F U T U R E C L I M AT E C H A N G E income countries are projected to account for the bulk of cumulative global GHG emissions. Together, these factors frame the international context in which the United States will need to decide on its domestic emissions-reduction goals, and also on its support for and involvement in international actions. Even today, as one of the largest individual GHG emitters, the United States cannot substantially reduce global emissions through unilateral action. With its shrinking relative contribution to global emissions, unilat- eral action by the United States would be decreasingly effective from a quantitative perspective. In some sense, then, a primary role of U.S. action in climate change is to provide global leadership and to motivate effective international action. See Chapter 7 for a fuller discussion of these issues. SETTING CLIMATE CHANGE LIMITING GOALS International policy goals for limiting climate change were established in 1992 un- der the UNFCCC, in which the United States and more than 190 other nations set the goal of “stabilization of GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” Subsequent scientific research has sought to better understand and quantify the links among GHG emissions, atmospheric GHG concentrations, changes in global climate, and the im- pacts of those changes on human and environmental systems. Based on this research, many policy makers in the international community recognize limiting the increase in global mean surface temperature to 2ºC above preindustrial levels as an important benchmark; this goal was embodied in the Copenhagen Accords, at a 2009 meeting of the G-8, and in other policy forums. Although these temperature and concentration goals are essential metrics for limiting global climate change over time, they are not sufficient to guide near-term, domes- tic policy goals. Policy requires a goal linked to outcomes that domestic action can directly affect and that can be measured contemporaneously. Global temperature and concentration goals lack this attribute, because they are the consequence of global, and not just domestic, actions to limit GHG emissions. To avoid this problem, a limit on cumulative emissions from domestic sources, measured in physical quantities of GHGs allowed over a specified time period, is in the panel’s view a more useful domestic policy goal. Policy can affect emissions directly, and actual emissions can be measured reasonably accurately on a current basis. Calculating the U.S. emissions budget is conceptually straightforward, but it involves a number of uncertainties and judgments that are complex and potentially contro- 0

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Goals for Limiting Future Climate Change 60% U.S. Annex 1 less US Non-Annex 1 50% Percent Contribution to Total 40% 30% 20% 10% 0% 1850-2000 1850-2025 1850-2050 1850-2075 1850-2100 Year FIGURE 2.8 Historical and future contributions to global CO2 emissions from fossil and industrial sources (does not include net CO2 emissions from land use). Annex I and non-Annex I refer to high-income and low- and middle-income groups of countries, respectively, under the UNFCCC. The three bars for each color within each time period represent emissions projections from three models used in the U.S. Climate Change Science Program (CCSP) studies: MIT’s EPPA model, EPRI’s MERGE model, and PNNL’s MiniCAM model. Note that the United States and other high-income countries have had the dominant share of emissions historically, but this share is projected to decrease over time. SOURCES: Historical estimates from Climate Analysis Indicators Tool, Version 6 (WRI, 2009); projections are from U.S. CCSP 2.1a (Clarke, 2007). versial. To systematically derive an emissions budget from global temperature and FIGURE 2-8 editable concentration goals requires establishing three crucial links: 1. a target global atmospheric GHG concentration that is consistent with an ac- ceptable global mean temperature change, 2. a global emissions budget that is consistent with a target atmospheric GHG concentration, and 3. an allocation to the United States of an appropriate share of the global emis- sions budget. According to the most recent assessment of the IPCC, the best estimate of global mean temperature increase over preindustrial levels resulting from stabilizing at- 

