ENVIRONMENTAL OUTLOOK TO 2050: PROJECTIONS, RECOMMENDATIONS & OMISSIONS BY THE OECD

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1 ENVIRONMENTAL OUTLOOK TO 2050: PROJECTIONS, RECOMMENDATIONS & OMISSIONS BY THE OECD BY SAM MARGINSON (LA TROBE SID ) INTRODUCTION This essay examines the OECD Environmental Outlook to 2050 (OECD, 2012) (EO), initially published in It discusses the business-as-usual projections made for the EO, its policy recommendations and how they were arrived at, as well as making some analysis of the reports methodologies including comparisons with other literature. CONSEQUENCES OF INACTION AND POLICY RECOMMENDATIONS The EO outlines how the global environmental situation is likely to progress under a Baseline scenario with no new policies to addresses four serious environmental issues climate change, biodiversity, water and human health. It contains a number of proposals for new policies to address issues that existing policies do not respond to adequately. The consequences of inaction and the policy proposals outlined in the EO are summarised below. CLIMATE CHANGE CLIMATE CHANGE TRENDS AND PROJECTIONS Continuing increases in greenhouse gas (GHG) emissions from developing countries will lead to an overall increase of more than 50 per cent by Most of the increases in emissions are from the energy sector and industry, as shown in Figure 1, Panel A, with distribution by region shown in Panel B. Emissions from transport are also projected to double, mostly due to an increase in the use of cars in developing countries and aviation growth. GHG concentrations in the atmosphere are expected to approach 685 parts per million (PPM). Consequently, temperatures are projected to rise to the point where they are between 3 and 6 C above pre-industrial levels by Sea levels will also rise by between 0.9 and 1.6m by the end of the century. The number of people exposed to the corresponding rise of 50cm by 2070 is projected to be 150 million and asset exposure will increase by an order of magnitude to USD 35,000 billion. These levels of warming make it more likely that we will pass poorly understood tipping points (OECD, 2012, p. 73).

2 Figure 1. GHG emissions: Baseline, (OECD, 2012) CLIMATE CHANGE POLICY RECOMMENDATIONS The EO assumes that a single global market for emissions is necessary to limit atmospheric concentrations to 450PPM and does not analyse the policies required to achieve this target without one. In its absence, countries should link existing markets to achieve reductions at lowest cost. Ways to close the emissions gap (UNEP, 2012) include the implementation of conditional pledges and the use of stricter emissions accounting rules. At a national level, it s estimated that removing fossil fuel subsidies could result in a 6 per cent reduction in emissions and a 0.3 per cent increase in real income by 2050, which would be concentrated in Brazil, Russia, India, Indonesia, China and South Africa (BRIICS). Negative impacts from removing these subsidies and introducing carbon pricing might need to be offset by policies to address energy poverty in the rest of the world (RoW, refers to countries outside the OECD and BRIICS), but leftover funds could be directed towards low-carbon alternatives. Governments need to make entry to established markets easier and remove barriers to trade in low-emissions technologies. There s potential for net job creation from restructuring the energy sector but additional policies will be required to provide the necessary education and job training. Adaptation measures need to be incorporated into aid projects but might not adequately offset the impacts of climate change in some regions. Early warning systems and disaster risk management will be necessary. There are knowledge gaps regarding the costs and benefits of adaptation that need to be addressed. Innovative insurance systems will be necessary to reduce risks. BIODIVERSITY BIODIVERSITY TRENDS AND PROJECTIONS A decline in terrestrial Mean Species Abundance (MSA) of about 10 per cent globally between 2010 and 2050 is projected. This will be worst in Asia, Europe and southern Africa. The drivers for this are shown in Figure 2. Primary forests will continue to decline to 2050, most severely in the RoW. There s projected not to be any net forest loss after 2020 but this includes land dedicated to forestry, which is projected to increase by 60 per cent from 2010 to 2050, all in OECD and BRIICS. So whilst there s projected to be an increase in forest cover by 2050 (though not in the RoW, where it won t return to 2010 levels by then), there are no guarantees about the biodiversity contained in these areas.

3 Declines in the MSA of freshwater environments are projected to continue to 2050, especially in Africa, Latin America and some Asian regions. The report doesn t make any projections for fisheries, but does point out that there is an opportunity to increase takes in only 20 per cent of fisheries, with over 30 per cent over-fished. Figure 2. Relative share of each pressure to additional terrestrial MSA loss: Baseline, and (OECD, 2012) BIODIVERSITY POLICY RECOMMENDATIONS The report advocates an increase in the number of, size of and linkages between protected areas (PAs). Standards for things such as net size and effluent pollution concentrations need to be implemented. Bans (on fishing in certain areas or the use of certain pesticides, for example) might need to be introduced, even if they re only seasonal. Enforcement often needs to be improved. A key policy gap is with regard to channels for biodiversity measures to be funded by international finance. There are potential co-benefits with other issues, especially climate change, which could be tapped into. Existing funding for PAs covering per cent of terrestrial area and up to 30 per cent of oceans falls short of required levels by between USD 18 and 45 billion per year. It s estimated that USD 290 billion will be required for conservation outside PAs. Another 355 to 385 billion per year is estimated to be needed for climate change adaptation. Payments for ecosystem services should be gathered from users of them and transferred to institutions responsible for them. Biodiversity offsets and tradable permits can be used to ensure cost-efficiency. Subsidies need to be aligned with biodiversity objectives. Progress is needed in valuing biodiversity, in particular services provided by ecosystems. Environmental-economic accounting needs to be improved and will be most beneficial where there are clear policy outcomes, e.g. water flows. Data quality and quantity need to be improved to establish the effectiveness of policies.

