NB: Not all the presentations captured, or discussion after.
Fabian Kisicki, UCL energy centre
- Marginal abatement cost curve – used for past 30 years to judge cost-effectiveness of energy for air pollution, electricity saving etc
- First carbon MACs came out in early 1990s – used all round the world, have been used in policy making in US, UK, EU, France, Mexico, China etc and in Redd debate
- Unclear assumptions
- Cost definition – usually focus on technical costs, not costs of foregone demand etc
- Implementation barriers – often don’t take into account information deficiencies, financing hurdles etc.
- Dicounting – gap between social discount rate and the higher rates used by private sector (higher rates increase the MACs)
- Intertemporal issues – MACs usually a static shot of one year.
- Interactions / baseline emissions – also possibility of double counting if not properly assessed
- Behavioural aspects – how will demand react to implementing abatement measures? Possible that will lead to increase in energy price, and so demand will react.
- Ancillary benefits / costs – for example can also lead to reduction in air pollution, biodiversty preservation etc.
- Handling uncertainty
- Financial focus
MAC curves and REDD
- Estimates for reducing carbon from redd are all over the place – Stern (2007) gives a MAC of $1 per kilo of Co2, others give far far higher estimates. Why?
- Uncertainty concerning baseline emissions
- Focus on opportunity cost without condisering administration , implementation, monitoring costs
- Price discrimination – might be difficult for example to have higher compensation for more efficient farmers (who will lose more)
- Potential leakage
- Interactions with demand for bioenergy, timber industry
- MAC curves – simple and useful illustration tool, but first rough guide to abatement costs and potentials at a specific time
- Caveats have been overlooked in the past
- Should be applied very carefully in the REDD debate.
David Ritter, Greenpeace: How McKinsey-inspired plans lead to rainforest destruction
- REDD’s point is to enable simultaneous achievement of a number of global public goods – carbon reduction, biodiversity preservation, indigenous peoples rights etc
- Greenpeace has supported principle of REDD from the outset. Misgivings on McKinsey inspired plans are quite specific:
- Not fit for purpose – could lead to forest destruction – and methodologically suspect
- McKinsey has been very successful in gaining business in this area, and its advice has been very influential, including in developing countries.
- Method – independent discussion of McKinsey cost curve + investigate and analytical work, including in-country investigations in Guyana, DRC, Indonesia, PNG
- Investigation and analysis in this area is ongoing.
When rainforest countries hire McKinsey to develop its trademarked cost curve, few plans meet basic poitns of reliability, and many could lead to increased emissions:
1. McKinsey’s advice does not lead to a cessation of deforestation or degradation – in DRC it implies increased industrial extraction
2. McKinsey’sCost curve fundamentally flawed – yet aggressive maintenance of IPRs on this means there can be no independent scrutiny
3. Their approach leads rainforest nations to claim REDD + funding for preventing destruction that was never likely to happen
4. Mc-Kinsey inspired plans rarely acknowledge governance challenges within rainforest nation.
5. Fail to address major drivers of deforestation such as mining and logging, actually reward industries that cause it – through inflated baseline scenarios, sometimes as in Guyana by directly paying for industrial development
6. Systematically play down environmental impact of industrial logging and plantations, they exaggerate the impact of smallholders and farmers
7. McKinsey advice has informed national plans that have then been criticised by funding institutions – wasted money for rainforest nations.
McKinsey: publish all data, assumptions and anlaysis behind its cost curve methodology
McKinsey: Review and revise its methodology
McKinsey: reject logging as a climate mitigation measure