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L I M I T I N G T H E M A G N I T U D E O F F U T U R E C L I M AT E C H A N G E FIGURE 2.10 Illustration of the representative U.S. cumulative GHG emissions budget targets: 170 and 200 Gt CO2-eq (for Kyoto gases) (Gt, gigatons, or billion tons; Mt, megatons, or million tons). The exact value of the reference budget is uncertain, but nonetheless illustrates a clear need for a major departure from business as usual. As mentioned above, these emissions budgets are for gross emissions in the United States and do not include sources and sinks from land use, land-use change, and for- estry (LUCF). If LUCF emissions are net positive (emissions), it will make attaining these budgets more difficult. If LUCF emissions are net negative (sinks), which is the current trend, it will make attaining these budgets easier. There are many differing views on the relative burdens that different countries should bear to address climate change. For example, it has been suggested that the United States should make more stringent emissions-reduction efforts, based, for instance, on precautionary concerns that lower global concentration targets are needed, or based on “fairness” arguments that high-income countries, having produced most of the GHG emissions to date, should shoulder a larger share of future emission reductions. For example, the German Advisory Council on Global Change (2009) developed a global emissions budget and applied the criterion of equal per capita emissions among all 0

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Goals for Limiting Future Climate Change countries; this calculation allocates to the United States a budget of 35 Gt CO2-eq over the same time period of the EMF22 budget. Conversely, actions by other countries influence the U.S. contribution required to meet any global concentration goal. The EMF study indicates that, in general, the effect of delaying action is not to dramatically alter global emissions reductions required for 2050 but rather to cause a shift in the distribution of emissions among regions. Thus, emissions reductions not undertaken by one large country (or group of smaller coun- tries) must be made up for by other countries in order to achieve atmospheric GHG stabilization at the levels explored in the scenarios above. If the United States elected to make additional commitments beyond the least-cost allocated domestic budget mentioned above, it would be reasonable to achieve these additional commitments through a mechanism for investing in emissions reductions elsewhere in a way that does not increase the total cost of meeting the global emis- sions budget. The purchase of international offsets or participation in a global carbon pricing system would in principle provide such a mechanism. As discussed in Chapter 4, however, these mechanisms must be designed to ensure the emissions reductions are “real, additional, quantifiable, verifiable, transparent, and enforceable” and do not result in emissions leakage, all of which are difficult challenges to address. If the United States sought to lessen its domestic emissions-reduction requirements by purchasing offsets from other countries, then to avoid double counting, the coun- tries selling offsets could not take credit for these emissions reductions if they estab- lish their own national emissions budget. Economic theory suggests that the solu- tion to this kind of problem is to compensate the seller for the loss of the purchased emissions reduction. For example, the United States might purchase an offset from Country A for the price of the offset itself plus the future cost that Country A may face in reducing its emissions through actions that are more costly than the original offset. It is beyond our scope to recommend how to design an international offset system that addresses this issue, but it is worth noting that a system without this form of ad- ditional compensation may be resisted by countries interested in selling offsets. Finally, we note that, because of the uncertainties and judgment involved, the initial U.S. domestic emissions budget may not be stable over time. Indeed, changes to the emissions budget—up or down—are to be expected. This is an unavoidable problem with a scientifically complex, politically controversial, and long-term problem like cli- mate change. This fact is a primary reason for ensuring that the U.S. policy framework for limiting GHG emissions is both durable and adaptive, as discussed in Chapter 8. 

