Analysis of policies to reduce oil consumption and greenhouse-gas emissions from the US transportation sector

Even as the US debates an economy-wide CO₂ cap-and-trade policy the transportation sector remains a significant oil security and climate change concern. Transportation alone consumes the majority of the US’s imported oil and produces a third of total US Greenhouse-Gas (GHG) emissions. This study examines different sector-specific policy scenarios for reducing GHG emissions and oil consumption in the US transportation sector under economy-wide CO₂ prices. The 2009 version of the Energy Information Administration’s (EIA) National Energy Modeling System (NEMS), a general equilibrium model of US energy markets, enables quantitative estimates of the impact of economy-wide CO₂ prices and various transportation-specific policy options. We analyze fuel taxes, continued increases in fuel economy standards, and purchase tax credits for new vehicle purchases, as well as the impacts of combining these policies. All policy scenarios modeled fail to meet the Obama administration’s goal of reducing GHG emissions 14% below 2005 levels by 2020. Purchase tax credits are expensive and ineffective at reducing emissions, while the largest reductions in GHG emissions result from increasing the cost of driving, thereby damping growth in vehicle miles traveled.     

Climate policy scenarios in Brazil: A multi-model comparison for energy

This paper assesses the effects of market-based mechanisms and carbon emission restrictions on the Brazilian energy system by comparing the results of six different energy-economic or integrated assessment models under different scenarios for carbon taxes and abatement targets up to 2050. Results show an increase over time in emissions in the baseline scenarios due, largely, to higher penetration of natural gas and coal. Climate policy scenarios, however, indicate that such a pathway can be avoided. While taxes up to 32 US$/tCO₂e do not significantly reduce emissions, higher taxes (from 50 US$/tCO₂e in 2020 to 16 2US$/tCO₂e in 2050) induce average emission reductions around 60% when compared to the baseline. Emission constraint scenarios yield even lower reductions in most models. Emission reductions are mostly due to lower energy consumption, increased penetration of renewable energy (especially biomass and wind) and of carbon capture and storage technologies for fossil and/or biomass fuels. This paper also provides a discussion of specific issues related to mitigation alternatives in Brazil. The range of mitigation options resulting from the model runs generally falls within the limits found for specific energy sources in the country, although infrastructure investments and technology improvements are needed for the projected mitigation scenarios to achieve actual feasibility.     

National energy policies: Obstructing the reduction of global CO2 emissions? An analysis of Swedish energy policies for the district heating sector

The effect of national energy policies on a local Swedish district heating (DH) system has been studied, regarding the profitability of new investments and the potential for climate change mitigation. The DH system has been optimised regarding three investments: biomass-fuelled CHP (bio CHP), natural gas-fuelled combined cycle CHP (NGCC CHP) and biomass-fuelled heat-only boiler (bio HOB) in two scenarios (with or without national taxes and policy instruments). In both scenarios EU’s tradable CO₂ emission permits are included. Results from the study show that when national policies are included, the most cost-effective investment option is the bio CHP technology. However, when national taxes and policy instruments are excluded, the DH system containing the NGCC CHP plant has 30% lower system cost than the bio CHP system. Regardless of the scenario and when coal condensing is considered as marginal electricity production, the NGCC CHP has the largest global CO₂ reduction potential, about 300 ktonne CO₂. However, the CO₂ reduction potential is highly dependent on the marginal electricity production. Demonstrated here is that national policies such as tradable green certificates can, when applied to DH systems, contribute to investments that will not fully utilise the DH systems’ potential for global CO₂ emissions reductions.     

Interactions and implications of renewable and climate change policy on UK energy scenarios

As a response to the twin challenges of climate change mitigation and energy security, the UK government has set a groundbreaking target of reducing the UK’s economy-wide carbon emissions by 80% from 1990 levels by 2050. A second key UK energy policy is to increase the share of final energy consumption from renewables sources to 15% by 2020, as part of the wider EU Renewable Directive. The UK’s principle mechanisms to meet this renewable target are the Renewable Obligation (RO) in the electricity sector, the Renewable Transport Fuel Obligation (RTFO), and most recently the Renewable Heat Programme (RHP) for buildings. This study quantifies a range of policies, energy pathways, and sectoral trade-offs when combining mid- and long-term UK renewables and CO₂ reduction policies. Stringent renewable policies are the binding constraints through 2020. Furthermore, the interactions between RO, RTFO, and RHP policies drive trade-offs between low carbon electricity, bio-fuels, high efficiency natural gas, and demand reductions as well as resulting 2020 welfare costs. In the longer term, CO₂ reduction constraints drive the costs and characteristics of the UK energy system through 2050.     

