1<!DOCTYPE html> 2<html lang="en"> 3 <head> 4 <meta charset="utf-8"> 5 <meta name="description" content="We measure the gains from phasing out coal as the average social cost of carbon times the quantity of avoided emissions. By comparing the present value of benefits from avoided emissions against the present value of costs of ending coal and replacing it with renewables, our conservative baseline estimate is that the world can realize a net gain of $85 trillion."> 6 <link href="https://cdn.jsdelivr.net/npm/[email protected]/dist/css/bootstrap.min.css" rel="stylesheet" integrity="sha384-1BmE4kWBq78iYhFldvKuhfTAU6auU8tT94WrHftjDbrCEXSU1oBoqyl2QvZ6jIW3" crossorigin="anonymous"> 7 <title>The Great Carbon Arbitrage</title> 8 <link rel="stylesheet" type="text/css" href="public/style.css"> 9 </head> 10 <body class="text-responsive"> 11 <div class="container"> 12 <header class="d-flex flex-wrap justify-content-center py-3 mb-4 navbar navbar-light bg-light"><a class="d-flex align-items-center mb-3 mb-md-0 me-md-auto text-decoration-none ms-3" href="/"><span class="fs-4 navbar-brand">The Great Carbon Arbitrage</span></a> 13 <!-- This is GDPR-compliant--> 14 <!-- script(async defer src="https://beampipe.io/js/tracker.js" data-beampipe-domain="greatcarbonarbitrage.com")--> 15 <!-- The following has unlimited events--> 16 <!--script(data-host="https://microanalytics.io" data-dnt="false" src="https://microanalytics.io/js/script.js" id="ZwSg9rf6GA" async defer)--> 17 <ul class="nav nav-text"> 18 <li class="nav-item"><a class="nav-link active" href="index.html">Carbon Arbitrage</a></li> 19 <li class="nav-item"> 20 <div class="dropdown"><a class="nav-link active dropdown-toggle" href="#" role="button" data-bs-toggle="dropdown" aria-expanded="false" id="ClimateFinancingDropdown">Climate Financing</a> 21 <ul class="dropdown-menu" aria-labelledby="ClimateFinancingDropdown"> 22 <li><a class="dropdown-item" href="climate_financing_map.html">Country</a></li> 23 <li><a class="dropdown-item" href="climate_financing.html">Regional</a></li> 24 <li><a class="dropdown-item" href="climate_financing_yearly.html">Annual</a></li> 25 </ul> 26 </div> 27 </li> 28 <li class="nav-item"> 29 <div class="dropdown"><a class="nav-link active dropdown-toggle" href="#" role="button" data-bs-toggle="dropdown" aria-expanded="false" id="OpportunityCostsDropdown">Opportunity Costs</a> 30 <ul class="dropdown-menu" aria-labelledby="OpportunityCostsDropdown"> 31 <li><a class="dropdown-item" href="opportunity_costs_map.html">Country</a></li> 32 <li><a class="dropdown-item" href="opportunity_costs.html">Global</a></li> 33 </ul> 34 </div> 35 </li> 36 <li class="nav-item"> 37 <div class="dropdown"><a class="nav-link active dropdown-toggle" href="#" role="button" data-bs-toggle="dropdown" aria-expanded="false" id="CoasianBargainDropdown">Coasian Bargain</a> 38 <ul class="dropdown-menu" aria-labelledby="CoasianBargainDropdown"> 39 <li><a class="dropdown-item" href="coasian_bargain_global.html">Global deal</a></li> 40 <li><a class="dropdown-item" href="coasian_bargain_regional.html">Regional deal</a></li> 41 <li><a class="dropdown-item" href="coasian_bargain_country.html">Country deal</a></li> 42 </ul> 43 </div> 44 </li> 45 <li class="nav-item"> 46 <div class="dropdown"><a class="nav-link active