4 WATER WATER TRENDS AND PROJECTIONS Projections for global water demand show an increase of 55 per cent from 2000 to The result is that more than 40 per cent of the 2050 global population will be living in river basins under severe water stress, including those in almost all of South Asia and the Middle East, as well as significant areas of China and North Africa. Lakes at risk of algal blooms are projected to increase by 20 per cent by 2050, mostly in Asia, Africa and Brazil. Nitrogen loads from wastewater are projected to increase by 180 per cent and phosphorus loads by 150 per cent from 2000 to Agricultural phosphorus surpluses in developing countries and Brazil are projected to continue increasing to 2050, but decline elsewhere after Algal blooms in coastal zones are projected to increase. Projections for access to an improved water source are shown in Figure 3 and those for access to basic sanitation in Figure 4. These are related to the United Nations Millennium Development Goal Target 7.C Halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation (United Nations, 2012). Improved sanitation is used as a proxy for basic sanitation and the aim of that component of the goal is to prevent open defecation and ideally provide people access to private toilets (UNICEF and World Health Organization, 2012). Almost 20 per cent of the world s population are projected to be at risk of flooding in 2050, with the value of assets at risk projected to grow by over 340 per cent, based on increased development in flood-prone areas alone. Growth in these asset exposures is greatest in BRIICS, with 640 per cent growth, followed by 440 per cent growth in developing countries. Figure 3. Population lacking access to an improved water source: Baseline, (OECD, 2012)

5 Figure 4. Population lacking access to basic sanitation facilities: Baseline, (OECD, 2012) WATER POLICY RECOMMENDATIONS Water rights and trading assist in allocating water to the most cost-efficient uses. Adequate reserves need to be allocated to environmental flows. Education and training will be required to enable the transfer of water-efficient technologies from OECD countries. Agricultural water users need to be charged tariffs that account for the costs of supply, scarcity, social values and environmental costs. Water pricing will encourage alternative water sources to be developed, including recycled water. Wastewater collection systems should be expanded as treatment facilities are developed in order to avoid discharging waste untreated. Investment in water supply and sanitation infrastructure in developing countries might require aid from OECD countries but has net positive economic benefits. Nutrient rights and trading have potential as a solution to poor surface water quality. Subsidies in other sectors can be an issue and those that work at cross-purposes to water objectives should be removed. The valuation of services related to water that ecosystems provide needs to be improved. A flexible and appropriate System of Environmental and Economic Accounts for Water (SEEAW) should be implemented. Planning policies need to remove incentives to develop in flood-prone areas. HEALTH AND ENVIRONMENT HEALTH TRENDS AND PROJECTIONS With regard to particulate matter (PM), a slow decline is projected in PM 10 (particulates with diameters 10 m or less) concentrations in OECD countries as well as Brazil, China and India. In the rest of the BRIICS, PM 10 concentrations are projected to rise until 2030 then decline slightly by In the RoW, they are projected to continue increasing. The percentage of urban dwellers in BRIICS and the RoW living with levels of particulate pollution above the WHO s highest interim standard is currently 70 per cent and is projected to increase. The number of premature deaths from exposure to particulate matter (PM) worldwide is likely to more than double to 3.6 million in 2050 under the Baseline, mostly in China and India (OECD, 2012, p. 276).

