Alternative policy impacts on US GHG emissions and energy security: A hybrid modeling approach

This study addresses the possible impacts of energy and climate policies, namely corporate average fleet efficiency (CAFE) standard, renewable fuel standard (RFS) and clean energy standard (CES), and an economy wide equivalent carbon tax on GHG emissions in the US to the year 2045. Bottom–up and top–down modeling approaches find widespread use in energy economic modeling and policy analysis, in which they differ mainly with respect to the emphasis placed on technology of the energy system and/or the comprehensiveness of endogenous market adjustments. For this study, we use a hybrid energy modeling approach, MARKAL–Macro, that combines the characteristics of two divergent approaches, in order to investigate and quantify the cost of climate policies for the US and an equivalent carbon tax. The approach incorporates Macro-economic feedbacks through a single sector neoclassical growth model while maintaining sectoral and technological detail of the bottom–up optimization framework with endogenous aggregated energy demand. Our analysis is done for two important objectives of the US energy policy: GHG reduction and increased energy security. Our results suggest that the emission tax achieves results quite similar to the CES policy but very different results in the transportation sector. The CAFE standard and RFS are more expensive than a carbon tax for emission reductions. However, the CAFE standard and RFS are much more efficient at achieving crude oil import reductions. The GDP losses are 2.0% and 1.2% relative to the base case for the policy case and carbon tax. That difference may be perceived as being small given the increased energy security gained from the CAFE and RFS policy measures and the uncertainty inherent in this type of analysis.     

Hybrid modelling of long-term carbon reduction scenarios for the UK

This paper summarizes the development of a new hybrid MARKAL–Macro (M–M) energy system model for the UK. This hybrid model maintains the technological and sectoral detail of a bottom-up optimisation approach with aggregated energy demand endogeneity and GDP impacts from a single sector neoclassical growth model. The UK M–M model was developed for underpinning analysis of the UK's groundbreaking mandatory long-term − 60% carbon dioxide (CO₂) emissions reduction target. Hybrid modelling illustrates that long-term UK CO₂ emission reductions are feasible. However, there are endemic uncertainties, notably a trade-off between behavioural and technological decarbonisation options with resultant energy system impacts in the requirements for zero-carbon electricity. UK M–M model sensitivity runs further illustrate the range of energy system interactions including the deployment of the UK's limited CO₂ storage capacity, alternate timing of power vs. transport sectoral reductions, the relative ease of switching between electricity generation portfolios, and substitution opportunities between natural gas and coal. The macro-economic cost impacts range from 0.3% to 1.5% reduction in UK GDP by 2050, with higher cost estimates strongly influenced by pessimistic assessments of future low-carbon technologies. However cost impacts from the UK M–M model are likely to be in the lower range for stringent CO₂ reduction pathways as the simplicity of the reduced form macro-linkage omits competitiveness and transitional impacts on the UK economy.     

Estimates of inter-fuel substitution possibilities in Chinese chemical industry

The chemical sector is a key driver of China's remarkable growth record and accounts for about 10% of the country's GDP. This has made the industry energy-intensive and consequently a major contributor to greenhouse gas emissions (GHG) and other pollutants. This study has attempted to investigate the potential for inter-fuel substitution between coal, oil, natural gas and electricity in Chinese chemical sector by employing a translog production and cost function. Ridge regression procedure was adopted to estimate the parameters of the function. Estimation results show that all energy inputs are substitutes. In addition, the study produces evidence that the significant role of coal in the Chinese chemical fuel mix converges over time, albeit slowly. These results suggest that price-based policies, coupled with capital subsidy programs can be adopted to redirect technology use towards cleaner energy sources like electricity and natural gas; hence, retaining the ability to fuel the chemical sector, while also mitigating GHG emissions. Notwithstanding, one must understand that the extent to which substituting electricity for coal will be effective depends on the extent to which coal or oil is used in generating electricity. The findings of this study provide general insights and underscore the importance of Chinese government policies that focus on installed capacity of renewable electricity, energy intensity targets as well as merger of enterprises.     

