Robust MACCs? The topography of abatement by fuel switching in the European power sector

This paper employs a simulation model of the European power sector to analyze the abatement response to a CO₂ price through fuel switching, one of principal means of reducing greenhouse gas emissions in any economy. Abatement is shown to depend not only on the price of allowances, but also and more importantly on the load level of the system and the ratio between natural gas and coal prices. The interplay of these different determinants vitiates any simple relation between a CO₂ price and abatement and requires the development of more than two-dimensional graphics to illustrate these complex relationships. In the terms of the literature on the use of marginal abatement cost curves (MACCs), we find that these MACCs are not robust as usually defined and we suggest that the more complex topography developed in this paper may be more helpful in visualizing this abatement response to a CO₂ price.     

Uncertainty quantification of CO2 emission reduction for maritime shipping

The International Maritime Organization (IMO) has recently proposed several operational and technical measures to improve shipping efficiency and reduce the greenhouse gases (GHG) emissions. The abatement potentials estimated for these measures have been further used by many organizations to project future GHG emission reductions and plot Marginal Abatement Cost Curves (MACC). However, the abatement potentials estimated for many of these measures can be highly uncertain as many of these measures are new, with limited sea trial information. Furthermore, the abatements obtained are highly dependent on ocean conditions, trading routes and sailing patterns. When the estimated abatement potentials are used for projections, these ‘input’ uncertainties are often not clearly displayed or accounted for, which can lead to overly optimistic or pessimistic outlooks. In this paper, we propose a methodology to systematically quantify and account for these input uncertainties on the overall abatement potential forecasts. We further propose improvements to MACCs to better reflect the uncertainties in marginal abatement costs and total emissions. This approach provides a fuller and more accurate picture of abatement forecasts and potential reductions achievable, and will be useful to policy makers and decision makers in the shipping industry to better assess the cost effective measures for CO₂ emission reduction.     

Supply- and demand-side effects of power sector planning with CO2 mitigation constraints in a developing country

In this paper, the implications of CO₂ emission mitigation constraints in the power sector planning in Indonesia are examined using a long term integrated resource planning model. An approach is developed to assess the contributions of supply- and demand-side effects to the changes in CO₂, SO₂ and NO_x emissions from the power sector due to constraints on CO₂ emissions. The results show that while both supply- and demand-side effects would act towards the reduction of CO₂, SO₂ and NO_x emissions, the supply-side options would play the dominant role in emission mitigations from the power sector in Indonesia. The CO₂ abatement cost would increase from US$7.8 to US$9.4 per ton of CO₂, while the electricity price would increase by 3.1 to 19.8% if the annual CO₂ emission reduction target is raised from 10 to 25%.     

Valuation of marginal CO2 abatement options for electric power plants in Korea

The electricity generation sector in Korea is under pressure to mitigate greenhouse gases as directed by the Kyoto Protocol. The principal compliance options for power companies under the cap-and-trade include the application of direct CO₂ emission abatement and the procurement of emission allowances. The objective of this paper is to provide an analytical framework for assessing the cost-effectiveness of these options. We attempt to derive the marginal abatement cost for CO₂ using the output distance function and analyze the relative advantages of emission allowance procurement option as compared to direct abatement option. Real-option approach is adopted to incorporate emission allowance price uncertainty. Empirical result shows the marginal abatement cost with an average of €14.04/ton CO₂ for fossil-fueled power plants and confirms the existence of substantial cost heterogeneity among plants which is sufficient to achieve trading gains in allowance market. The comparison of two options enables us to identify the optimal position of the compliance for each plant. Sensitivity analyses are also presented with regard to several key parameters including the initial allowance prices and interest rate. The result of this paper may help Korean power plants to prepare for upcoming regulations targeted toward the reduction of domestic greenhouse gases.     

