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2010_Defiglio.pptx
- 1. 1 Co-Benefits of Climate Policies: Recent Evidence Carmen Difiglio, Ph.D. Deputy Assistant Secretary for Policy Analysis Office of Policy & International Affairs World Federation of Scientists Seminars on Planetary Emergencies Erice, 19 August, 2010
- 2. 2 Outline: Co-Benefits of Climate Policies Efficiency – Why the Free-Market is Suboptimal Cost Abatement Curves Climate Policy Models (as opposed to climate models) Overview of “450” Policy Co-Benefits IEA 2009 World Energy Outlook (WEO) IEA 2010 Energy Technology Perspectives (ETP) IIASA Research Why Co-Benefits Are Important
- 3. 3 Proposition: Energy Efficiency Government intervention to increase energy efficiency produces consumer benefits. These are direct financial benefits to consumers without consideration of the externalities of energy use. Several studies confirm that the free market provides sub-optimal levels of energy efficiency. For example:
- 4. 4 Distribution of NPV to Improve Fuel Economy 7.8 ltr/100 km to 6.7 ltr/100 km (U.S., from David Greene) Distribution of Net Present Value to Consumer of a Passenger Car Fuel Economy Increase from 28 to 35 MPG Mean = $405 X <= $2941 95% X <= -$1556 5% 0.00 0.05 0.10 0.15 0.20 0.25 -$3,000 -$1,500 $0 $1,500 $3,000 $4,500 $6,000 Relative Frequency 2005 Dollars
- 5. 5 Estimated Value to Consumer to Improve Fuel Economy (U.S., from David Greene) Price and Value of Increased Fuel Economy to Passenger Car Buyer, Using NRC Average Price Curves -$500 $0 $500 $1,000 $1,500 $2,000 $2,500 28 30 32 34 36 38 40 42 44 46 Miles per Gallon Constant 2005 $ Fuel Savings Price Increase Net Value Assumes cars driven 15,600 miles/year w hen new , decreasing at 4.5%/year, 12% discount rate, 14 year vehicle life, $1.50/gallon gasoline, 15% shortfall betw een EPA test and on-road fuel economy. Greatest net value to consumer at about 35 MPG
- 6. 6 Value of 7.8 ltr/100 km to 6.7 ltr/100 km Fuel Economy Improvement to Consumer (U.S., from David Greene) Net Present Value Distribution of Loss Averse Consumer Mean = -$32 X <= $1128 95% X <= -$1449 5% 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20 -$3,000 -$1,500 $0 $1,500 $3,000 Relative Frequency 2005 Dollars
- 7. 7 Perceived Value to a Consumer to Improve Fuel Economy (U.S., from David Greene) Price and Value of Increased Fuel Economy to Passenger Car Buyer, Using NRC Average Price Curves -$500 $0 $500 $1,000 $1,500 $2,000 $2,500 28 30 32 34 36 38 40 42 44 46 Miles per Gallon Constant 2000 $ Fuel Savings Price Increase Net Value Assumes cars driven 15,600 miles/year when new, decreasing at 4.5% /year, 12%discount rate, 14 year vehicle life, $2.00/gallon gasoline, 15%shortfall between EPA test and on-road fuel economy. Greatest net value to customer at about 30 MPG
- 8. 8 Energy Efficiency Measures do Well on CO2 Abatement Cost Curves CO2 “abatement cost curves” rank climate policy measures by cost. In addition to cost, they show how much CO2 mitigation is provided by measure. Many measures are shown with negative cost. These measures are typically energy efficiency programmes. Example: the McKinsey CO2 Abatement Cost Curve.
- 9. 9 McKinsey CO2 Abatement Cost Curve
- 10. 10 Energy Sector Climate Stabilization Policies Several models estimate the cost of reducing GHG emissions in the energy sector: – IEA Energy Technology Perspectives – IEA World Energy Model – Integrated Model to Assess the Global Environment (IMAGE) – Pacific Northwest National Laboratory MiniCAM/GCAM* – IIASA Model for Energy Supply Strategy Alternatives & their General Environmental Impact (MESSAGE) – Stanford Integrated Assessment Model for Climate Change (MERGE)* These are not climatology models. *MiniCam/GCAM & MERGE do have reduced-form climate calculations to connect emissions to stabilization scenarios. They are models that simulate the economic & technological relationship between the economy & GHG emissions. They show how energy investments respond to climate policies (cap & trade, GHG taxes, efficiency measures, etc.) to produce an energy sector that has a different relationship between energy services & GHG emissions.
- 11. 11 450 Policies Correct free market efficiency bias. Reduce energy import bills. Reduce fuel costs. Reduce “conventional” air pollution: –improves health, –increases productivity, –reduces medical costs, & –reduces environmental damage.
- 12. 12 Oil & Gas Import Bills IEA WEO, 450 ppm Scenario 0 100 200 300 400 500 600 700 2008 2030 Reference Scenario 2030 450 Scenario Billion dollars (2008) European Union China United States India Japan
- 13. 13 Incremental Investment vs. Fuel Costs Savings IEA WEO, 450 ppm Scenario 0 3 000 6 000 9 000 12 000 15 000 18 000 Incremental investment 2010- 2030 Fuel cost savings 2010-2030 Fuel cost savings over lifetime Billion dollars (2008) Transport Buildings Industry
- 14. 14 IEA WEO, 450 Scenario: Co-Benefits Summary Consumer fuel costs are $8.6 trillion lower (2010 & 2030) for an additional investment of $8.3 trillion. • Savings in transport alone account for $6.2 trillion. OECD oil imports are 6 mb/d lower in 2030 than in 2008. China & India oil imports are 10% & 15% lower, respectively, by 2030 than in the Reference Scenario. China's gas imports are 23% lower by 2030. Worldwide SO2 emissions are 29% lower than in the Reference Scenario (2030). Worldwide NOx emissions are 19% lower & emissions of particulate matter 9% lower (2030).