The energy and environmental implications of UK more electric transition pathways: A whole systems perspective

Electricity generation contributes a large proportion of the total greenhouse gas emissions in the United Kingdom (UK), due to the predominant use of fossil fuel (coal and natural gas) inputs. Indeed, the various power sector technologies [fossil fuel plants with and without carbon capture and storage (CCS), nuclear power stations, and renewable energy technologies (available on a large and small {or domestic} scale)] all involve differing environmental impacts and other risks. Three transition pathways for a more electric future out to 2050 have therefore been evaluated in terms of their life-cycle energy and environmental performance within a broader sustainability framework. An integrated approach is used here to assess the impact of such pathways, employing both energy analysis and environmental life-cycle assessment (LCA), applied on a ‘whole systems’ basis: from ‘cradle-to-gate’. The present study highlights the significance of ‘upstream emissions’, in contrast to power plant operational or ‘stack’ emissions, and their (technological and policy) implications. Upstream environmental burdens arise from the need to expend energy resources in order to deliver, for example, fuel to a power station. They include the energy requirements for extraction, processing/refining, transport, and fabrication, as well as methane leakage that occurs in coal mining activities – a major cotribution – and from natural gas pipelines. The impact of upstream emissions on the carbon performance of various low carbon electricity generators [such as large-scale combined heat and power (CHP) plant and CCS] and the pathways distinguish the present findings from those of other UK analysts. It suggests that CCS is likely to deliver only a 70% reduction in carbon emissions on a whole system basis, in contrast to the normal presumption of a 90% reduction. Similar results applied to other power generators.     

Evaluating the EU ETS impacts on profits,investments and prices of the Italian electricity market

Climate change is a global issue, but actions to mitigate its development are regional. Europe has taken the leadership in the carbon emission policy by introducing the Emissions Trading Scheme (EU ETS), formerly regulated by Directive 2003/87/EC and since 2013 by Directive 2009/29/EC. This new Directive imposes a full auctioning system for allocating CO₂ allowances to the power sector and encourages the use of renewable energy sources.We investigate the economic impacts of the EU ETS on the Italian electricity market using a power generation expansion model. We adopt a technological representation of the energy market that also accounts for power exchanges with foreign countries and we assume that generators operate in different zones connected by interconnections with limited capacity. We study both an oligopolistic and a perfectly competitive behavior of Italian generators and we compare the corresponding outcomes under different EU ETS scenarios. Our analysis shows that, in perfect competition, generators generally invest more than in an oligopolistic framework, but in both market configurations, investments in Italy are mainly concentrated in fossil-fired plants, especially in 2020. This happens also when incentives are given to renewables.The developed models are implemented as complementarity problems and solved in GAMS using the PATH solver.     

An assessment of factors impacting Canada's electricity sector's GHG emissions

In this article we develop and then implement a decomposition model of Canada's electricity sector in order to assess multiple factors impacting on trends in greenhouse gas emissions from the sector, with a focus on the impact of climate and energy policy on emissions for the time period spanning from 1990 to 2008. The analysis shows that during these years, the primary factors driving changes in emissions included changes in electricity demand, changes in the generation mix of electricity, and weather, but that government policy and programs had only minor impacts on emissions. Although having relatively lesser impacts compared to the aforementioned factors, the most significant policy related factors included efforts to increase renewables in the generation mix through programs such as renewable portfolio standards and incentives for wind generators.     

Reformulating taxes for an energy transition

An energy transition toward clean energy sources would reduce environmental impacts. One proposal to trigger this energy transition uses economic instruments, particularly environmental taxes. This research studies the potential impact of taxes on electricity on the environment and the economy. Using a dynamic computable general equilibrium model for Spain with energy and environmental extensions, we assess their current impact on GDP growth, energy use, and a set of different pollutant emissions. Then we propose a reform that would foster an energy transition toward clean energies and assess their economic and environmental impact. We find that only taxing the production of electricity by coal, oil, and natural gas can be better for the environment and economy than taxing all forms of electricity production in a revenue-neutral context. Moreover, the production of electricity by biomass, though considered renewable, is an important source of pollutant emissions and, in these terms, should have less importance in an energy transition.     

The role of public policy in optimizing renewable energy development in the greater southern Appalachian mountains

This research presents a third component of a comprehensive decision support system for energy planning that allows for combining existing electricity generating capabilities with increased use of renewable energy sources. It focuses on energy planning at the regional level, and concentrates specifically on the greater southern Appalachian mountains of the eastern United States: a region that was chosen for analysis not only due to its heavy dependence on coal for electricity, but also because of its potential for increased use of wind and solar power. Previous research used a geographic information system (GIS) model for identifying renewable energy potential to provide input data for a multi-objective linear programming (MOLP) model to determine the optimal constrained mix of renewable energy sources and existing fossil fuel facilities by balancing annual generation costs against the corresponding greenhouse gas emissions. This new component of the system analyzes three potential public policies—renewable portfolio standard, carbon tax, and renewable energy production tax credit—that have been used to foster increased renewable energy usage. These policies require minor modifications to the MOLP model for implementation. The results of these policy cases were then analyzed to determine the impact that these policies have on generation cost and pollution emissions within the region.     