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L I M I T I N G T H E M A G N I T U D E O F F U T U R E C L I M AT E C H A N G E IMPLICATIONS OF U.S. EMISSION GOALS To evaluate the implications of the representative U.S. emissions budgets discussed above, we have drawn from the U.S. component of the EMF22 study11 (Fawcett et al., 2009). These analyses help illustrate one of the reasons why cumulative emissions goals are an effective way to set long-term targets: They allow flexibility in emissions over time. Emitters might either bank permits (by reducing more than the target in a particular year) or borrow permits (so that they can emit more than they are allotted in a given year). The opportunity to bank emissions rights for future use, or to borrow emissions rights from the future, means that the actual emissions pathway to any cumulative 2050 goal will probably not be linear (see Fawcett et al. [2009] for discus- sion of the forces that could influence the degree to which emitters choose to bank or borrow emissions rights). Figure 2.11 shows estimates from the same study for CO2 emissions reduction from electric power generation and transportation. For the 203 and 167 Gt CO2-eq scenar- ios, electricity sector emissions in 2050 are reduced by an average of approximately 90 and 100 percent, respectively; in the transportation sector, emissions fall by an average of approximately 20 and 30 percent, respectively. Overall, the electricity sector reduces emissions to levels well below the target while transportation-sector emissions remain well above the target. This reflects differences in the emissions-reduction options across sectors. These projections are of course influenced by assumptions built into the models, which are generally based on technologies and processes that we know how to characterize. It is possible that unknown technological breakthroughs or major socioeconomic shifts could lead to a very different picture in the future. Ideally, the costs of U.S. emissions reductions are measured as a change in the well-be- ing of Americans. However, all measures that aggregate across the entire population give rise to ethical questions about how to weigh differences in the well-being of separate individuals and groups within that population. Hence, for practical purposes, aggregate economic metrics are often used to represent the change in well-being that is brought on by emissions reductions. Typical metrics include CO2 prices (which, while not a direct measure of cost, can be used to determine effects on basic energy goods such as gasoline or natural gas for home heating and cooking) and overall changes to economic output such as GDP. Figure 2.12 shows the carbon prices estimated in the U.S. component of the EMF22 11The U.S. component of the EMF22 study included six models that explored specific domestic goals (see Fawcett et al., 2009). Note that this study used budget targets of 167 to 203 Gt CO2-eq, rather than our “rounded” targets of 170 to 200 Gt CO2-eq. 

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FIGURE 2.11 EMF22 electricity and transportation CO2 emissions and reduction for 167 and 203 Gt CO2-eq goals. Note that the electricity sector  generates greater emissions reductions than the transportation sector in all scenarios. SOURCE: Fawcett et al. (2009).

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L I M I T I N G T H E M A G N I T U D E O F F U T U R E C L I M AT E C H A N G E study for the cumulative emissions scenarios discussed above. Several insights emerge: First, there is a distinct range of prices. For example, under the 167 Gt CO2- eq goal, the 2020 carbon price ranges from roughly $50 to $120 per ton of CO2. The differences among these estimates stem largely from differing expectations about the technologies that will be available and the ability to deploy these technologies effectively. Note that this includes not just energy supply technologies but also tech- nologies to reduce emissions in end-use and industrial applications. Second, the effect of CO2 prices on energy gives a sense of the economic burden that would be imposed by emissions-reduction policies. Ultimately the effect of CO2 prices is to increase the cost of carbon-intensive energy and of products that use energy as an input. Table 2.2 shows the effect of a $100 per ton CO2 price on the costs of key fuels. In all the scenarios and for all the models, carbon prices exhibit a steady increase. This is a key feature found in virtually all emissions-reduction studies. Because the strin- gency of the reductions must increase over time as emissions are eventually driven to- ward zero, the costs must go up over time. Thus, meeting the sorts of cumulative goals proposed here will require an increasing commitment with an increasing cost. Note, however, that increasing prices are based on the assumption that the exact degree and nature of future improvements in important drivers such as technology, economic growth, and population growth are known with certainty. If, for example, technology were to advance substantially more rapidly than expectations (for example, if there were to be a radical technological breakthrough), the CO2 price would rise less ag- gressively. Conversely, less-than-expected technological advance could drive price increases even higher. (See Chapter 5 for more discussion about technological innova- tion as a key factor for modulating GHG emission-control costs.) Aggregate economic indicators such as GDP or consumption losses are another common way to represent the costs of GHG emissions reduction. Given the sim- plifications required for a model to represent the national economy, these sorts of estimates are best viewed as informative in relative terms but highly uncertain in absolute terms. Figure 2.13 shows projected U.S. GDP under reference cases and the two budget scenarios, looking across the different models used in the EMF22 study. There is a large degree of uncertainty in future economic growth, for instance, with reference projections for 2030 varying by about 22 percent from the highest to low- est estimated values. An important insight emerges when comparing projected economic growth in a “no-policy” case (i.e., reference scenario) to a “policy” case (i.e., with mandates for the budget targets discussed earlier); that is, although climate action does put downward pressure on economic growth, the effects over the next several decades are generally 

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FIGURE 2.12 Carbon prices across EMF22 scenarios for 167 and 203 Gt CO2-eq goals. In all scenarios, carbon prices increase over time, and prices are higher for the more stringent (167 Gt CO2-eq) emissions budget. SOURCE: Fawcett et al. (2009). 

