Kaya Identity and climate change

Sustainable development is part of the CIE A2 Economic Syllabus and greenhouse emissions are significant barrier in trying to achieve specific goals. Sustainable Development Goals (SDG) requires a collective agreement and to advance towards a society which is more respectful of the environment, whilst at the same time working towards economic growth and sustainable development.
Kaya identity tries to explain the relationship between four factors:

  • Global carbon dioxide emissions, in carbon dioxide (CO2);
  • Global primary energy consumption, in Ton of Oil Equivalent (TOE);
  • GDP, in dollars ($);
  • Global population, in billions.

In other words global CO2 emissions from a human source = global population x quality of life x energy intensity x intensity of carbon in the energy mix. See the formula below:

GDP/Per Capita: represents the total value of output in an economy divided by the population
Energy/GDP: represents the energy intensity, i.e. the amount of energy used (in kWh) necessary to create a monetary unit, meaning to manufacture a product or provide a service. This intends to encourage us to rationalise our use of energy.
CO2/energy: represents the intensity of carbon in the global energy mix. This relationship demands a reduction in CO2 emissions in the production of energy, in particular through the promotion of energies low in carbon, such as renewable energy.

The focus from government and the private sector in reducing climate change has been on two of the four factors: Global carbon dioxide emissions, in carbon dioxide (CO2) and Global primary energy consumption, in Ton of Oil Equivalent (TOE). However should there be more emphasis on the other two: GDP and Global population? GDP can be influenced by government policy but there are political dangers if going down this avenue. Firstly by reducing growth you may limit the creation of jobs and the advancement of economies. Secondly developing economies depend on the demand from developed world to drive them out of poverty. Limiting population growth is not a policy that government’s can respectably push towards. Ultimately the global economy needs more than a power source without emissions but investment and innovation which can reverse the damage that emissions have already done. Below is an informative video on carbon markets from The Economist.

EU ETS – an oversupply of permits

The EU’s Emissions Trading Scheme has displayed an oversupply of carbon permits. In March this year the price of carbon permits plummeted to a record low after data suggested that Europe had produced a smaller amount of polluting emissions last year than had been thought. Below is quite an informative video explaining how the system works.