The renewable energy,CO2 emissions,and economic growth: VAR model

This paper provides an empirical analysis of CO₂ emissions and economic growth, renewable energy consumption, and energy consumption over the period 1975–2014 in Germany. This paper uses the autoregressive distributed lag (ARDL) approach of cointegration test and vector error-correction models. The unit root and cointegration tests show that the long-run relationship between CO₂ emissions and its determinants. The empirical results show that the findings do not support the environmental Kuznets curve between real GDP and CO₂ emissions. To estimate the shocks of renewable energy consumptions, the study applies the dynamic test of Impulse Response Function (IRF) under the VAR method. The increasing portion of renewable energy consumption in electricity generation would have no impacts on the environment. However, the hikes of renewable energy sources would incur more cost to electricity producers and shrivel up the growth of economies through the expansionary effect of industry’s consumption and private capital spending in the Germany’s economy.     

Impacts on the biophysical economy and environment of a transition to 100% renewable electricity in Australia

We investigate the impacts on the biophysical economy, employment and environment of a transition scenario to an energy-efficient, 100% renewable electricity (RE) system by 2060, based on wind, solar and biomass technologies, and an introduction of electric vehicles. We employ a CSIRO process-based model of the physical activity of Australia’s economy and environmental resources, the Australian Stocks and Flows Framework. The RE systems are assumed to be manufactured in Australia to identify possible employment benefits. In comparison with the business-as-usual (BAU) scenario, on a national scale, the RE scenario has much lower economy-wide net emissions, remaining below contemporary levels and becoming zero in the electricity sector by 2060. Compared with BAU, the RE scenario also has significantly lower industrial water use, somewhat higher materials use, slightly lower unemployment, lower net foreign debt (relative to a GDP proxy) and, resulting from the growth in electric vehicles, reduced oil imports. The GDP per capita growth, based on the physical stocks of capital and labour, is virtually the same in both scenarios. Hence, from the viewpoint of the biophysical economy, there are no major barriers to implementing policies to facilitate the transition to a 100% renewable electricity system for Australia.     

Creating a level playing field? The concentration and centralisation of emissions in the European Union Emissions Trading System

This article questions the assumption that carbon markets create a level playing field by exploring the relationship between the organisation of capital and the organisation of emissions in the European Union Emissions Trading System (EU ETS). It constructs a database by matching installations and owners to reveal that a relatively small number of large-scale coal-fired power stations, owned by a very small group of states and corporations, are responsible for a significant proportion of greenhouse gas emissions. The findings are analysed by considering how technological dependence on coal together with the corporate institutional form combine to support the socio-spatial concentration and centralisation of capital and emissions. Case studies of the consolidation of the seven largest polluting owners from Europe's coal-dependent electricity sector and the carbon trading strategies of the two largest polluters, RWE and E.ON, then assess the impacts of energy liberalisation and emissions trading policies. The article concludes that EU energy and climate policies are pulling in different directions by clustering responsibility for greenhouse gas emissions and diffusing responsibility to address climate change. The uneven distribution of emissions within the EU ETS makes an alternative policy approach that directly targets the biggest corporate and state polluters both feasible and necessary.     

State-scale evaluation of renewable electricity policy: The role of renewable electricity credits and carbon taxes

We have developed a state-scale version of the MARKAL energy optimization model, commonly used to model energy policy at the US national scale and internationally. We apply the model to address state-scale impacts of a renewable electricity standard (RES) and a carbon tax in one southeastern state, Georgia. Biomass is the lowest cost option for large-scale renewable generation in Georgia; we find that electricity can be generated from biomass co-firing at existing coal plants for a marginal cost above baseline of 0.2–2.2 cents/kWh and from dedicated biomass facilities for 3.0–5.5 cents/kWh above baseline. We evaluate the cost and amount of renewable electricity that would be produced in-state and the amount of out-of-state renewable electricity credits (RECs) that would be purchased as a function of the REC price. We find that in Georgia, a constant carbon tax to 2030 primarily promotes a shift from coal to natural gas and does not result in substantial renewable electricity generation. We also find that the option to offset a RES with renewable electricity credits would push renewable investment out-of-state. The tradeoff for keeping renewable investment in-state by not offering RECs is an approximately 1% additional increase in the levelized cost of electricity.     

