3.3.3 How to define substitution among gases
In multi-gas studies, a method is needed to compare different greenhouse gases with different atmospheric lifetimes and radiative properties. Ideally, the method would allow for substitution between gases in order to achieve mitigation cost reductions, although it may not be suitable to ensure equivalence in measuring climate impact. Fuglestvedt et al. (2003) provide a comprehensive overview of the different methods that have been proposed, along with their advantages and disadvantages. One of these methods, CO2-eq emissions based on Global Warming Potentials (GWP), has been adopted by current climate policies, such as the Kyoto Protocol and the US climate policy (White House, 2002). Despite the continuing scientific and economic debate on the use of GWPs (i.e. they are not based on economic considerations and use an arbitrary time horizon) the concept is in use under the UNFCCC, the Kyoto Protocol, and the US climate policy. In addition, no alternative measure has attained comparable status to date.
Useful overviews of the mitigation and economic implication of substitution metrics are provided by Bradford (2001) and Godal (2003). Models that use inter-temporal optimization can avoid the use of substitution metrics (such as GWPs) by optimizing the reductions of all gases simultaneously under a chosen climate target. Inter-temporal optimization or perfect foresight models assume that economic agents know future prices and make decisions to minimize costs. Manne and Richels (2001) show, using their model, that using GWPs as the basis of substitution did not lead to the cost-optimal path (minimizing welfare losses) for the long-term targets analyzed. In particular, reducing methane early had no benefit for reaching the long-term target, given its short lifespan in the atmosphere. In the recent EMF-21 study some models validated this result (see De la Chesnaye and Weyant, 2006). Figure 3.15 shows the projected EMF-21 CO2, CH4, N2O, and F-gas reductions across models stabilizing radiative forcing at 4.5 W/m2. Most of the EMF-21 models based substitution between gases on GWPs. However, three models substituted gases on the basis of inter-temporal optimization. While (for most of the gases) there are no systematic differences between the results from the two groups, for methane and some F-gases (not shown), there are clear differences related to the very different lifespans of these gases. The models that do not use GWPs, do not substantially reduce CH4 until the end of the time horizon. However, for models using GWPs, the reduction of CH4 emissions in the first three decades is substantial: here, CH4 reductions become a cost-effective short-term abatement strategy, despite the short lifespan (Van Vuuren et al., 2006b). It should be noted that if a short-term climate target is selected (e.g. rate of temperature change) then inter-temporal optimization models would also favour early methane reductions.
Figure 3.15: Reduction of emissions in the stabilization strategies aiming for stabilization at 4.5 W/m2 (multi-gas strategies) in EMF-21.
While GWPs do not necessarily lead to the most cost-effective stabilization solution (given a long-term target), they can still be a practical choice: in real-life policies an exchange metric is needed to facilitate emissions trading between gases within a specified time period. Allowing such exchanges creates the opportunity for cost savings through ‘what and where flexibility’. It is appropriate to ask what are the costs of using GWPs versus not using them and whether other ‘real world’ metrics exist that could perform better. O’Neill (2003) and Johansson et al. (2006) have argued that the disadvantages of GWPs are likely to be outweighed by the advantages, by showing that the cost difference between a multi-gas strategy and a CO2-only strategy is much larger than the difference between a GWP-based multi-gas strategy and a cost-optimal strategy. Aaheim et al. (2006) found that the cost of using GWPs compared to optimal weights, depends on the ambition of climate policies. Postponing the early CH4 reductions of the GWP-based strategy, as is suggested by inter-temporal optimization, generally leads to larger temperature increases during the 2000–2020 period. This is because the increased reduction of CO2 from the energy sector also leads to reduction of sulphur emissions (hence the cooling associated with sulphur-based aerosols) but allows the potential to be used later in the century.