dropdown-toggle" href="#" role="button" data-bs-toggle="dropdown" aria-expanded="false" id="paperDropdown">Paper</a> 47 <ul class="dropdown-menu" aria-labelledby="paperDropdown"> 48 <li><a class="dropdown-item" href="https://cepr.org/publications/dp17654">CEPR</a></li> 49 <li><a class="dropdown-item" href="https://www.imf.org/en/Publications/WP/Issues/2022/05/31/The-Great-Carbon-Arbitrage-518464">IMF</a></li> 50 </ul> 51 </div> 52 </li> 53 <li class="nav-item"><a class="nav-link active" href="https://github.com/ox-inet-resil
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61 62 <div class="p-5" style="width: 80%; margin:0 auto"> 63 <p style="text-align: center"><em> 64 We measure the gains from phasing out coal as the average social 65 cost of carbon times the quantity of avoided emissions. By comparing 66 the present value of benefits from avoided emissions against the 67 present value of costs of ending coal and replacing it with renewables, 68 our conservative baseline estimate is that the world can realize a net 69 gain of $85 trillion. This global net social benefit can be attained 70 through an international agreement to phase out coal. We also explore 71 how this net benefit is distributed across countries and find that most 72 countries would benefit from a global coal phase-out even without any 73 compensatory cross-country transfers. Finally, we estimate the size of 74 public funds that must be committed under a blended finance arrangement 75 to finance the cost of replacing coal with renewables.</em></p> 76 <p> 77 The main result of the paper can be explored in this page. 78 Additionally, you can explore the climate financing needed to phase 79 out coal by <a href="climate_financing_map.html">country</a> 80 or <a href="climate_financing.html">region</a>, or as an <a href="climate_financing_yearly.html">annual timeseries</a>. Feel free to pick your own parameters to generate the results (the 81 parameters are set to the baseline settings of the paper by default). 82 </p> 83 <p>To get an overview of how the numbers are calculated, you may read the brief <a href="https://github.com/ox-inet-resilience/carbon_arbitrage_code/blob/main/public/back_of_the_envelope.py">back-of-the envelope calculation</a> 84 of the cost and benefit using only public data from IEA, NGFS, and Our World in Data. 85 </p> 86 </div> 87 <div class="d-flex flex-column flex-lg-row justify-content-center"> 88 <!-- Input--> 89 <div class="d-flex flex-wrap py-3 mb-4 mx-auto me-lg-3 px-3"> 90 <div class="flex-column"> 91 <div class="flex-row"> 92 <label class="form-label" for="social-cost-of-carbon">Social cost of carbon<span class="text-success" data-bs-toggle="tooltip" data-bs-placement="top" title="The social cost of carbon is an estimate of the economic costs, or damages, of emitting one additional ton of carbon dioxide into the atmosphere, and thus the benefits of reducing emissions."> 93 <!-- The vertical-align: -0.125em is necessary. See https://github.com/twbs/icons/issues/82--> 94 <svg class="bi bi-info-circle" xmlns="http://www.w3.org/2000/svg" width="16" height="16" fill="currentColor" viewBox="0 0 16 16" style="vertical-align: -0.125em"> 95 <path d="M8 15A7 7 0 1 1 8 1a7 7 0 0 1 0 14zm0 1A8 8 0 1 0 8 0a8 8 0 0 0 0 16z"></path> 96 <path d="m8.93 6.588-2.29.287-.082.38.45.083c.294.07.352.176.288.469l-.738 3.468c-.194.897.105 1.319.808 1.319.545 0 1.178-.252 1.465-.598l.088-.416c-.2.176-.492.246-.686.246-.275 0-.375-.193-.304-.533L8.93 6.588zM9 4.5a1 1 0 1 1-2 0 1 1 0 0 1 2 0z"></path> 97 </svg></span> 98 </label> 99 <!