- 15. 15 Going to 2050: OECD and Non-OECD Primary Energy Demand IEA ETP Baseline Scenario Primary energy demand in non-OECD countries is projected to increase much faster than in OECD countries in the Baseline Scenario. 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 2007 Baseline 2015 Baseline 2030 Baseline 2050 Mtoe Non-OECD OECD
- 16. 16 Global Emissions in the Baseline and 450 (Blue) Scenarios 0 10 20 30 40 50 60 2007 2030 2050 2030 2050 Baseline BLUE Map Gt CO 2 Other Buildings Transport Industry Other transformation Power generation Global CO2 emissions double in the Baseline Scenario, but, in the Blue Scenario, abatement across all sectors reduces emissions to half of 2005 levels by 2050.
- 17. 17 Key Technologies for Reducing Global CO2 Emissions IEA ETP 450 (Blue) Scenario A wide range of technologies will be necessary to substantially reduce energy-related CO2 emissions. 0 5 10 15 20 25 30 35 40 45 50 55 60 2010 2015 2020 2025 2030 2035 2040 2045 2050 Gt CO 2 CCS 19% Renewables 17% Nuclear 6% Power generation efficiency and fuel switching 5% End-use fuel switching 15% End-use fuel and electricity efficiency 38% BLUEMap emissions 14 Gt Baseline emissions 57 Gt WEO 2009 450ppmcase ETP2010 analysis
- 18. 18 World Energy-Related CO2 Emissions Abatement by Region IEA ETP 450 (Blue) Scenario In the Blue Scenario, most of the reductions in energy- related CO2 emissions are in non-OECD countries. 5 10 15 20 25 30 35 40 45 50 55 60 2010 2015 2020 2025 2030 2035 2040 2045 2050 Gt CO 2 Other Non-OECD 19% Other OME 14% India 12% China 27% Other OECD 10% OECD Europe 7% United States 11% BLUE Mapemissions 14 Gt Baseline emissions 57 Gt ETP2010 analysis WEO 2009 450 ppm case
- 19. 19 Additional Investment Relative to the Baseline Scenario IEA ETP 450 (Blue) Scenario Over the period to 2050, most of the additional investment in low-carbon technologies will be needed in non-OECD countries. 0 100 200 300 400 500 600 700 800 2010-2030 2030-2050 2010-2030 2030-2050 2010-2030 2030-2050 2010-2030 2030-2050 OECD Other major economies Emerging economies Leastdeveloped countries USD billion / yr Buildings Transport Industry Power sector
- 20. 20 Incremental Investment and Fuel Savings Relative to the Baseline Scenario, 2010-2050 IEA ETP 450 (Blue) Scenario Even using a 10% discount rate, fuel savings in the Blue Scenario more than offset the additional investment required. -140 -120 -100 -80 -60 -40 -20 0 20 40 60 Investment Fuel savings USD trillion (2010-2050) Commercial Residential Transport Industry Power distribution Power transmission Power generation Biomass andwaste Natural gas Oil Coal Undiscounted 3% discount 10% discount Total
- 21. 21 Average Annual Electricity Capacity Additions to 2050 IEA ETP 450 (Blue) Scenario Annual rates of investment in many low-carbon technologies must be massively increased from today’s levels. 0 10 20 30 40 50 SolarCSP SolarPV Geothermal Wind-offshore Wind-onshore Biomass plants Hydro Nuclear Gas-firedwithCCS Coal-firedwithCCS GW/ yr Present rate Gaptoreach BLUE Map 30 plants (1 000 MW) 200 plants (50 MW) 12 000 turbines (4 MW) 3 600 turbines (4 MW) 45 units (100 MW) 55 CSP plants (250 MW) 325 millionm2 solar panels 2/3 of Three Gorges Dam 35 plants (500 MW) 20 plants (500 MW) Historical high
- 22. 22 Environmental Co-Benefits of Electricity Power Technologies IEA ETP 450 (Blue) Scenario Clean energy technologies have positive environmental co-impacts. Air Water Land Air Water Land Coal - USC 0.777 Coal - Biomass Positive Positive Variable / Uncertain Variable / Uncertain Minimal Minimal 0.622 Coal - CCS Negative Negative Negative Variable / Uncertain Negative Minimal 0.142 Coal - IGCC Minimal Variable / Uncertain Minimal Positive Positive Minimal 0.708 NGCC Positive Positive Positive Positive Positive Positive 0.403 Nuclear Positive Variable / Uncertain Variable / Uncertain Positive Negative Positive 0.005 Solar - CSP Positive Positive Positive Positive Negative Minimal 0.017 Solar - PV Positive Positive Positive Positive Positive Minimal 0.009 Wind Positive Positive Positive Positive Positive Variable / Uncertain 0.002 CO2 Emissions t/MWh Energy Technologies Baseline Technology for Relative Assessments Below Life Cycle Impacts (Pre- and Post-Generation) Power Generation Impacts
- 23. 23 IIASA Analysis: Fighting Climate & Air Pollution Together
- 24. 24 Why Co-Benefits Are Important The progress on a post-Kyoto climate treaty is less than had been hoped. It is politically difficult to ask people to take action now to avoid climate problems that seem far in the future. Some less-developed countries question why they should incur costs to avoid consequences of high GHG concentrations when the developed countries were responsible for doubling them since the pre-industrial age. Recognition of co-benefits could get countries started on climate policies because they provide economic benefits & reduce “conventional” pollution.