The cost of contributions

The process of national governments submitting Intended Nationally Determined Contributions (INDCs) to the UNFCCC is well underway, with a number of developing and least developed economies also submitting plans. Most recent amongst these is a detailed and ambitious plan from the government of Kenya.

The Kenya INDC proposes a 30% reduction in national greenhouse gas emissions from a business-as-usual (BAU) trajectory, which it is also very clear in defining. The plan notes that Kenya strives to be a newly industrialized middle income country by 2030. Current emissions are very low, with the majority coming from land use change (LULUCF). In 2010 emissions were 73 MtCO2eq, with the IEA reporting energy CO2 emissions of 11.4 Mt for that year. Given the population of 41 million in 2010, that gives an energy linked CO2 per capita of 0.28 tonnes, amongst the lowest in the world. Kenya has projected BAU emissions of 143 MTCO2eq by 2030, so that gives them a goal of just on 100 MTCO2eq for that year on the basis of their INDC.

Kenya has also made it clear that their INDC is subject to international support in the form of finance, investment, technology development and transfer, and capacity building. With some of this support coming from domestic sources, they estimate the total cost of mitigation and adaptation actions across sectors at US$40 billion, through to 2030. My first reaction to this was that it seemed like quite a hefty bill, but better to look at the numbers.

First of all, a few assumptions. These are all open to challenge, but they help frame the issue and allow some assessment of the numbers to at least establish a ballpark estimate of value for money and the implications flowing from that.

  1. I will look at mitigation only, so let’s assume that the $40 billion is split between mitigation and adaptation, but with emphasis on mitigation. That allows ~$10+ billion for major public works and capacity building programmes focussed on areas such as water and agriculture and $20-$30 billion in the energy system.
  2. I will assume that energy system growth and adaptation funding allows for a plateau and then gradual decline in LULUCF emissions, such that by 2050 these are below 10 MT per annum.
  3. A BAU for energy emissions only would see Kenya rising to nearly 2 tonnes per capita by 2030 (current Asia, excluding China) and 6 tonnes per capita by 2050 (approaching current Europe). This would mean extensive use of fossil fuels, but supplemented by their geothermal and hydroelectric resources in particular. This is the pathway that they might be on in the absence of this INDC.
  4. Kenya’s population rises in line with the UN mid-level scenario, i.e. to 66 million by 2030 and 97 million by 2050.

Based on the above, energy emissions could rise to some 120 Mt p.a. by 2030 and 600 Mt p.a. by 2050 under a BAU scenario. But in the INDC scenario, this could be curtailed such that they are at 70 Mt p.a. in 2030 and perhaps as low as 130 Mt p.a. in 2050, or 70-80% below BAU. The 2030 number is the more important one for this calculation as this is what the $20-$30 billion delivers, although the benefits of the investment stretch beyond 2030. However, further additional investment would be required to keep emissions at such a low level through to 2050 as energy demand grows.

The deviation from BAU is nearly 50 Mt p.a. by 2030, with that deviation starting in the early 2020s. If the gains are held through to 2050, then the cumulative emission reduction over the period is around 1 billion tonnes. On a simple 20 year project life with no discounting, that equates to around $25 per tonne of CO2 against the $20-$30 billion investment in the 2020s. On that basis, this looks like a good deal and is well within the bounds of plausibility. It could equate to a mixture of expanded renewable energy deployment, natural gas instead of coal and possibly some biofuel development for transport.

What is perhaps more interesting is how this scales up across Africa and other parts of the world where energy access is currently limited. If 1-2 billion people globally need support for similar energy infrastructure, that implies a financial requirement of about US$1 trillion over the period 2020-2030 just for mitigation (i.e. 30+ times the Kenya population of 50 million, multiplied by $US30 billion). This equates to $100 billion per annum, which is also the number that was agreed in Copenhagen in 2009 as the call on increased financial flows to developing countries, although that was for both mitigation and adaptation purposes. It also implies that if the world does reach the US$100 billion per annum goal, then most of this will be for mitigation in the least developed economies as they build their 21st century energy systems.

The flip side of this is that the emerging economies will probably have to self-fund, which argues for the implementation of a carbon price on a far wider basis than is currently envisaged. China is leading the way here, but so too are countries like Mexico and Chile.

The Kenya INDC offers some interesting insight into climate politics in the years to come.