Impact of international climate policies on CO2 capture and storage deployment: Illustrated in the Dutch energy system

A greenhouse gas emission trading system is considered an important policy measure for the deployment of CCS at large scale. However, more insights are needed whether such a trading system leads to a sufficient high CO₂ price and stable investment environment for CCS deployment. To gain more insights, we combined WorldScan, an applied general equilibrium model for global policy analysis, and MARKAL-NL-UU, a techno-economic energy bottom-up model of the Dutch power generation sector and CO₂ intensive industry. WorldScan results show that in 2020, CO₂ prices may vary between 20 €/tCO₂ in a Grand Coalition scenario, in which all countries accept greenhouse gas targets from 2020, to 47 €/tCO₂ in an Impasse scenario, in which EU-27 continues its one-sided emission trading system without the possibility to use the Clean Development Mechanism. MARKAL-NL-UU model results show that an emission trading system in combination with uncertainty does not advance the application of CCS in an early stage, the rates at which different CO₂ abatement technologies (including CCS) develop are less crucial for introduction of CCS than the CO₂ price development, and the combination of biomass (co-)firing and CCS seems an important option to realise deep CO₂ emission reductions.     

Supply- and demand-side effects of power sector planning with demand-side management options and SO2 emission constraints

This paper examines the implications of SO₂ emission mitigation constraints in the power sector planning in Indonesia—a developing country—during 2003–2017 from a long term integrated resource planning perspective. A decomposition model is developed to assess the contributions of supply- and demand-side effects to the total changes in CO₂, SO₂ and NO_x emissions from the power sector due to constraints on SO₂ emissions. The results of the study show that both the supply- and demand-side effects would act towards the reduction of CO₂, SO₂ and NO_x emissions. However, the supply-side effect would play the dominant role in emission mitigations from the power sector in Indonesia. The average incremental SO₂ abatement cost would increase from US$ 970 to US$ 1271 per ton of SO₂, while electricity price would increase by 2–18% if the annual SO₂ emission reduction target is increased from 10% to 25%.     

Carbon mitigation in the electric power sector under cap-and-trade and renewables policies

In Europe, CO₂ emissions from the electric power sector and energy intensive industries are capped under a cap-and-trade system (i.e., the EU ETS). When other indirect measures are taken to impact emissions in a specific sector under the cap (such as a push for renewables in the electric power sector), this has implications on the overall allowance price, and on CO₂ emissions both from this specific sector and the other sectors under the cap. The central contribution of this paper is the derivation of impact curves, which describe these interactions, i.e., the impact on allowance price and the shift of emissions across sectors. From a set of detailed simulations of the electric power system operation, a so-called “emission plane” is obtained, from which impact curves can be derived. Focus is on interactions between CO₂ abatement through fuel switching and measures affecting the residual electricity demand (such as deployment of renewables) in the electric power sector, as well as on interactions with other sectors, both in a short-term framework. A case study for Central-Western Europe is presented. The analysis reveals a substantial impact of renewables on CO₂ emissions, and hence on emissions shifts across sectors and/or on the CO₂ price.     

Directed technical change and differentiation of climate policy

This paper studies the cost effectiveness of climate policy if there are technology externalities. For this purpose, we develop a forward looking model that captures empirical links between CO₂ emissions associated with energy use, directed technical change and the economy. We find our most cost effective climate policy to include a combination of R&D subsidies and CO₂ emission constraints, although R&D subsidies raise the shadow value of the CO₂ constraint (i.e. CO₂ price) because of a strong rebound effect from stimulating innovation. Furthermore, we find that cost effectiveness of climate policy improves if it is differentiated between technologies. Even our rudimentary distinction between CO₂ intensive technologies and non-CO₂ intensive technologies lead to this result. Such differentiated climate policy encourages growth in the non-CO₂ intensive sectors and discourages growth in CO₂ intensive sectors by harnessing positive effects of technology externalities on total factor productivity in the former and letting the latter bear relatively more of the abatement burden. This result is robust to whether emission constraints, R&D subsidies or combinations of both are used as climate policy instruments.     