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.     

Quantifying CO2 abatement costs in the power sector

CO₂ cap-and-trade mechanisms and CO₂ emission taxes are becoming increasingly widespread. To assess the impact of a CO₂ price, marginal abatement cost curves (MACCs) are a commonly used tool by policy makers, providing a direct graphical link between a CO₂ price and the expected abatement. However, such MACCs can suffer from issues related to robustness and granularity. This paper focuses on the relation between a CO₂ emission cost and CO₂ emission reductions in the power sector. The authors present a new methodology that improves the understanding of the relation between a CO₂ cost and CO₂ abatement. The methodology is based on the insight that CO₂ emissions in the power sector are driven by the composition of the conventional power portfolio, the residual load and the generation costs of the conventional units. The methodology addresses both the robustness issue and the granularity issue related to MACCs. The methodology is based on a bottom-up approach, starting from engineering knowledge of the power sector. It offers policy makers a new tool to assess CO₂ abatement options. The methodology is applied to the Central Western European power system and illustrates possible interaction effects between, e.g., fuel switching and renewables deployment.     

ACROPOLIS: An example of international collaboration in the field of energy modelling to support greenhouse gases mitigation policies

Energy models are considered as valuable tools to assess the impact of various energy and environment policies. The ACROPOLIS initiative, supported by the European Commission and the International Energy Agency, used up to 15 energy models to simulate and evaluate selected policy measures and instruments and then compare their impacts on energy systems essentially in terms of costs of greenhouse gas emissions (GHG) reduction and energy technology choice. Four case studies are formulated considering policies and measures on renewable portfolio schemes and internationally tradable green certificates, emissions trading and global GHG abatement target, energy efficiency standards and internalisation of external costs. The main focus of the project is on the electricity sector. From a large set of quantified results, ACROPOLIS provides an international scientific consensus, on some key issues, which could be useful in assessing and designing energy and environment policies at the world, European and national/regional levels. It concludes that the Kyoto targets (and their continuation beyond 2010 in specific scenarios) could be achieved at a cost around 1% of GDP through global emissions trading, indicating also that this flexibility mechanism is a more cost-effective instrument for GHG mitigation than meeting the goal domestically without trade. It demonstrates that internalising external costs through a price increase reduces local pollutants (SO_x, NO_x, and others) and it produces other benefits such as triggering the penetration of clean technologies in addition to the curbing of CO₂ emissions.     

Using performance indicators to reduce cost uncertainty of China's CO2 mitigation goals

Goals on absolute emissions and intensity play key roles in CO₂ mitigation. However, like cap-and-trade policies with price uncertainty, they suffer from significant uncertainty in abatement costs. This article examines whether an indicator could be established to complement CO₂ mitigation goals and help reduce cost uncertainty with a particular focus on China. Performance indicators on CO₂ emissions per unit of energy consumption could satisfy three criteria: compared with the mitigation goals, (i) they are more closely associated with active mitigation efforts and (ii) their baselines have more stable projections from historical trajectories. (iii) Their abatement costs are generally higher than other mitigation methods, particularly energy efficiency and conservation. Performance indicators could be used in the following way: if a CO₂ goal on absolute emissions or intensity is attained, the performance indicator should still reach a lower threshold as a cost floor. If the goal cannot be attained, an upper performance threshold should be achieved as a cost ceiling. The narrower cost uncertainty may encourage wider and greater mitigation efforts.     

Assessment of cleaner electricity generation technologies for net CO2 mitigation in Thailand

