Australia mid-range in the list of winners and losers from global emissions targets

Most of the world has signed up to commitments to reduce emissions under the Paris Agreement^[1]. It aims to hold the increase in the global average temperature to “well below 2°C above pre-industrial levels” and to pursue efforts to limit it to 1.5°C.

Australia’s commitments are net-zero greenhouse gas emissions by 2050 and a reduction to 43% below 2005 levels by 2030^[2].

Progress on meeting the commitments is reviewed every five years. The next review is due next year, along with upgraded commitments.

Those who are having difficulty meeting their commitments are likely to claim that their economic cost is too big. This claim is hard to verify, in part because those economic costs depend on what other countries are doing.

Every nation’s commitment, modelled

In an effort to try to get a handle on which countries will do well out of the commitments all countries have made and which will do badly in purely economic terms (regardless of the benefits from limiting climate change) I have modelled the 2030 promises using a variant of the global trade model GTAP^[3].

The model includes most forms of emissions and, when commitments are input, determines the cheapest way for each region to hit its target.

The biggest commitments compared to business as usual have been made by Japan, the United States, the European Union and Australia.

The model has Russia and all but the largest economies in Asia and the Pacific (i.e. not China, India and Japan) actually increasing their emissions as industrial activity relocates to them from other regions that are trying harder to reduce emissions.

India does well, the Middle East does badly

In terms of the impacts on gross national income, two regions actually benefit from the commitments of all nations – India and the rest of Asia and the Pacific. Both regions have weak emissions reduction targets and import energy.

The model predicts lower oil and gas prices as a result of reduced demand from the regions with ambitious emissions targets. This will allow energy importers without ambitious targets to benefit.

The Middle East does badly. It is heavily reliant on fossil fuel exports and has slightly more stringent emissions reduction targets than India and the rest of Asia and the Pacific.

That makes the Middle East the worst-affected region. Its per capita income is modelled to grow by only 1.5% per year on average if all countries hit their 2030 targets compared to at least 2.1% every year without global climate action.

Russia is less reliant on fossil fuel exports than some Middle Eastern countries, which is one of the reasons the impacts on Russia’s income are not as severe.

The other is that Russia’s emissions reduction commitments are weak. Russian fossil fuels that aren’t exported as a result of efforts to reduce emissions elsewhere get used in Russia.

Impact on Australia modest, given emissions per capita

If Australia made no effort to reduce its emissions, Australians’ real income is estimated to grow by at least 1% every year to 2030. With the 2030 commitment, that annual increase becomes 0.9%, which is modestly less.

The modelling suggests Australia could be doing more. Of the regions modelled, Australia is set to have the highest emissions per capita until 2028 when it is overtaken only by Russia.

Many of the nations that will see their incomes rise as a result of others’ emissions reduction efforts have lower per capita incomes than Australia’s.

It will be hard to pressure them to reduce their emissions while Australia’s emissions per capita are high.

References

1. ^{^} Paris Agreement (unfccc.int)
2. ^{^} 43% below 2005 levels by 2030 (www.dcceew.gov.au)
3. ^{^} GTAP (www.gtap.agecon.purdue.edu)