The European Commission has recently suggested a new greenhouse gas reduction target for 2030 that is perceived as too low by many NGOs. Moreover, some claim that the Commission has hidden the fact that higher emission reductions than proposed would lead to GDP gains. Brigitte Knopf from the Potsdam-Institute for Climate Impact Research argues that GDP gains are a very specific finding with a non-standard model and that emission targets can only be set politically and not by science.
Do we have a Modelgate in Brussels? Did the European Commission hide secret results of computer simulations about the transformation of our energy system? Is climate change mitigation cheaper than told by those people in Brussels? The answer is No. Contrary to the accusations raised by Brook Riley of Friends of the Earth, the European Commissionâs projections are surprisingly in line with other independent research results. This is shown by a comprehensive multi-model analysis we recently published.
I will comment on two main aspects mentioned in Rileyâs post. The first aspect is his claim that the EU Commissionâs own Impact Assessment shows a positive effect on the GDP with more ambitious climate targets but that the Commission has hidden this fact.
The Commission uses four different macro-economic models from three institutions to assess the impact of the different climate targets and additional targets for renewable energy and energy efficiency. Two of the models, GEM-E3 and PACE, show GDP losses in a scenario with 40 percent GHG reduction compared to the reference case. The losses are rather small with a range of -0.1 to -0.45 percent. By contrast, the model family E3ME/E3MG shows GDP gains in the range of +0 to +0.55 percent. All this is very transparently stated in Table 16/17/18 (p. 84), Table 27 (p. 101), and in the overview Table 40.
With E3ME, an additional analysis is done to assess the impact of energy efficiency policies and renewable targets, again showing gains. However, Â no message can be deduced that GDP gains would increase with higher targets or additional policies, as claimed by Riley, because here he compares two fundamentally different types of models. But it is scientifically not sound to compare directly the results for 40 percent GHG scenario (GHG40) from one model to a scenario outcome with higher reductions of 45 percent and additional energy efficiency policies and renewable targets (GHG45EE RES35) from another model.
Different models, different answers
The only statement that can be made based on the Commissionâs assessment of the GDP effects of climate policy is that different models give different answers: two show GDP losses and one class of models shows GDP gains. But in contrast to Rileyâs claim, it is rather the model family that shows the GDP gains, E3MG/E3ME, which is exceptional in the modeling world. In general, models show GDP losses due to climate change policies relative to a baseline or reference case.
It is important to note that setting targets always includes value judgments and ethical considerations.Â
This is different in E3ME/E3MG: A major driver of the mitigation strategy in this model class is the recycling of revenues raised from the auctioning of carbon permits (in the sectors covered by the EU Emission Trading Scheme) Â and of carbon taxation (in the non-ETS sectors). In these models, the revenues are used to lower indirect taxes such as labor taxation. But this means that in this model you would also see GDP gains if you tax the use of apples instead of carbon, as long as the revenues are recycled in the same way. This specific kind of revenue recycling is also the reason why in these models the employment effect of climate policy is positive.
In addition, the standard models assume a perfect reference case as the benchmark and evaluate mitigation policies against this benchmark. By contrast, E3MG is a simulation model without perfect foresight and optimization, where resources are not fully employed or optimally utilized in the reference scenario. The increase in investment induced by climate policy can therefore achieve net GDP gains. These gains are then attributed to climate policy.
However, it is important to note that these gains can in principle be achieved also by policies other than climate policy, such as taxing apples. So the gains cannot be simply attributed to climate change mitigation, as often done, but are rather an effect of assuming an imperfect reference case with idle capacities that can be put into use in the mitigation scenario. It is crucial to understand the differences of these econometric simulation models such as E3MG/E3ME compared to the great majority of the other models that show GDP losses. This is not splitting hairs, this is fundamental, because the latter models do not assume inefficiencies in the baseline and can therefore accurately compare a case with and without climate policy.
But there is still a positive message: also in the standard models, GDP losses due to climate policy are rather small for Europe. In an independent model comparison we came to the conclusion that upscaling greenhouse-gas emissions reduction from the current policies in the reference scenario to 40 percent GHG reduction by 2030 would cost less than an additional 0.7 percent of economic activity. However, costs may increase by 2050.