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L I M I T I N G T H E M A G N I T U D E O F F U T U R E C L I M AT E C H A N G E TABLE 2.2 Effect of Carbon Prices on Energy Prices Cost of Current 2009 Carbon Total End-User Added Carbon Price/Fuel Price and Type Prices Content Price Cost (%) Metric ton of CO2 $100.00 Metric ton of Carbon $366.67 Crude oil ($/bbl) $65.27 $42.80 $108.07 66 Regular gasoline avg. ($/gal) $2.32 $0.88 $3.20 38 Utility coal avg. ($/short ton) $46.34 $221.05 $267.39 477 Residential natural gas avg. ($/tCf ) $12.47 $5.44 $17.91 44 NOTE: The additional costs are based on a $100 per ton CO2 price. Percentage added cost is dependent on base costs at any point in time and therefore subject to some variability. SOURCE: EIA December 2009 Monthly Energy Review. modest in comparison to the degree of growth. For instance, in the most optimistic projection of the EMF22 study, for the reference case, economic growth for the period 2010 to 2130 increases by 88 percent. When the most stringent emissions-reduction targets are imposed, economic growth still increases by 83 percent. In the most pessi- mistic projection, economic growth is 52 percent in the reference case; this is changed to 51 percent for the 167 Gt CO2-eq target case. Economic losses increase over time, so the expectation is that they will be larger through and beyond 2050 than they are through 2030. It is important to note that none of these GDP impacts include esti- mates of the welfare benefits that would be associated with reducing GHG emissions. Note also that these studies assume efficient national policy architectures resembling an economy-wide cap-and-trade system or carbon tax. Less efficient approaches could substantially increase costs. Figure 2.14 presents another way of evaluating differences across models: to compare the impacts as a percentage of reference GDP. By 2030, GDP losses range from 0.5 to 4.5 percent. The range of estimates highlights the tremendous uncertainty surround- ing the costs of climate action, which is due to differences among analyses including different economic growth and GHG emission levels in the reference (no-policy) case, differences in how households respond to higher energy prices, and variations in the deployment and effectiveness of mitigation technologies. This range is roughly consistent with previous studies, such as the U.S. CCSP scenarios (Clarke, 2007). In no scenario does growth stop or does the economy decline; rather, in all cases, the effect of the emissions-reduction policy is to delay the achievement of higher GDP levels. As 

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Goals for Limiting Future Climate Change 25 Reference MRN-NEEM 167 MRN-NEEM Reference EPPA 23 167 EPPA GDP (in trillion dollars) Reference ADAGE 21 167 ADAGE Reference IGEM 167 IGEM 19 Reference MERGE 167 MERGE 17 15 13 2010 2020 2030 Year FIGURE 2.13 Projected U.S. GDP under reference cases and a 167 Gt CO2-eq budget goal across five mod- els used in the EMF22 study. SOURCE: F. de la Chesnaye, EPRI. noted above, none of these GDP impacts includes estimates of the benefits that would be associated with reducing GHG emissions. A Congressional Budget Office report on the economic effects of GHG limiting policies (CBO, 2009) arrives at the same finding: that there is an upfront cost to the economy, but it will be relatively modest. The main impact of GHG limiting policies would be on energy expenditures, whicheditable for about 9 percent of GDP in 2006 (EIA, 2009). Figure 2.13, accounted A resulting price on GHG emissions ($/tCO2-eq) would lead to higher delivered-energy prices which in turn would lead to decreased economic output. In general, the econ- omy will shift production, investment, and employment away from sectors related to the production of carbon-based energy and energy-intensive goods and services and toward sectors related to the production of alternative energy sources and non- energy-intensive goods and services. 