-- https://stackoverflow.com/questions/10004723/html5-input-type-range-show-range-value--> 100 <input class="form-range w-80" id="social-cost-of-carbon" type="range" min="20" max="300" step="20" value="80" oninput="this.nextElementSibling.value = this.value; calculate()"> 101 <output>80</output> USD/tCO<sub>2</sub> 102 </div> 103 <label class="form-label" for="time-horizon">Time horizon of carbon arbitrage<span class="text-success" data-bs-toggle="tooltip" data-bs-placement="top" title="The last year in which costs are made to phase out coal."> 104 <!-- The vertical-align: -0.125em is necessary. See https://github.com/twbs/icons/issues/82--> 105 <svg class="bi bi-info-circle" xmlns="http://www.w3.org/2000/svg" width="16" height="16" fill="currentColor" viewBox="0 0 16 16" style="vertical-align: -0.125em"> 106 <path d="M8 15A7 7 0 1 1 8 1a7 7 0 0 1 0 14zm0 1A8 8 0 1 0 8 0a8 8 0 0 0 0 16z"></path> 107 <path d="m8.93 6.588-2.29.287-.082.38.45.083c.294.07.352.176.288.469l-.738 3.468c-.194.897.105 1.319.808 1.319.545 0 1.178-.252 1.465-.598l.088-.416c-.2.176-.492.246-.686.246-.275 0-.375-.193-.304-.533L8.93 6.588zM9 4.5a1 1 0 1 1-2 0 1 1 0 0 1 2 0z"></path> 108 </svg></span> 109 </label> 110 <select class="form-select w-80 mb-2" id="time-horizon" onchange="calculate()"> 111 <option>2030</option> 112 <option>2050</option> 113 <option>2070</option> 114 <option selected>
1142100</option> 115 </select> 116 <label class="form-label" for="phaseout-scenario">Coal phase out scenario<span class="text-success" data-bs-toggle="tooltip" data-bs-placement="top" title="The pathway according to which coal is phased out. âNet Zero 2050 (NGFS global scenario)â uses a pathway developed by the Network for Greening the Financial System (NGFS) to phase out coal in line with the net zero 2050 ambitions."> 117 <!-- The vertical-align: -0.125em is necessary. See https://github.com/twbs/icons/issues/82--> 118 <svg class="bi bi-info-circle" xmlns="http://www.w3.org/2000/svg" width="16" height="16" fill="currentColor" viewBox="0 0 16 16" style="vertical-align: -0.125em"> 119 <path d="M8 15A7 7 0 1 1 8 1a7 7 0 0 1 0 14zm0 1A8 8 0 1 0 8 0a8 8 0 0 0 0 16z"></path> 120 <path d="m8.93 6.588-2.29.287-.082.38.45.083c.294.07.352.176.288.469l-.738 3.468c-.194.897.105 1.319.808 1.319.545 0 1.178-.252 1.465-.598l.088-.416c-.2.176-.492.246-.686.246-.275 0-.375-.193-.304-.533L8.93 6.588zM9 4.5a1 1 0 1 1-2 0 1 1 0 0 1 2 0z"></path> 121 </svg></span> 122 </label> 123 <select class="form-select w-80 mb-2" id="phaseout-scenario" onchange="calculate()"> 124 <option selected>Net Zero 2050 (NGFS global scenario)</option> 125 </select> 126 <label class="form-label" for="coal-replacement">Coal replacement<span class="text-success" data-bs-toggle="tooltip" data-bs-placement="top" title="The mixture of replacement energy with which phased out coal is replaced."> 127 <!