6 Urban ground-level ozone concentrations are projected to rise due to rising emissions of SO 2, which are projected to be 90 per cent higher in 2050 than they were in 2000, as well as NO X, which are projected to be 50 per cent higher. Increases are worst in BRIICS, though emissions there will stabilise by They will continue to rise in the RoW. It is projected that there will be six times more chemical production outside OECD countries by This results in a greater risk of exposure to hazardous chemicals. The existing trend of production shifting from OECD countries to BRIICS is projected to continue, with BRIICS (mostly China) surpassing OECD countries by HEALTH POLICY RECOMMENDATIONS Pollution needs to be priced or regulated, especially particulates in non-oecd countries, notably from transportation. Other options to reduce vehicle emissions are to encourage public transport use and behavioural changes. There are potential synergies between air pollution and climate change policies. Abatement achieved through structural measures, such as change in energy sources, will have a bigger impact on GHG emissions than end-of-pipe measures. Regulating methane would likely have the largest positive synergistic effects. A 25 per cent reduction in NO x and black carbon emissions could lead to a 5 per cent reduction in CO 2 emissions by A lack of understanding of the health risks of exposure to chemicals is a significant issue. Large scale data collection is required. There is a need to more accurately determine the burden of disease from environmental causes, in order to perform better cost-benefit analyses of policies addressing these risks. Sound management techniques developed in OECD countries need to be transferred to BRIICS as production shifts. There needs to be more focus on sustainable use and green chemistry. The public also need to be informed in order to minimise exposure. Finally, it is important to protect people at an early stage in life, not just because foetuses and children are most vulnerable, but also because this is where the benefits of intervention will be greatest. POLICY MODELLING Modelling for the EO was undertaken using two separate packages. The economic modelling was performed using the ENV- Linkages (Chateau, Rebolledo, & Dellink, 2011) general equilibrium model. The environmental modelling was performed using the Integrated Model to Assess the Global Environment (IMAGE) framework (PBL, 2012), which is a grid based model where the world is split into 24 different regions for economic variables other than energy, which is modelled for 26 different regions. These two packages were used to analyse a wide range of potential future policy scenarios, which are summarised below. CLIMATE CHANGE POLICY MODELLING Four emissions scenarios were modelled to analyse climate change policies for the EO three resulting in atmospheric concentrations of CO 2 equivalent (CO 2 e) GHGs of 450PPM in 2100 and one where the concentration reaches 550PPM, as shown in Figure 5. These compare with the Baseline projection of a concentration of almost 685 PPM with implications as discussed in the Climate change trends and projections section above. Achieving less than 450PPM is claimed to lead to a 40 to 60 per cent chance of limiting temperature rises to 2 C. In all scenarios including the Baseline, fossil fuel subsidies were assumed to remain constant as a percentage of fuel prices through to 2050, though a separate analysis of the removal of fossil fuel consumption subsidies was performed for 37 countries. In this separate analysis of the Baseline scenario, subsidies were assumed to be phased out between 2013 and 2020, which produced a 6 per cent emissions reduction by 2050 compared to the Baseline.

7 Figure 5. Concentration pathways for the four Outlook scenarios including all climate forcers, (OECD, 2012) 450 CORE SCENARIO This scenario assumes that a global carbon market is quickly established, ensuring reductions are achieved with a mitigation option mix that results in minimised costs. Reductions of 12 per cent by 2020 and 70 per cent by 2050 are required relative to those in the Baseline. 75 per cent of these are achieved through reductions in fossil fuel use. Energy efficiency improvements were found to be the main driver of these reductions, especially in BRIICS. Significant cuts in the emissions intensities of power generation and transport sectors are also required, most importantly in OECD countries. A carbon price that increases to USD325/tonne CO 2 e by 2050 provides sufficient incentive for these changes. Emissions cuts and economic impacts relative to the Baseline from ENV-Linkages are shown in Table 1. Even these emissions are relatively high and are offset by the use of biomass energy with carbon capture and storage (BECCS) in the second half of the century. This requires land for bioenergy crops, though most bioenergy is produced using second generation biofuels in this modelling. However, there are considerable uncertainties regarding the costs and potential for BECCS. Table Core scenario: emissions and cost of mitigation, (ENV-Linkages results) Group of Countries Change in 2050 Emissions ( per Change in 2050 GDP ( per cent) cent) OECD Annex I Rest of Annex I Rest of BRIICS RoW This scenario assumes that emissions permit allocations converge over time to a uniform per capita allocation. Three other permit allocation scenarios were modelled: a Grandfathering scenario that assumes permits are allocated to countries at the same percentages that those countries produced emissions as a share of total global emissions in 2010; a Per capita scenario where permits are allocated on a uniform per capita basis from 2013, as opposed to converging over time to a uniform per capita allocation by 2050 as they do in the standard 450 Core scenario; and a Global carbon tax scenario, which assumes permits are allocated in a way that results in marginal costs of abatement being the same in all regions, causing no trading to occur. In this last scenario, permit allocation is a result of the model. Marginal costs of abatement are calculated and countries where they are low receive fewer permits, while countries where they are high receive more permits, with the outcome being an absence of permit trading. The impacts of the various scenarios on regional emissions and income are shown in Figure 6.

8 Figure 6. Impact of permit allocation schemes on emission allowances and real income in 2050 (OECD, 2012) Real income changes very little between these scenarios on a global scale, but the distribution changes significantly. Whether permits are allocated on a per capita basis from 2013 or whether they converge to a per capita distribution by 2050, a per capita allocation is the worst scenario for the OECD and Annex I countries, which are all best off when emission permits are allocated so as to make the distribution of emissions as it was in 2010 (i.e. in the Grandfathering scenario). The RoW countries are the opposite, becoming major exporters of permits in scenarios where emission permits are allocated on a per capita basis. The rest of BRIICS are best off in the Global carbon tax scenario, indicating that costs of abatement there are perhaps highest, though in those countries there is still a greater reduction in emissions in this scenario than in the Grandfathering scenario, even though the impacts on real income are greater in the Grandfathering scenario. This is possibly due to China skewing the data for the Rest of BRIICS region as a whole, as China is best off in the Grandfathering scenario due to its high emissions as a percentage of global emissions in ACCELERATED ACTION SCENARIO In this scenario, carbon prices are 50 per cent higher in 2030 than in the 450 Core scenario and this enables power plants with CCS to become cost-competitive by about China and the Middle East are the source of more significant reductions in this scenario. While the RoW will rely mostly on renewable energy, other countries will need either CCS or nuclear power. By 2050, about half electricity production is renewable in OECD countries and BRIICS. A number of different energy technology options were investigated as variations of simulations of this scenario: 1. Low efficiency and renewables 20 per cent lower efficiency gains in energy production and productivity gains in renewable energy technology compared to the standard 450 Accelerated Action scenario. 2. Progressive nuclear phase-out no nuclear power plants other than those already operating or planned to be constructed by No CCS use of CCS is as per the Baseline scenario. Phasing out nuclear power causes an overall reduction in electricity generation in BRIICS. Without CCS, prices rise and consumption patterns change. Fossil fuel plants without CCS decrease to around 10 per cent of capacity by 2050 unless nuclear power is also phased out. The RoW is projected to rely mostly on renewables and is consequently the most adversely affected in the Low efficiency and renewables scenario, though this scenario showed that variations in the assumptions made regarding these mitigation options have a more significant effect than the phase-out of nuclear or the absence of CCS. Overall, each of these variations requires a higher carbon price to produce the emissions pathway of the 450 Accelerated Action scenario, with the price highest in the No CCS scenario. Effects on real income are worst in the Low efficiency and renewables scenario in all regions due to greater energy production required to offset losses in efficiency assumed in the 450 Accelerated Action scenario. The EO recommends that future energy systems should be diverse to avoid issues related with any particular technology.