The choice of electricity generation technologies not only directly affects the amount of CO₂ emission from the power sector, but also indirectly affects the economy-wide CO₂ emission. It is because electricity is the basic requirement of economic sectors and final consumptions within the economy. In Thailand, although the power development plan (PDP) has been planned for the committed capacity to meet the future electricity demand, there are some undecided electricity generation technologies that will be studied for technological options. The economy-wide CO₂ mitigations between selecting cleaner power generation options instead of pulverized coal-thermal technology of the undecided capacity are assessed by energy input–output analysis (IOA). The decomposition of IOA presents the fuel-mix effect, input structural effect, and final demand effect by the change in technology of the undecided capacity. The cleaner technologies include biomass power generation, hydroelectricity and integrated gasification combined cycle (IGCC). Results of the analyses show that if the conventional pulverized coal technology is selected in the undecided capacity, the economy-wide CO₂ emission would be increased from 223 million ton in 2006 to 406 million ton in 2016. Renewable technology presents better mitigation option for replacement of conventional pulverized coal technology than the cleaner coal technology. The major contributor of CO₂ mitigation in cleaner coal technology is the fuel mix effect due to higher conversion efficiency. The demand effect is the major contributor of CO₂ mitigation in the biomass and hydro cases. The embedded emission in construction of power plant contributes to higher CO₂ emission.     

Decision making under uncertainty and inertia constraints: sectoral implications of the when flexibility

Current debates on climate mitigation emphasize the role of the inertia of the economic system. Our aim in this paper is to study in more depth how sectorally differentiated inertia impacts on optimal CO₂-emission abatement policies. Using the STARTS model, we show that optimal abatement levels and costs differ sensibly among sectors. Differential inertia is the critical determinant of this trade-off, especially in the case of a 20-year delay in the action, or in an underestimation of the growth of the transportation sector. In particular, the burden of any additional abatement effort falls on the most flexible sector, i.e. the industry. Debates on mitigation emphasize the role of inertia of the economic system. This paper aims at studying more in depth how sectorally differentiated inertia should influence optimal CO₂ emission abatement policies. Using a two-sector version of STARTS, we show that under perfect expectations, optimal abatement profiles and associated costs differ sensibly between a flexible and a rigid sector (transportation). In a second step, we scrutinize the role of the uncertainty by testing the case of a 20-year delay of action and an underestimated growth of the transportation sector. We do this for three concentration ceilings and we point out the magnitude of the burden which falls on the flexible sector. We derive some policy implications for the ranking of public policies and for incentive instruments to be set up at international level.     

Spill or leak? Carbon leakage with international technology spillovers: A CGE analysis

This paper studies the effect of endogenous technical change and international technology spillovers on carbon leakage. It is well known that a unilateral CO₂ abatement policy in one region may cause CO₂ emissions to increase in non-abating regions because of the relocation of CO₂-intensive firms and because of energy market effects. If, however, the CO₂ mitigation policy induces energy-saving technological innovation in the home region and this innovation can freely spill-over to energy users abroad, carbon leakage may be offset by induced efficiency gains in foreign firms. In this paper we develop a simple mathematical model of carbon leakage and technological spillovers and perform numerical simulations with an adjusted CGE model to illustrate the potential importance of international technology spillovers. We show that carbon leakage can become negative at moderate levels of technology spillover.     

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.     

Soft-linking energy systems and GIS models to investigate spatial hydrogen infrastructure development in a low-carbon UK energy system

This paper describes an innovative modelling approach focusing on linking spatial (GIS) modelling of hydrogen (H₂) supply, demands and infrastructures, anchored within a economy-wide energy systems model (MARKAL). The UK government is legislating a groundbreaking climate change mitigation target for a 60% CO₂ reduction by 2050, and has identified H₂ infrastructures and technologies as potentially playing a major role, notably in the transport sector. An exploratory set of linked GIS–MARKAL model scenarios generate a range of nuanced insights including spatial matching of supply and demand for optimal zero-carbon H₂ deployment, a crucial finding on successive clustering of demand centres to enable economies of scale in H₂ supply and distribution, the competitiveness of imported liquid H₂ and of liquid H₂ distribution, and sectoral competition for coal with carbon sequestration between electricity and H₂ production under economy-wide CO₂ constraints.     

The long-term impact of the market stability reserve on the EU emission trading system