A post-Kyoto analysis of the Greek electric sector

The obligations resulting from the Kyoto Protocol (KP) are implemented by many participants, e.g. Greece, by a combination of two methods: (a) application of regional measures which restrict CO₂ emissions and (b) procurement of green certificates e.g. in a Climate Exchange Market (CEX). Therefore, the cost for compliance with the KP depends on the extent each method is used and also on the traded values in the CEX. The energy policy and planning to be considered are long-term items and now extension of the KP to a post-KP is discussed which reaches year 2020. In Greece, the electricity sector is with a weighted CO₂ contribution of 73%, the dominantly emission sector. The paper analyzes the cost and other merits of different scenarios for the expansion of electrical power system in Greece. For different scenarios, the total cost of the electrical power system expansion is calculated as a function of the price of emission certificates. It has been shown that there is a price of 27.5€/tCO₂, above which specific mitigation measures may lead to cost optimum solutions. A sensitivity analysis is also presented concerning the variation of key parameters like the participation in the system expansion of new supercritical coal units, the price evolution of natural gas, the RES usage rate and the discount rates of the expansion investments. Results may be of interest for a decision on the cost optimum electrical power system expansion.     

Power and cogeneration technology environomic performance typification in the context of CO2 abatement part I: Power generation

In this series of two articles, the concepts and approaches of environomic (thermodynamic, economic and environmental) performance ‘Typification’ of power generation technologies (Part I) and of combined heat and power (CHP) cogeneration technologies (Part II) in the context of CO₂ abatement are introduced. A methodology is then proposed for a flexible and fast project based power or CHP cogeneration system design evaluation though post-optimization integration of the operating and capital costs. This allows to effectively deal with the uncertainty of the project specific design and operation conditions (fuel, electricity and heat selling prices, project financial conditions such as investment amortization periods, annual operating hours, etc). Furthermore, the uncertainties linked to the external cost such as the CO₂ tax level under a tax scheme or the CO₂ permit price in the emission trading market can be assessed.     

Cost of energy and environmental policy in Portuguese CO2 abatement—scenario analysis to 2020

This paper quantifies the contribution of Portuguese energy policies for total and marginal abatement costs (MAC) for CO₂ emissions for 2020. The TIMES_PT optimisation model was used to derive MAC curves from a set of policy scenarios including one or more of the following policies: ban on nuclear power; ban on new coal power plants without carbon sequestration and storage; incentives to natural gas power plants; and a cap on biomass use. The different MAC shows the policies’ effects in the potential for CO₂ abatement. In 2020, in the most encompassing policy scenario, with all current and planned policies, is possible to abate only up to +35% of 1990 emissions at a cost below 23 € t/CO₂. In the more flexible policy scenarios, it is possible to abate up to −10% of 1990 emissions below the same cost. The total energy system costs are 10–13% higher if all policies are implemented—76 to 101 B€—roughly the equivalent to 2.01–2.65% of the 2005 GDP. Thus, from a CO₂ emission mitigation perspective, the existing policies introduce significant inefficiencies, possibly related to other policy goals. The ban on nuclear power is the instrument that has the most significant effect in MAC.     

Internalisation of external cost in the power generation sector: Analysis with Global Multi-regional MARKAL model

The Global MARKAL-Model (GMM), a multi-regional “bottom-up” partial equilibrium model of the global energy system with endogenous technological learning, is used to address impacts of internalisation of external costs from power production. This modelling approach imposes additional charges on electricity generation, which reflect the costs of environmental and health damages from local pollutants (SO₂, NO_x) and climate change, wastes, occupational health, risk of accidents, noise and other burdens. Technologies allowing abatement of pollutants emitted from power plants are rapidly introduced into the energy system, for example, desulphurisation, NO_x removal, and CO₂ scrubbers. The modelling results indicate substantial changes in the electricity production system in favour of natural gas combined cycle, nuclear power and renewables induced by internalisation of external costs and also efficiency loss due to the use of scrubbers. Structural changes and fuel switching in the electricity sector result in significant reduction of emissions of both local pollution and CO₂ over the modelled time period. Strong decarbonisation impact of internalising local externalities suggests that ancillary benefits can be expected from policies directly addressing other issues then CO₂ mitigation. Finally, the detailed analysis of the total generation cost of different technologies points out that inclusion of external cost in the price of electricity increases competitiveness of non-fossil generation sources and fossil power plants with emission control.     