9 450 DELAYED ACTION SCENARIO This scenario assumes there is no global carbon market until 2020 and that reductions are at the upper end of those pledged in Copenhagen / Cancún. To interpret these pledges, the same methodology was used as in The Emissions Gap Between the Copenhagen Pledges and the 2 C climate Goal: Options for Closing and Risks that Could Widen the Gap (den Elzen, Hof, & Roelfsema, 2011). Pledges made with respect to reductions from business-as-usual were considered to apply to Baseline projections rather than estimates that each country might have made for its own business-as-usual emissions. All targets were converted to reductions from each countries emissions in The target for South Africa was changed due to the significant difference between the Baseline projections and South Africa s emissions under what it considered to be unconstrained growth (den Elzen, Hof, & Roelfsema, 2011, p. 735). The use of offsets was assumed to be limited to 20 per cent of reductions for Annex I countries except for Canada and the EU. Canada was assumed not to use offsets and the EU was assumed to limit offsets to 4 per cent of total emissions. Finally, 50 per cent of the costs of mitigation in Brazil, Mexico and South Africa are assumed to come from finance supplied by Annex I countries. The lack of an international carbon market until 2020 means that this is not a least-cost pathway, with larger real income losses for most regions compared with the 450 Core scenario. It requires quicker reductions after 2020 and a rapid transformation of the energy system in the second half of the century to have a 50 per cent chance of limiting the temperature increase to 2 C. There is a risk of 10 per cent larger temperature rises in the short term compared to the 450 Core scenario. Higher costs occur between 2020 and 2050, partly due to the belated reform of the electricity sector. Overall global real income in 2050 is about 8 per cent lower in this scenario than in the Baseline scenario and emissions are 60 per cent lower than in CORE SCENARIO The 550 Core scenario is almost the same as the 450 Delayed Action scenario until Now however the chance that the temperature increase will be limited to 2.5 C-3 C in this scenario is as low as 50 per cent. Costs of mitigation are significantly higher as premature closure and retrofitting of carbon-intensive energy generators will be the only way to achieve the target. The global decline in real income by 2050 would be 1.3 per cent relative to the Baseline and emissions would be at 2010 levels. Emissions move from OECD Kyoto Annex I countries and Russia to other Annex I countries or another of BRIICS. OECD countries are projected to be the main emission permit buyers in this scenario. This scenario assumes the existence of a fully linked global ETS, though variations tested included: a 550 No linking scenario with no trading; a 550 OECD linking scenario, which assumes trading only between OECD countries; a 550 Annex I linking scenario, which assumes only Annex I countries are linked; and a 550 OECD-BRIICS linking scenario, which excludes the RoW. The economic impact of each variation is shown in Figure 7. The most important aspect of Figure 7 is the increase in real income experienced in RoW countries as a result of linking emission trading schemes. RoW countries produce 25 per cent of all available emissions reductions in the standard 550 Core scenario and permit exports are a significant source of revenue for them. In all other scenarios shown in Figure 7, real income losses in RoW countries are worse than those in OECD Annex I countries. The impact of linking with the BRIICS is clearly apparent, with a significant drop in real income losses in the 550 OECD + BRIICS linking scenario visible in both the Russia and rest of Annex I group as well as the Rest of BRIICS group. Finally, income losses in the 550 OECD + BRIICS linking and the fully linked 550 Core scenario are significantly lower in OECD Annex I countries than in any of the less completely linked scenarios. Clearly the more countries an emission trading scheme covers, the lower the cost of mitigation is.