Figure 1. GDP reduction as a percentage of a scenario with 80% reduction by 2050 compared to a reference scenario with 40% reduction. Â Source: EMF28 model comparison, Knopf et al. 2013
Out of line with the science
The second aspect I want to comment on is the authorâs claim that âa 40 percent reduction is out of line with the climate science.â What can climate science really say when it comes to setting targets and what does climate science actually say about the EU target? First of all, it is important to note that setting targets always includes value judgments and ethical considerations. The latest IPCC report has clearly pointed this out, stating that:
âMany areas of climate policyâmaking involve value judgements and ethical considerations. These areas range from the question of how much mitigation is needed to prevent dangerous interference with the climate system to choices among specific policies for mitigation or adaptation. Social, economic and ethical analyses may be used to inform value judgements and may take into account values of various sorts, including human wellbeing, cultural values and nonâhuman values.â (IPCC WGIII SPM)
This implies that climate science cannot answer the question of what the âcorrectâ target for the EU is, be it 35, 40 or 55-60 percent reduction, because it is a political decision. The only answers that scientists can give are if-then statements. If the EU wants to achieve 80 percent reduction, what is then the (cost-efficient) milestone for 2030?
It is certainly legitimate to call for more ambitious targets than proposed by the EU Commission. One should only be careful in how to use model results in this context.
The Commission comes, based on its own assessment, to the conclusion that this is 40 percent GHG reduction. With our independent analysis we come to the conclusion that for achieving 80 percent GHG reduction by 2050 a CO2 reduction by 2030 of 47 percent with a model range of 40â51 percent is required. This 47 percent CO2 reduction corresponds to a GHG reduction of roughly 43 percent. This indicates that a reduction of GHG emissions of 40 percent by 2030 â as suggested by the Commission â could, in principle, be in line with the long-term effort to reduce emissions by 80 percent by 2050. The model median, however, would suggest setting a more ambitious target.
This means that 40 percent GHG is not âout of line with the climate scienceâ. But this also implies that if the EU wants to go for 95 percent reduction by 2050, then cost-efficient emission reductions have to be even higher by 2030. And on the other hand, this does not imply that the long-term target cannot be achieved anymore if we do less than 40 percent GHG reduction by 2030. It only means that it will become more costly. But there is no imperative by climate science what the ârightâ target is, science can only inform the debate.
In summary, the Impact Assessment of the Commission is balanced in the sense that it assesses different types and classes of models. It is sound work also in terms of scientific standards. It is transparent in reporting the outcomes, although not on every detail about model input and model fundamentals. And the main conclusions, especially those of the EU âEnergy Roadmap 2050â, can be independently confirmed by a model comparison with 12 different models. So there is no reason to call this Impact Assessment and the Commissionâs communication about it a âModelgateâ.
However, it is certainly legitimate to call for more ambitious targets than proposed by the EU Commission. One should only be careful in how to use model results in this context.
Editor’s Note
Brigitte Knopf is head of the research group âEnergy Strategies Europe and Germanyâ and deputy head of the research domain âSustainable Solutionsâ at the Potsdam Institute for Climate Impact Research (PIK) and is on Twitter as @BrigitteKnopf
This article is a response to the article by Brook Riley that we published on 29 April: “Welcome to Modelgate: Brussels’ justification for a small climate target is based on a big lie“. See also the comments below this article for more discussion on the topic.
Brook Riley says
@Brigitte: I find it rather frustrating to be having a debate about the benefits of additional action on climate change with someone from the Potsdam Institute, which does superb work on the issue.
I confirmed my point that the Commission’s analysis shows GDP losses with low ambition / GDP gains with higher ambition in discussions with Commission officials before publishing.
Itâs probably best for you to talk to the Commission and Cambridge Econometrics (the people who did the GDP analysis). The GEM E-3 model which shows GDP losses is an equilibrium model. As I understand it, this type of model tends to view deviation from business as usual as a cost rather than an opportunity. Given that the Commission didn’t factor in the impacts of climate change – loss of food production, extreme weather events such as flooding, etc – this hardly seems like the right approach.