-- The vertical-align: -0.125em is necessary. See https://github.com/twbs/icons/issues/82--> 128 <svg class="bi bi-info-circle" xmlns="http://www.w3.org/2000/svg" width="16" height="16" fill="currentColor" viewBox="0 0 16 16" style="vertical-align: -0.125em"> 129 <path d="M8 15A7 7 0 1 1 8 1a7 7 0 0 1 0 14zm0 1A8 8 0 1 0 8 0a8 8 0 0 0 0 16z"></path> 130 <path d="m8.93 6.588-2.29.287-.082.38.45.083c.294.07.352.176.288.469l-.738 3.468c-.194.897.105 1.319.808 1.319.545 0 1.178-.252 1.465-.598l.088-.416c-.2.176-.492.246-.686.246-.275 0-.375-.193-.304-.533L8.93 6.588zM9 4.5a1 1 0 1 1-2 0 1 1 0 0 1 2 0z"></path> 131 </svg></span> 132 </label> 133 <select class="form-select w-80 mb-2" id="coal-replacement" onchange="calculate()"> 134 <option value="100% solar, 0% wind">100% solar, 0% wind</option> 135 <option value="56% solar, 42% wind onshore, 2% wind offshore">56% solar, 44% wind (42% onshore, 2% offshore)</option> 136 <option selected value="50% solar, 25% wind onshore, 25% wind offshore">50% solar, 50% wind (25% onshore, 25% offshore)</option> 137 <option value="0% solar, 100% wind onshore, 0% wind offshore">0% solar, 100% wind (100% onshore, 0% offshore)</option> 138 <option value="0% solar, 0% wind onshore, 100% wind offshore">0% solar, 100% wind (0% onshore, 100% offshore)</option> 139 </select> 140 <label class="form-label" for="lifetime-renewable-plants">Lifetime of renewable plants 141 </label> 142 <select class="form-select w-80 mb-2" id="lifetime-renewable-plants" onchange="calculate()"> 143 <option selected>30 years</option> 144 <option>50 years</option> 145 </select> 146 <label class="form-label" for="learning-curve">Investment costs fall - learning curve<span class="text-success" data-bs-toggle="tooltip" data-bs-placement="top" title="The costs of renewables have fallen sharply over the last decades because of learning-by-doing. The drop-down âlearningâ means that we capture the drop in investment costs in renewables resulting from learning of earlier built renewables to replace coal. The drop-down âno learningâ represents a benchmark where no learning-by-doing effects take place and future investment costs do not further fall."> 147 <!-- The vertical-align: -0.125em is necessary. See https://github.com/twbs/icons/issues/82--> 148 <svg class="bi bi-info-circle" xmlns="http://www.w3.org/2000/svg" width="16" height="16" fill="currentColor" viewBox="0 0 16 16" style="vertical-align: -0.125em"> 149 <path d="M8 15A7 7 0 1 1 8 1a7 7 0 0 1 0 14zm0 1A8 8 0 1 0 8 0a8 8 0 0 0 0 16z"></path> 150 <path d="m8.93 6.588-2.29.287-.082.38.45.083c.294.07.352.176.288.469l-.738 3.468c-.194.897.105 1.319.808 1.319.545 0 1.178-.252 1.465-.598l.088-.416c-.2.176-.492.246-.686.246-.275 0-.375-.193-.304-.533L8.93 6.588zM9 4.5a1 1 0 1 1-2 0 1 1 0 0 1 2 0z"></path> 151 </svg></span> 152 </label> 153 <select class="form-select w-80 mb-2" id="learning-curve" onchange="calculate()"> 154 <option selected>Learning (investment cost drop because of learning)</option> 155 <option>No learning (no investment cost drop)</option> 156 </select> 157 <label class="form-label" for="discount-rate">Discount rate Ï<span class="text-success" data-bs-toggle="tooltip" data-bs-placement="top" title="The discount rate is used to obtain the present value of costs of phasing out coal over 2024 to the horizon. WACC stands for the weighted average costs of capital."> 158 <!