10 Figure 7. Income impact of fragmented emission trading schemes for reaching concentrations of 550 ppm compared to the Baseline, 2050 (OECD, 2012) BIODIVERSITY POLICY MODELLING A number of factors, as shown in Figure 2, are having impacts on biodiversity around the world. Three scenarios were modelled to simulate the impacts of policies that could result in mitigation of these impacts. EXPANDED TERRESTRIAL PROTECTED AREAS SCENARIO This scenario assesses the implications of the Aichi target (Convention on Biological Diversity, 2010) of achieving an ecologically representative 17 per cent protection of terrestrial area by assuming that 17 per cent of each major ecoregion would be protected. Global terrestrial area was split into 65 ecoregions that were considered to adequately represent the diversity of all ecosystems. New areas were added to existing protected areas with preference given to known biodiversity hotspots and secondly to areas nearest agricultural land. These were implemented as restrictions on land available for agriculture. The most work needs to be done in BRIICS, especially Russia and India, as well as OECD Europe. Less work is required in Southern Africa, Japan/Korea and Brazil. The overall result is a drop in the productive land area of 1 per cent. 450 PPM + REDUCED LAND USE SCENARIO Under the 450 Core scenario, climate change goes from causing a 2.9 per cent loss in biodiversity in the Baseline to causing a 1.4 per cent loss. However, this requires more land for bioenergy and the net outcome on biodiversity is only a 0.1 per cent gain. The 450 ppm + Reduced Land Use scenario assumes a decline in crop and pasture area relative to the Baseline. This is assumed to be achieved by agricultural yield improvements, which vary from region to region in the range of 3-18 per cent higher than in the Baseline scenario. The result is that there is no net loss of natural ecosystems. 7 per cent of the emissions reductions required in this scenario come from avoiding deforestation. The result is a net gain in biodiversity of 1.2 per cent in MSA by 2050 relative to the Baseline, from reducing both climate change and agricultural land. This would be greater but for the impacts of increasing area for bioenergy crops, as well as infrastructure, encroachment and fragmentation, as shown in Figure LOW BIOENERGY SCENARIO In the 450 and 550 Core scenario variations, bioenergy is sourced from abandoned agricultural land and natural grasslands. Protected areas are excluded from production. In the 550 Low Bioenergy scenario, natural grasslands have also been excluded and sustainability criteria are stricter, especially with regard to areas where there are water shortages or that are in poor condition. Also, bioenergy R&D incentives were removed in this variation.

11 The net impact on biodiversity in the 550 Core scenario is a 0.2 per cent increase in MSA by 2050 relative to the Baseline. The long term improvement is less after per cent of total primary energy supply comes from bioenergy in the 550 Core scenario. The 550 Low Bioenergy scenario has a 1.3 per cent increase in MSA by 2050 relative to the Baseline as a result of limiting bioenergy to 6.5 per cent of total energy use (as well as a number of other factors as shown in Figure 8), but would likely lead to increased mitigation costs in the absence of a substitute. Uncertainties include the yield of bioenergy crops and the type of land used. For example, impacts on biodiversity would be lower if the land used to grow bioenergy crops had less biodiversity originally, though this would probably cost more in cases where the original lack of biodiversity was due to poorer soils. The impact of climate change on biodiversity is also uncertain. Figure 8. Impacts on biodiversity of different Outlook climate change mitigation scenarios (OECD, 2012) Mitigating climate change has significant positive flow-on effects on biodiversity, as shown in Figure 8. However, in the 450 Core and 550 Core scenarios, these are almost entirely negated by the production of bioenergy crops. Whilst climate change is more severe in the 550 Low Bioenergy scenario, similar improvements in global MSA to those of the 450 PPM + Reduced Land Use scenario can be achieved by minimising the use of bioenergy. This shows that whilst the impacts of climate change might be negative, they can be exacerbated by a selection of climate change mitigation measures that don t take synergies with other environmental objectives into account. WATER POLICY MODELLING A number of scenarios were modelled to estimate the impact of policies regarding water demand, quality, supply and sanitation. The number of people and value of assets at risk of water-related disasters were not analysed for scenarios other than the Baseline. In the Baseline, changes in risk were estimated as the result of population dynamics and economics.