To provide a strong price signal for greenhouse gas emissions abatement, Europe decided to strengthen the European Union Emissions Trading System (EU ETS) by implementing a market stability reserve (MSR) that includes a cancellation policy and to increase the linear reduction factor from 1.74% to 2.2% after 2020. Results of a detailed long-term investment model, formulated as a large-scale mixed complementary problem, show that this strengthened EU ETS may quadruple EUA prices and may decrease cumulative CO₂ emissions with 21.3 GtCO₂ compared to the cumulative cap before the strengthening (52.2 GtCO₂). Around 40% of this decrease (8.3 GtCO₂) is due to the increased linear reduction factor and 60% due to the cancellation policy (13 GtCO₂). Without the increased linear reduction factor, the MSR's cancellation policy would decrease emissions by only 4.1 GtCO₂, indicating their complementarity. A sensitivity analysis on key model assumptions and parameters reveals that the impact of the MSR is, however, strongly dependent on other policies (e.g., renewable energy targets, nuclear, lignite and coal phase-outs) and cost evolutions of abatement options (e.g., investment cost reductions for wind and solar power). This renders the effective CO₂ emissions cap highly uncertain. In our simulation results, cancellation volumes range between 5.6 and 17.8 GtCO₂, which is to be compared with our central estimate of 13 GtCO₂. We calculate the required linear reduction factors to achieve these CO₂ emission reductions without an MSR, which would remove all uncertainty on the cumulative CO₂ emissions and interference with other complementary climate or energy policies.     

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.     

Estimating the potential CO2 mitigation from agricultural energy efficiency in the United States

Energy efficiency in agriculture is an underanalyzed aspect of a potential climate change mitigation strategy. According to the Fourth Assessment Report, experts report only medium agreement and medium evidence that energy efficiency can provide substantial reductions (Smith et al. 2007). This paper estimates the CO₂ mitigation potential achievable through improvements in energy efficiency in the US agriculture sector. The data are presented in three formats: the cost data or break-even points of each technology, a marginal abatement supply curve expressed in terms of reduction in energy use by fuel category, and a marginal abatement supply curve expressed in terms of CO₂ emission reductions by fuel category. The largest sources of energy use in the sector were identified as motors used in irrigation systems or other pumping operations; farm machinery such as tractors used in daily farm operations; and space conditioning, such as HVAC systems for livestock and crop-drying systems.

Will a radical transport pricing reform jeopardize the ambitious EU climate change objectives?

This paper examines the effects of replacing current fuel taxes by a system of taxes that account better for all the different external costs of the different transport modes. One of the important implications of this reform is that current fuel taxes are decreased to a level of 80 euro/ton of CO₂ but that the mileage related taxes on car and truck use increase. Using the TREMOVE model for the transport sector of 31 European countries, one finds that the volume of transport will decrease because current taxes on transport are too low compared to overall external costs. Overall CO₂ emissions will decrease slightly. Using the MARKAL–TIMES model for the Belgian energy sector, putting all sectors and technologies on equal footing shows that a fuel tax reform makes that it is not cost efficient to require large CO₂ emission reductions in the transport sector and that traditional car technologies will continue to dominate the car market in 2020–2030.     

Marginal abatement costs of greenhouse gas emissions: A meta-analysis

In this paper, we carry out a meta-analysis of recent studies into the costs of greenhouse gas mitigation policies that aim at the long-term stabilisation of these gases in the atmosphere. We find the cost estimates of the studies to be sensitive to the stringency of the stabilisation target, the assumed emissions baseline, the way in which the time profile of emissions is determined in the model, the choice of control variable (CO₂ only versus multigas), the number of regions and energy sources in the model and, to a lesser degree, the scientific “forum” in which the study was developed. We find that marginal abatement costs of the stringent long-term targets that are currently considered by the European Commission are still very uncertain but might exceed the costs that have been suggested by recent policy assessments.     

The macro-economic rebound effect and the UK economy

This paper examines the macroeconomic rebound effect for the UK economy arising from energy efficiency policies 2000–2010 using the macroeconomic model, MDM-E3. The literature distinguishes between three types of rebound effect: direct, indirect and economy-wide. The macroeconomic rebound effect considered here is the combination of the indirect and economy-wide effects. Policies for the domestic, business, commercial and public, and transport sectors of the economy are analysed for 2000–2010. Overall, the policies lead to a saving of about 8% of the energy, which would otherwise have been used and a reduction in CO₂ emissions of 10% (or 14 mtC) by 2010. There are also favourable macroeconomic effects: lower inflation and higher growth. We find that the macroeconomic rebound effect arising from UK energy efficiency policies for the period 2000–2010 is around 11% by 2010, averaged across sectors of the economy. When this is added to the (assumed) direct rebound effect of around 15%, this gives a total rebound effect of around 26% arising from these policies. Thus, the findings of the study support the argument that energy efficiency improvements for both consumers and producers, stimulated by policy incentives, will lead to significant reductions in energy demand and hence in greenhouse gas emissions.