Power and cogeneration technology environomic performance typification in the context of CO2 abatement part II: Combined heat and power cogeneration

This is the second of a series of two articles, dealing with a new approach of environomic (thermodynamic, economic and environmental) performance ‘Typification’ and optimization of power generation technologies. This part treats specifically of combined heat and power (CHP) cogeneration technologies in the context of CO₂ abatement and provides a methodology for a flexible and fast project based CHP system design evaluation. One of the aspect of the approach is the post-optimization integration of the operating and capital costs, in order to effectively deal with the uncertainty of the project specific design and operation conditions (fuel, electricity and heat selling prices, project financial conditions such as investment amortization periods, annual operating hours, etc). In addition the approach also allows to efficiently evaluate the influence of the external cost such as the CO₂ tax level under a tax scheme or the CO₂ permit price in the emission trading market.     

Scenario analysis of the energy demand and CO2 emission reduction potential of the urban transport system of Beijing through 2030

An assessment of the energy demand and the potential for sector-based emission reductions will provide necessary background information for policy makers. In this paper, Beijing was selected as a special case for analysis in order to assess the energy demand and potential of CO₂ abatement in the urban transport system of China. A mathematical model was developed to generate three scenarios for the urban transport system of Beijing from 2010 to 2030. The best pattern was identified by comparing the three different scenarios and assessing their urban traffic patterns through cost information. Results show that in the high motorization-oriented pattern scenario, total energy demand is about 13.94% higher, and the average CO₂ abatement per year is 3.38 million tons less than in the reference scenario. On the other hand, in the bus and rail transit-oriented scenario, total energy demand is about 11.57% less, and the average CO₂ abatement is 2.8 million tons more than in the reference scenario. Thus, Beijing cannot and should not follow the American pattern of high motorization-oriented transport system but learn from the experience of developed cities of Europe and East Asia.     

Scenario analysis of the energy demand and CO<Subscript>2</Subscript> emission reduction potential of the urban transport system of Beijing through 2030

An assessment of the energy demand and the potential for sector-based emission reductions will provide necessary background information for policy makers. In this paper, Beijing was selected as a special case for analysis in order to assess the energy demand and potential of CO₂ abatement in the urban transport system of China. A mathematical model was developed to generate three scenarios for the urban transport system of Beijing from 2010 to 2030. The best pattern was identified by comparing the three different scenarios and assessing their urban traffic patterns through cost information. Results show that in the high motorization-oriented pattern scenario, total energy demand is about 13.94% higher, and the average CO₂ abatement per year is 3.38 million tons less than in the reference scenario. On the other hand, in the bus and rail transit-oriented scenario, total energy demand is about 11.57% less, and the average CO₂ abatement is 2.8 million tons more than in the reference scenario. Thus, Beijing cannot and should not follow the American pattern of high motorization-oriented transport system but learn from the experience of developed cities of Europe and East Asia.     

Preliminary exploration on low-carbon technology roadmap of China’s power sector

Climate change poses huge challenges to the sustainable development of human society. As a major CO₂ emission source, decarbonization of power sector is fundamental for CO₂ emission abatement. Therefore, considering the “carbon lock-in” effects, it’s critical to formulate an appropriate roadmap for low-carbon generation technologies. In this paper, key low-carbon technology solutions are firstly identified according to their developing prospects and the fundamental realities of China’s power sector. Then, costs, reduction effects and potentials for the key technology options are evaluated. On this basis, typical scenarios are selected and a scenario set is established which identifies and incorporates the key low carbon factors, and a multi-scenario analysis is implemented to China’s power sector based on a comprehensive power mix planning model. Then, contributions of CO₂ reduction among the key technology solutions are revealed. Prospect for CO₂ emission reduction is discussed, which informs the possible emission trajectories towards 2030. Finally, low-carbon technology roadmaps under specific scenarios are elaborated, which implies corresponding optimal evolution of power generation mix.     