-- The vertical-align: -0.125em is necessary. See https://github.com/twbs/icons/issues/82--> 159 <svg class="bi bi-info-circle" xmlns="http://www.w3.org/2000/svg" width="16" height="16" fill="currentColor" viewBox="0 0 16 16" style="vertical-align: -0.125em"> 160 <path d="M8 15A7 7 0 1 1 8 1a7 7 0 0 1 0 14zm0 1A8 8 0 1 0 8 0a8 8 0 0 0 0 16z"></path> 161 <path d="m8.93 6.588-2.29.287-.082.38.45.083c.294.07.352.176.288.469l-.738 3.468c-.194.897.105 1.319.808 1.319.545 0 1.178-.252 1.465-.598l.088-.416c-.2.176-.492.246-.686.246-.275 0-.375-.193-.304-.533L8.93 6.588zM9 4.5a1 1 0 1 1-2 0 1 1 0 0 1 2 0z"></path> 162 </svg></span> 163 </label> 164 <select class="form-select w-80 mb-2" id="discount-rate" onchange="calculate()"> 165 <option>0%</option> 166 <option selected>2.8% (WACC)</option> 167 <option>3.6% (WACC, average risk-premium 100 years)</option> 168 <option>5%</option> 169 <option>8%</option> 170 </select> 171 <label class="form-label" for="energy-storage">Investment costs in energy storage 172 </label> 173 <select class="form-select w-80 mb-2" id="energy-storage" onchange="calculate()"> 174 <option selected>Not included</option> 175 <option>Short-term storage</option> 176 <option>Short-term + long-term storage</option> 177 </select> 178 </div> 179 </div> 180 <!-- Output--> 181 <div class="mx-auto ms-lg-3 px-3" style="width:700px"> 182 <h4>Result</h4> 183 <table class="table table-hover"> 184 <tr> 185 <td>Present value of benefits of phasing out coal (in trillion dollars)</td> 186 <td> 187 <output id="pv-benefits">114.04</output> 188 </td> 189 </tr> 190 <tr> 191 <td>Present value of costs of phasing out coal (in trillion dollars)<s
191pan class="text-success" data-bs-toggle="tooltip" data-bs-placement="top" title="Consists of the opportunity costs of coal and investment costs in replacement (renewable) energy."> 192 <!-- The vertical-align: -0.125em is necessary. See https://github.com/twbs/icons/issues/82--> 193 <svg class="bi bi-info-circle" xmlns="http://www.w3.org/2000/svg" width="16" height="16" fill="currentColor" viewBox="0 0 16 16" style="vertical-align: -0.125em"> 194 <path d="M8 15A7 7 0 1 1 8 1a7 7 0 0 1 0 14zm0 1A8 8 0 1 0 8 0a8 8 0 0 0 0 16z"></path> 195 <path d="m8.93 6.588-2.29.287-.082.38.45.083c.294.07.352.176.288.469l-.738 3.468c-.194.897.105 1.319.808 1.319.545 0 1.178-.252 1.465-.598l.088-.416c-.2.176-.492.246-.686.246-.275 0-.375-.193-.304-.533L8.93 6.588zM9 4.5a1 1 0 1 1-2 0 1 1 0 0 1 2 0z"></path> 196 </svg></span> 197 </td> 198 <td> 199 <output id="pv-costs">29.03</output> 200 </td> 201 </tr> 202 <tr> 203 <td> 204 205 Opportunity costs (in trillion dollars)<span class="text-success" data-bs-toggle="tooltip" data-bs-placement="top" title="Present value of missed free cash flows of coal
205companies resulting from phasing out coal."> 206 <!-- The vertical-align: -0.125em is necessary. See https://github.com/twbs/icons/issues/82--> 207 <svg class="bi bi-info-circle" xmlns="http://www.w3.org/2000/svg" width="16" height="16" fill="currentColor" viewBox="0 0 16 16" style="vertical-align: -0.125em"> 208 <path d="M8 15A7 7 0 1 1 8 1a7 7 0 0 1 0 14zm0 1A8 8 0 1 0 8 0a8 8 0 0 0 0 16z"></path> 209 <path d="m8.93 6.588-2.29.287-.082.38.45.083c.294.07.352.176.288.469l-.738 3.468c-.194.897.105 1.319.808 1.319.545 0 1.178-.252 1.465-.598l.088-.416c-.2.176-.492.246-.686.246-.275 