12 RESOURCE EFFICIENCY SCENARIO This scenario is a variant of the 450 Core scenario, with a 15 per cent increase in efficiency of irrigation outside OECD countries, as well as a worldwide 30 per cent increase in the efficiency of domestic and manufacturing water use. The result is that water demand in OECD countries is 25 per cent below that in the Baseline scenario, which is itself 10 per cent lower than 2000 levels. However, the result is only a relatively small improvement in the number of people living in catchments where water stress is severe, which decreases from 3.9 billion to 3.7. These improvements are mostly in China, the U. S., Russia, southern and eastern Europe. Water stress would remain severe in large swathes of India, central Asia, north Africa and the Middle East. NUTRIENT RECYCLING AND REDUCTION SCENARIO This scenario assumes that by 2030, 25 per cent of sewerage connections will collect urine separately for use as fertiliser and that this will rise to 50 per cent by Additionally, 25 per cent of phosphorus-based detergents are replaced by a phosphorus-free equivalent by 2030, rising to 50 per cent by It is also assumed that there will be a 40 per cent increase in agricultural yields, half due to increased fertiliser use, with the other half due to efficiency improvements from better management and selection of crop varieties. Livestock production is more intense and efficient, with pastoral area consequently reduced. The results show fertiliser surpluses (fertiliser added to soils that isn t removed via crop harvesting or grazing) are almost 20 per cent lower than those in the Baseline scenario and nutrients in wastewater effluent would fall by nearly 40 per cent. Nutrients from livestock are expected to be 10 per cent lower than in the Baseline scenario. Loads of nitrogen to rivers would fall by almost 40 per cent compared to the Baseline and loads of phosphorus by 15 per cent. Overall, loads to rivers, lakes and wetlands would decrease, as would loads to the Pacific Ocean. Loads to the Atlantic and Indian Oceans do not improve significantly due to the expansion of agriculture. Phosphorus loads to the Indian Ocean actually increase due to the low percentage of people with connection to sewerage treatment in catchments that drain to this ocean, as well as the fact that fertiliser use needs to increase to achieve food production requirements but is still relatively low, so there s less scope for substitution with manure. Also what manure is used as fertiliser would not have ended up in run-off under the Baseline scenario, instead being used as fuel or as a building material. ACCELERATED ACCESS SCENARIO This scenario relates to the Millenium Development Goal to improve access to water sources and basic sanitation discussed in the Water trends and projections section. It increases the rates that people are connected at, assuming that by 2030 numbers of people without access to an improved water source and basic sanitation is half what it was in 2005, then universal access is finally achieved by There are substantial benefits for certain economic sectors such as tourism and fisheries, as well as for the environment. They far outweigh the costs in the least developed countries in particular. It requires investments of US$1.9 billion per year beyond those in the Baseline scenario to 2030 and then US$7.6 extra per year to This will need to come from water tariffs, general taxes and international contributions. HEALTH AND ENVIRONMENT POLICY MODELLING Only one scenario was modelled specifically to estimate health benefits. The Accelerated Access scenario, discussed above, has health benefits primarily in the RoW. The various climate change scenarios produce only minimal reductions in the number of people at risk from malaria compared to the Baseline. 25 PER CENT AIR POLLUTION REDUCTION SCENARIO The economic impact of air pollution was modelled using Worldscan (Bollen & Brink, 2011), a general equilibrium model with 25 regions and 13 sectors. Marginal emissions abatement (mostly end-of-pipe measures) costs were input and assumed to decrease by 0.5 per cent annually from The emission reduction potential of abatement technology was also

13 assumed to increase by 0.5 per cent p.a. A weighting was applied to emissions of substances contributing to particulate matter exposure, based on their contribution. Emissions of each substance were then reduced according to their weight and a price was produced that would result in this reduction, though prices were capped as a function of the Value of Statistical Life (VSL) in each region. Benefits were estimated as a result of the drop in mortality and the VSL was used to estimate their value. This scenario projects about 50 per cent of reductions would be achieved by end-of-pipe measures (for example scrubbers and catalytic converters) mostly outside OECD countries, as these measures have already been implemented in many OECD countries. The health benefits of this scenario are greatest in the BRIICS, but reductions are still not enough to make a significant impact on the number of overall deaths as the levels of pollution in the Baseline scenario are so high that a 25 per cent reduction does not get them below threshold levels. CRITICAL ASSUMPTIONS AND OMISSIONS The EO relies on a number of assumptions to simplify the task of forecasting and omits what could be considered important factors in some cases. Below are summaries of some of the more important examples of this. AGRICULTURAL YIELDS The EO uses yield projections from the book World Agriculture: towards 2015/2030 (Food and Agriculture Organization, 2003). The latter projected a slowing of yield growth, with the projections it contains showing on average half the yield growth of the previous 30 years. As this slowing is expected to continue (Food and Agriculture Organization, 2003, p. 144) and the FAO only makes projections out to 2030, we can expect that beyond 2030 yield growth will be slower than that through to 2030 due to this slowing in yield growth, consequently the use of these projections for the period from 2030 to 2050 in the EO could cause an overestimation of the growth in yields. This implies that the demand for agricultural area might be underestimated in the EO beyond More recent studies have suggested that assumptions of continued growth might be optimistic and that in fact significant decreases might occur (Deryng, Sacks, Barford, & Ramankutty, 2011). CARBON STORAGE All 450 PPM climate change scenarios in the EO are based on the use of BECCS to achieve negative emissions in the second half of the century. The most recent article referenced by the EO with regard to the use of carbon capture and storage specifically cautions that relying on it to produce negative emissions and hence allowing more emissions in the short term comes with the risk that this mitigation option might not live up to its potential (van Vuuren & Riahi, 2011). Whilst the technology to capture and store carbon dioxide already exists, the availability of enough appropriate storages cannot be taken for granted (Azar, et al., 2010, p. 200) with more than 10,000 times the current area used for commercial carbon storage activities required. It has been estimated that approximately 2,000GtCO 2 can be stored in geological formations (IPCC, 2005). If all fossil fuel reserves were consumed without emissions reduction technology used, 2,860GtCO 2 would be emitted. To stay within 2 C of warming, a further 565 to 886GtCO 2 can be emitted (Carbon Tracker and the Grantham Research Research Institute, LSE, 2013). The excess almost exactly matches the amount of available storage, leaving no room for emissions from land use, land use change and forestry, though these are projected to decrease in the Baseline scenario. However, this is dependent on increasing agricultural yields that may not eventuate, as discussed in the Agricultural yields section. More recent studies of potential storage area have produced larger estimates (IPCC, 2007) but detailed work on more accurately identifying potential storage areas on a country by country basis is still underway (IEA, 2012). BENEFITS OF CLIMATE CHANGE MITIGATION Perhaps the most serious omission the EO makes is that of the benefits of mitigating climate change. Land use change relationships in IMAGE are approximated by ENV-Linkages (Chateau, Rebolledo, & Dellink, 2011). The Terrestrial Vegetation Model in IMAGE takes climate into consideration when calculating crop distribution (PBL, 2012) and consequently climate impacts on agricultural production will feed through to economic projections. The EO does not