Impacts of China's emissions trading schemes on deployment of power generation with carbon capture and storage

The establishment of an emissions trading scheme (ETS) in China creates the potential for a “least cost” solution for achieving the greenhouse gas (GHG) emissions reductions required for China to meet its Paris Agreement pledges. China has pledged to reduce CO₂ intensity by 60–65% in 2030 relative to 2005 and to stop the increase in absolute CO₂ emissions around 2030. In this series of studies, we enhance the MIT Economic Projection and Policy Analysis (EPPA) model to include the latest assessments of the costs of power generation technologies in China to evaluate the impacts of different potential ETS pathways on deployment of carbon capture and storage (CCS) technology. This paper reports the results from baseline scenarios where power generation prices are assumed to be homogeneous across the country for a given mode of generation. We find that there are different pathways where CCS might play an important role in reducing the emission intensity in China's electricity sector, especially for low carbon intensity targets consistent with the ultimate goals of the Paris Agreement. Uncertainty about the exact technology mix suggests that decision makers should be wary of picking winning technologies, and should instead seek to provide incentives for emission reductions. While it will be challenging to meet the CO₂ intensity target of 550 g/kWh for the electric power sector by 2020, multiple pathways exist for achieving lower targets over a longer timeframe. Our initial analysis shows that carbon prices of 35–40$/tCO₂ make CCS technologies on coal-based generation cost-competitive against other modes of generation and that carbon prices higher than 100$/tCO₂ favor a major expansion of CCS. The next step is to confirm these initial results with more detailed modeling that takes into account granularity across China's energy sector at the provincial level.     

Modeling carbon emission performance under a new joint production technology with energy input

The nonparametric data envelopment analysis (DEA) methodology has gained much popularity in assessing carbon emission performance within a joint production framework with energy inputs and CO₂ emissions. The majority of existing studies, however, neglected the interlinkage between energy inputs and CO₂ emissions in their analytical frameworks, which may distort the modeling results. To address this issue, we invoked the weak disposability assumption for both (fossil) energy inputs and CO₂ emissions, and developed a new joint production technology that was found in line with the material balance principle and simultaneously allowed for the flexibility of emission abatement options. Built upon the production technology, we developed two indexes to measure carbon emission performance, and proposed a decomposition model to quantify the roles of different options in abating CO₂ emissions. We also applied the proposed models to study the carbon emission performance of the world's top 25 CO₂ emitters. It was found that carbon emission performance varied across different emitters and different abatement options. Energy efficiency improvement and energy structure adjustment were not of equal importance in pursuing the minimum CO₂ emissions.     

Achieving CO2 reductions in Colombia: Effects of carbon taxes and abatement targets

In this paper we investigate CO₂ emission scenarios for Colombia and the effects of implementing carbon taxes and abatement targets on the energy system. By comparing baseline and policy scenario results from two integrated assessment partial equilibrium models TIAM-ECN and GCAM and two general equilibrium models Phoenix and MEG4C, we provide an indication of future developments and dynamics in the Colombian energy system. Currently, the carbon intensity of the energy system in Colombia is low compared to other countries in Latin America. However, this trend may change given the projected rapid growth of the economy and the potential increase in the use of carbon-based technologies. Climate policy in Colombia is under development and has yet to consider economic instruments such as taxes and abatement targets. This paper shows how taxes or abatement targets can achieve significant CO₂ reductions in Colombia. Though abatement may be achieved through different pathways, taxes and targets promote the entry of cleaner energy sources into the market and reduce final energy demand through energy efficiency improvements and other demand-side responses. The electric power sector plays an important role in achieving CO₂ emission reductions in Colombia, through the increase of hydropower, the introduction of wind technologies, and the deployment of biomass, coal and natural gas with CO₂ capture and storage (CCS). Uncertainty over the prevailing mitigation pathway reinforces the importance of climate policy to guide sectors toward low-carbon technologies. This paper also assesses the economy-wide implications of mitigation policies such as potential losses in GDP and consumption. An assessment of the legal, institutional, social and environmental barriers to economy-wide mitigation policies is critical yet beyond the scope of this paper.