0-.375-.193-.304-.533L8.93 6.588zM9 4.5a1 1 0 1 1-2 0 1 1 0 0 1 2 0z"></path> 210 </svg></span> 211 </td> 212 <td> 213 <output id="opportunity-costs">0.05</output> 214 </td> 215 </tr> 216 <tr> 217 <td> 218 219 Investment costs (in trillion dollars) 220 </td> 221 <td> 222 <output id="investment-costs">28.98</output> 223 </td> 224 </tr> 225 <tr class="table-success"> 226 <td>Carbon arbitrage (in trillion dollars)<span class="text-success" data-bs-toggle="tooltip" data-bs-placement="top" title="Difference between present value of benefits and costs of phasing out coal."> 227 <!-- The vertical-align: -0.125em is necessary. See https://github.com/twbs/icons/issues/82--> 228 <svg class="bi bi-info-circle" xmlns="http://www.w3.org/2000/svg" width="16" height="16" fill="currentColor" viewBox="0 0 16 16" style="vertical-align: -0.125em"> 229 <path d="M8 15A7 7 0 1 1 8 1a7 7 0 0 1 0 14zm0 1A8 8 0 1 0 8 0a8 8 0 0 0 0 16z"></path> 230 <path d="m8.93 6.588-2.29.287-.082.38.45.083c.294.07.352.176.288.469l-.738 3.468c-.194.897.105 1.319.808 1.319.545 0 1.178-.252 1.465-.598l.088-.416c-.2.176-.492.246-.686.246-.275 0-.375-.193-.304-.533L8.93 6.588zM9 4.5a1 1 0 1 1-2 0 1 1 0 0 1 2 0z"></path> 231 </svg></span> 232 </td> 233 <td> 234 <output id="carbon-arbitrage">85.01</output> 235 </td> 236 </tr> 237 <tr class="table-success"> 238 <td>Carbon arbitrage relative to world GDP<span class="text-success" data-bs-toggle="tooltip" data-bs-placement="top" title="Carbon arbitrage relative to GDP every year from t+2 until time T, where t+2=2024 and T=time horizon of carbon arbitrage."> 239 <!-- The vertical-align: -0.125em is necessary. See https://github.com/twbs/icons/issues/82--> 240 <svg class="bi bi-info-circle" xmlns="http://www.w3.org/2000/svg" width="16" height="16" fill="currentColor" viewBox="0 0 16 16" style="vertical-align: -0.125em"> 241 <path d="M8 15A7 7 0 1 1 8 1a7 7 0 0 1 0 14zm0 1A8 8 0 1 0 8 0a8 8 0 0 0 0 16z"></path> 242 <path d="m8.93 6.588-2.29.287-.082.38.45.083c.294.07.352.176.288.469l-.738 3.468c-.194.897.105 1.319.808 1.319.545 0 1.178-.252 1.465-.598l.088-.416c-.2.176-.492.246-.686.246-.275 0-.375-.193-.304-.533L8.93 6.588zM9 4.5a1 1 0 1 1-2 0 1 1 0 0 1 2 0z"></path> 243 </svg></span> 244 </td> 245 <td> 246 <output id="carbon-arbitrage-relative-gdp">1.3 %</output> 247 </td> 248 </tr> 249 <tr class="table-success"> 250 <td>Carbon arbitrage (in dollars) per tonne of coal production</td> 251 <td> 252 <output id="carbon-arbitrage-per-tcoal">136</output> 253 </td> 254 </tr> 255 <tr class="table-success"> 256 <td>Carbon arbitrage (in dollars) per tCO<sub>2</sub></td> 257 <td> 258 <output id="carbon-arbitrage-per-tco2">60</output> 259 </td> 260 </tr> 261 <tr> 262 <td>Total coal production prevented (Giga Tonnes)</td> 263 <td> 264 <output id="coal-production-prevented">623.62</output> 265 </td> 266 </tr> 267 <tr> 268 <td>Total emissions prevented (GtCO<sub>2</sub>)</td> 269 <td> 270 <output id="emissions-prevented">1425.55</output> 271 </td> 272 </tr> 273 <tr> 274 <td>Further temperature increase — on top of 1.1 ℃<br>already observed — prevented</td> 275 <td> 276 <output id="temperature-increase">2.14</output> 277 </td> 278 </tr> 279 </table> 280 </div> 281 </div> 282 <!--include includes/footer.pug--> 283
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