14 attempt to estimate the economic costs of climate change, though some impacts will likely be incorporated into the Baseline economic growth projections via ENV-Linkages approximation of land use from IMAGE. It does present the costs of mitigation, but not presenting the benefits gives a skewed picture of the situation, as benefits have been estimated to exceed costs (Stern, 2007). Benefits of climate change mitigation that the EO does not account for include, most significantly, the avoided costs of adapting to sea level rise, discussed below, as well as the mitigation of an increase in deaths due to extreme heat, though this will be offset to some extent by a decrease in deaths due to extreme cold. Also, as mentioned in the Biodiversity policy recommendations section, 355 to 385 billion per year is needed for climate change adaptation in order to protect biodiversity. Some of these costs, too, could be avoided with mitigation of climate change. The EO does discuss impacts of sea level rise on coastal cities, on the basis of findings presented in Ranking Port Cities with High Exposure and Vulnerability to Climate Extremes (Nicholls, et al., 2008), which analyses the population and assets exposed to a 1 in 100 year Average Recurrence Interval (ARI) storm surge event. It estimates that asset exposure will increase from approximately 5 per cent of 2005 GDP to 9 per cent of projected 2070 GDP, though it should be noted that the study does not account for mitigation of risk via protection measures, which are more prevalent in wealthy countries, where asset values are more concentrated. Much of the increase in exposure is driven by development in areas that are already prone to inundation. This is more the case in developing regions. Approximately one third is caused by a rise in extreme sea levels and land subsidence due to groundwater extraction. To isolate the impacts of sea level rise, the most relevant scenario discussed is that with the future climate and natural land subsidence, but no anthropogenic subsidence or socio-economic changes (no scenario also excluding natural land subsidence was included, i.e. with only climate change impacts). Results were presented for this scenario showing impacts to residual average annual risk of inundation for both population and assets for a subset of cities that have known standards for defence from storm surge. For assets, these have been summarised in Table 2, which shows the average annual residual risk of damage to assets caused by coastal flooding after protection measures have been accounted for, in billions of US dollars per year. Table 2. Estimated average annual risks for selected cities City Average Annual Risk (Residual Risk US$bil/yr) Current With Climate Change and Natural Subsidence London Shanghai Osaka New York Tokyo Amsterdam Rotterdam It is clear that when existing storm surge defences are not upgraded to cater for the increase in exposure due to natural causes, residual average annual risk to assets increases by a few orders of magnitude on average. Other estimates of damages due to sea level rise include USD 270 to 475 billion for each metre of sea level rise in the United States alone (OECD, 2010). Also with regard to flooding, the EO states that a link between climate change and increased economic losses due to flooding cannot be confirmed due to insufficient data, with damages stabilised or decreasing when corrected for socio-economic factors. More recent work has shown that when population is held stable at 2005 levels, the population exposed to a 1 in 100 year ARI river flood event will be 4 to 14 times greater in 2100 depending on the emissions pathway followed (Hirabayashi, et al., 2013). Whilst economic damages were not considered, it would appear likely that damages would similarly increase and some of these would also be avoided if climate change were mitigated. EO projections for Baseline temperature increases by the end of the century range from 3.5 to 5.5 C and are around 2.5 C in The 450 Core scenario requires a reduction of 70 per cent of emissions by 2050 at a cost of 5.5 per cent of global GDP compared to the Baseline in 2050 and has the objective of resulting in a 40 to 60 per cent probability of keeping the temperature rise under 2 C. Figure 9 shows estimates of damages to GDP from a variety of sources, with scenarios from the Stern Review on the right. Assuming a mean temperature increase in the Baseline of 4.5 C by 2100, a rough average of economic impacts is about 3 per cent. Were the temperature increase limited to 2 C, the economic impact would be roughly 0.5 per cent. The difference is approximately the benefit of mitigation, which for the sake of discussion can be