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L I M I T I N G T H E M A G N I T U D E O F F U T U R E C L I M AT E C H A N G E 1% 0% % Change from Reference GDP –1% –2% 203 ADAGE 167 ADAGE 203 EPPA –3% 167 EPPA 203 IGEM 167 IGEM 203 MERGE –4% 167 MERGE 203 MRN-NEEM 167 MRN-NEEM –5% 2010 2020 2030 Year FIGURE 2.14 Impact of 167 and 203 Gt CO2-eq budget targets as a percent of reference GDP across five models used in the EMF22 study. Negative GDP losses (projected increases) in the near term are due Figure 2.14 editable to households increasing expenditures in the near term, in expectation of higher prices in the future. SOURCE: F. de la Chesnaye, EPRI. KEY CONCLUSIONS AND RECOMMENDATIONS Future U.S. and global GHG emissions will be driven by trends in population, economic activity, intensity of energy use, and technological developments. Thus, long-term GHG emissions trends are difficult to predict with certainty. It is highly likely, however, that emissions will continue to rise in the coming decades without concerted new emis- sions-reduction policies. Recent integrated assessment modeling studies indicate that limiting the increase in global atmospheric GHG concentrations to 450 ppm CO2-eq this century (which can be related, in probabilistic terms, to the goal of limiting global mean temperature rise to 2ºC above preindustrial levels) would require aggressive emissions-reduction ef- forts by all major GHG-emitting nations, starting within the next few years. 

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Goals for Limiting Future Climate Change From a quantitative perspective, significant U.S. emissions reductions will not by themselves substantially alter the rate of climate change. Although the United States has the largest share of historic contributions to global GHG concentrations, this rela- tive share will decrease over time. All major economies will need to reduce emissions substantially in concert with the United States. Although long-term global mean temperature change and global atmospheric GHG concentrations are essential outcomes for policies to limit future climate change, they are not sufficient metrics for setting a domestic policy goal. The domestic goal will need to be one that policy can affect directly and for which progress can be measured directly. We recommend that the U.S. goal be framed as a cumulative emissions bud- get over a set period of time. Identifying global temperature and atmospheric GHG concentration targets, and link- ing these to global and U.S. emissions-reduction goals, involves numerous scientific uncertainties as well as ethical and political judgments. We thus do not attempt to recommend definitive U.S. emissions-reduction goals here. However, as a benchmark for the analyses in this study, we conclude that a reasonable range for representative budget goals is 170 to 200 Gt CO2-eq for the period 2012 to 2050. These numbers were chosen because they roughly correspond to the goals of reducing U.S. emissions by 80 and 50 percent, respectively, by 2050—targets that have been used in many recent policy proposals—and because studies indicate that they are roughly consistent with the goals of limiting global GHG concentrations to 450 and 550 ppm, respectively (us- ing global least-cost criteria for allocating a global emissions budget). This representative U.S. emissions budget range is suggested as actual reductions in domestic emissions rather than a goal to be met through international offsets. A com- mitment to deeper emissions reductions, as some suggest is warranted on precaution- ary or fairness grounds, could possibly be achieved through mechanisms for investing in emissions reductions internationally, including the purchase of international offsets if they are truly additional and verifiable (which is discussed further in Chapter 4). The costs of meeting these emissions-reduction goals are highly uncertain and de- pend heavily on the available technological options. Recent research estimates the prices of CO2 per ton that would result from the emissions budget scenarios men- tioned above; across these scenarios, however, climate action reduces U.S. GDP by between 0.5 and 4.5 percent in 2030. In all the scenarios, however, GDP continues to grow substantially through midcentury. None of these GDP impacts include estimates of the benefits that would be associated with reducing GHG emissions. Also note that these studies assume well-constructed, efficient national mitigation policies. Less ef- ficient approaches could substantially increase the costs of mitigation. 

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