Regardless of what you think about the GDP analysis, before you claim thereâs no cause to talk about a âmodelgateâ, please also take the time to think about the other issues I described in my oped:
-The EUâs dependence on energy imports is significantly higher under the 40% proposal, than with bigger emissions cuts and targets for renewables and energy efficiency;
-The Commission used very high discount rates for energy efficiency which penalised the more ambitious 2030 scenarios, despite arguments from within the Commission that this was unjustified;
-The Commissionâs efficiency unit has been told not to recommend levels of energy savings for 2030 which imply more than 40% emission cuts (as if additional emission cuts are a problemâŚ).
All this is being done in the name of political reality (in other words, to secure a quick deal with the member states), to placate opposition from BusinessEurope and other industry and fossil fuel lobby groups, and to âprotectâ the Emissions Trading System from what some people in the Commission see as competition from renewables and energy efficiency. I for one think this is pretty scandalous.
It would be good if you could also clarify your opening statement that ’emission cuts can only be set politically and not by science’. What exactly does this mean – that scientists won’t be responsible if politicians choose to ignore their evidence? As if policymakers will take adequate action on climate change just because it’s the rational thing to do!
All I can say is, I wish there were more scientists like James Hansen, who, when working for the NASA, was arrested when protesting outside the White House (http://wapo.st/1opbN5Y). Or Kevin Anderson, who demolished the Commission’s claim that 40% greenhouse gas cuts are enough to meet the EU’s climate commitments (http://bit.ly/1aZzD03).
Brigitte Knopf says
@Brook:
Here my answers on the two general points you made:
1) What about the GDP analysis and why didnât the Commissionâs analysis factor in the impacts of climate change and the benefits of climate change mitigation?
Two of the models used by the Commission (GEM-E3 and PACE) and also the models used in our analysis are standard economics models that are also applied in the IPCC for the global analyses. The IPCC calculates the costs in exactly the same manner as the Commission did. The approach is explained in detail in Appendix A.II.3.2. (mitigation cost metrics):
http://report.mitigation2014.org/drafts/final-draft-postplenary/ipcc_wg3_ar5_final-draft_postplenary_annex-ii.pdf
It is only two pages long and it gives a very good educational introduction of the cost-effectiveness concept that is applied in these models compared to the cost-benefit concept that you ask for (by the way, the gains in E3MG/E3ME do not stem from the effect of including benefits of climate change, they rather apply a completely different approach, as I explained in the blog above).
2) Why can targets only be set politically and not by science?
For this aspect, I recommend reading the ideas of IPCC WGIII Co-Chair Edenhofer on how to shape the science-policy interface: http://www.mcc-berlin.net/fileadmin/data/pdf/Edenhofer_Kowarsch_PEM_Manuscript_2012.pdf
Abstract: âThough more and more scientific reports are produced for public policy advice, there is still a lack of an appropriate concept for guiding the role and ensuring quality of scientific expertise in policy. The prevailing decisionist model and technocratic model, for example, are seriously flawed. For one, their central assumptionâthat value-neutral scientific research on policy means, or even ends is possibleâdoes not hold. On the other end of the spectrum, the proposed participatory models often fail to provide a concrete framework for how value-laden policy objectives or policy means can be scientifically assessed. As a new alternative, the âpragmatic-enlightened modelâ (PEM) of scientific policy advice refines these participatory approaches, largely building on John Deweyâs pragmatist philosophy. [âŚ] With the PEM, assessment bodies would exploreâin cooperation with policymakers and the publicâdifferent future policy options as well as their practical consequences, trade-offs and overlaps through multi-scenario analyses. These options could then be discussed in a public discourse. The mapping of alternative, viable policy pathways with all their ramifications is what makes scientific assessments policy-relevant without being policy-prescriptive, and what could effectively support social learning about policy options as well as deliberative democracy.â
This abstract clearly explains the interplay between scientists and policymakers. And this is in brief why scientist (as scientists) cannot set or claim for specific targets. Of course, they can do this as private persons, but not with scientific authority.
See also here for a less philosophical and more catchy version:
http://www.ipcc-wg3.de/news/Edenhofer%20Opening%20Speech-%20LAM2-%20Wellington-%20New%20Zealand.pdf/view
Best,
Brigitte