15 considered to be 2.5 per cent. This would make the net cost of mitigation more like 3 per cent of the Baseline GDP in However, it must be noted that this is not comparing like with like, as the costs of mitigation in the EO are in 2050 and the Baseline temperature projections do not level off, indicating that economic damages would continue to increase beyond Stern estimates they would reach 5.5 per cent of GDP with approximately 5 C of warming if non-market impacts are included and with about 7.5 C of warming otherwise. Figure 9. Damage estimates (IPCC, 2007) MARINE FISHERIES Despite pointing out that marine fish stocks are in decline, the EO does not make projections for them. The latest version of The State of World Fisheries and Aquaculture 2012 (Food and Agriculture Organisation, 2012) makes projections to 2021, which show capture fisheries remaining stable and an increase in aquaculture. This latest edition focusses more on capture fisheries than the 2010 edition, which the EO relied on. It has also been concluded that while aquaculture might be limited by energy and technology demands, capture fisheries, if better managed, might have some room for increased production, though not enough to match projected population growth (Frid & Paramor, 2012). MINERAL RESOURCES The modelling for the EO does not consider resource scarcity, with mining modelled simply as a sector of the economy and a source of emissions (Chateau, Rebolledo, & Dellink, 2011). Elsewhere, assumptions regarding resource availability and declining ore quality, combined with increasing usage, have been found to be critical (Meadows, Randers, & Meadows, 2005). More recent work has demonstrated the reality of resource depletion and suggested that technological innovation is unlikely to solve future problems of declining ore quality due to diminishing returns, combined with concurrent increases in environmental impacts (Prior, Giurco, Mudd, Mason, & Behrisch, 2012). Prior et al did suggest that recycling could be used to offset the effects of declining ore quality, but what Meadows et al showed was that unless the rate of consumption can be brought into line with the rate of sustainable production, overshoot will occur. It is unclear whether rates of production of minerals by recycling can be increased to the point that they are sufficient to cater for current demand, but both sets of authors make recommendations for more policies focussing on this issue. It has also been suggested that resource depletion is the end result of our economic system and that capitalism itself is the problem (Magdoff, 2013), that needs to be solved by developing an alternative system less reliant on the growth in consumption of resources (The Royal Society, 2012). CONCLUSION The EO concludes that there will be significant negative repercussions of not responding to environmental challenges with new policies. Since the previous OECD Environmental Outlook, released in 2008 and looking forward to 2030, prospects have worsened. The report recommends swift action. The OECD expects environmental assets to continue to be degraded with negative impacts on living standards into the future, with the potential for irreversible changes due to tipping points that are poorly understood. Under a business-asusual scenario, climate change is likely to cause a 3 to 6 C increase in average global temperatures, with significant negative impacts on the populace, biodiversity loss will continue, freshwater availability will decrease and the burden of disease from

16 air pollution, as well as from chemical exposure (especially in non-oecd countries), will worsen. Many of these issues are linked and some are poorly understood. Swift action is both environmentally and economically sound policy. A range of policies have been recommended, focussing on OECD countries and BRIICS. Regulations and standards are required, but on their own are unlikely to lead to lowest cost solutions. This will be achieved by pricing pollution and ecosystem services. It s also necessary to assign appropriate values to natural assets. Additionally, subsidies for activities causing environmental harm need to be removed and replaced with incentives for producing innovative solutions to environmental problems. It s important that policies are coherent across sectors and that, where possible, attempts to fix one problem do not cause another to worsen. Best results can be achieved when policies address multiple issues. High level political commitment and international cooperation are required for equitable cost-sharing. Eleven main scenarios, as outlined below, have been modelled to estimate the impact of various policies for the EO, some with a number of variations Core Accelerated Action Delayed Action Core 5. Expanded Terrestrial Protected Areas PPM + Reduced Land Use Low Bioenergy 8. Resource Efficiency 9. Nutrient Recycling and Reduction 10. Accelerated Access per cent Air Pollution Reduction Many of the policies are projected to be successful, though some of these rely on assumptions that have the potential to be non-conservative, particularly regarding unproven technologies and efficiency improvements. The likelihood of climate change policies achieving their target appears to be dependent on either nuclear power or unproven BECCS technologies, though removal of fossil fuel subsidies and avoiding further deforestation would have significant impacts. The economic benefit of linking emission trading schemes was shown to be significant when BRIICS and RoW countries are included. Biodiversity goals are achievable via increased protected areas with negligible economic impacts. Water stress is unlikely to be avoided in large areas and water quality goals require new technology, as well as behavioural change. Universal access to an improved water source and basic sanitation requires investment but will have net economic benefits. Air pollution is projected to be so bad that even a 25 per cent reduction in emissions relative to the Baseline is unlikely to significantly reduce the number of deaths that it causes. The EO involved a comprehensive modelling effort, but relied on some major assumptions. Chief among these is the ability to use carbon storage as a way to offset GHG emissions. The scope for this is still being investigated and the postponement of emission reductions based on this assumption may prove to be a mistake. Limitations to mineral resource availability have not been included and agricultural yields may have been overestimated, leading potentially to the overestimation of growth potential, as well as an underestimation of demand for agricultural land, respectively. Finally, it would benefit from the inclusion of a cost-benefit analysis of climate change mitigation, rather than simply presenting costs. BIBLIOGRAPHY Azar, C., Lindgren, K., Obersteiner, M., Riahi, K., van Vuuren, D. P., den Elzen, K. M., et al. (2010). The feasibility of low CO2 concentration targets and the role of bio-energy with carbon capture and storage (BECCS). Climatic Change, Bollen, J., & Brink, C. (2011). The Economic Impacts of Air Pollution Policies in the EU. Retrieved from

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18 The Royal Society. (2012). People and the Planet. London: The Royal Society. UNEP. (2012). The Emissions Gap Report Nairobi: United Nations Environment Programme. UNICEF and World Health Organization. (2012). Progress on Drinking Water and Sanitation: 2012 Update. New York: UNICEF. United Nations. (2012). The Millennium Development Goals Report New York: United Nations. van Vuuren, D. P., & Riahi, K. (2011). The relationship between short-term emissions and long-term concentration targets. Climatic Change,