An assessment of alternative carbon mitigation policies for achieving the emissions reduction of the Clean Power Plan: Case study for the state of Indiana

National carbon mitigation policy included in the Clean Power Plan (CPP) targets electric power generation facilities and may have substantial impacts at the national level. The subnational impacts will vary because the level of dependence on coal for electricity generation varies substantially across states. Indiana represents a state where the CPP impacts may be relatively large due to heavy dependence on coal for electricity generation. Therefore, this paper presents analysis of the efficacy and cost of alternative approaches to carbon mitigation policy, taking Indiana as an example.A state-level energy system model, IN-MARKAL, was developed based on the MARKAL framework to explore alternative policy scenarios. Results show that a renewable portfolio standard (RPS) is relatively cost effective in achieving carbon emissions reduction for Indiana from the perspective of the power system alone, but that the RPS may also lead to a generation mix dominated by coal and wind. Carbon cap and carbon tax outperform the RPS when considering the entire energy system modeled in IN-MARKAL, which also lead to a more diverse generation portfolio for the state.     

How much have electricity shortages hampered China's GDP growth?

Based on an econometric analysis of the annual growth data for China's GDP and electricity generation from 1953 to 2010, we find that electricity generation growth Granger causes GDP growth, but not vice versa. We also find that the GDP elasticity of electricity generation is about 0.6, implying that a 1% increase in China's electricity generation growth would increase GDP growth by 0.6%. While Deng's reform raised China's GDP growth rate by about 5% per year, it did not alter the GDP elasticity of electricity generation. Hence, an obvious strategy to promote China's economic growth would be accelerating electricity generation expansion. Rapidly adding thermal generation units, however, could have large-scale, adverse environmental impacts. We therefore support China's 2011 five-year plan, which calls for expanding investments in renewable energy, conservation and energy efficiency as well as improving China's integrated electricity planning and cost-based pricing decisions.     

Renewable energy in South Africa: Potentials,barriers and options for support

The challenge of transforming entire economies is enormous; even more so if a country is as fossil fuel based and emission intensive as South Africa. However, in an increasingly carbon constrained world and already now facing climate change impacts South Africa has to reduce greenhouse gas emissions intensity soon and decidedly. The South African electricity sector is a vital part of the economy and at the same time contributes most to the emissions problem. First steps have been taken by the South African government to enhance energy efficiency and promote renewable energy, however, they fail to show large-scale effects. This paper seeks to identify the relevant barriers to renewable energy investments and, based on experience from other countries, provide policy recommendations.     

Sustainability of algal biofuel production using integrated renewable energy park (IREP) and algal biorefinery approach

Algal biomass can provide viable third generation feedstock for liquid transportation fuel. However, for a mature commercial industry to develop, sustainability as well as technological and economic issues pertinent to algal biofuel sector must be addressed first. This viewpoint focuses on three integrated approaches laid out to meet these challenges. Firstly, an integrated algal biorefinery for sequential biomass processing for multiple high-value products is delineated to bring in the financial sustainability to the algal biofuel production units. Secondly, an integrated renewable energy park (IREP) approach is proposed for amalgamating various renewable energy industries established in different locations. This would aid in synergistic and efficient electricity and liquid biofuel production with zero net carbon emissions while obviating numerous sustainability issues such as productive usage of agricultural land, water, and fossil fuel usage. A ‘renewable energy corridor’ rich in multiple energy sources needed for algal biofuel production for deploying IREPs in the United States is also illustrated. Finally, the integration of various industries with algal biofuel sector can bring a multitude of sustainable deliverables to society, such as renewable supply of cheap protein supplements, health products and aquafeed ingredients. The benefits, challenges, and policy needs of the IREP approach are also discussed.     

Analysis of the energy intensity of Kazakhstan: from data compilation to decomposition analysis

There are large gaps in energy consumption data and consequently in the estimates of CO₂ emissions from fuel combustion in Kazakhstan. This study provides the first comprehensive review of energy consumption trends in Kazakhstan, discusses several important discrepancies in energy statistics and presents an improved versions of Energy Balances, developed using additional data. The results indicate that Kazakhstan’s energy intensity of gross domestic product (GDP) declined by 30% from 1.14 to 0.8 toe/thousand 2005USD between 2000 and 2014. To understand factors influencing this decline, the change in energy intensity of GDP was decomposed using the Logarithmic Mean Divisia Index I method. The upstream sector (mainly oil and gas) played the most important role in the observed GDP energy intensity change. Although the share of this sector in total GDP increased, causing an increase in energy intensity due to inter-sectoral structural effects, the consequences were counteracted by a twofold decline in the sector’s energy intensity, resulting in a net decrease. On the contrary, the power and heat, transport and household sectors saw an increase in energy intensity between 2000 and 2014. The results clearly demonstrate that there is an urgent need for policies and measures to be put in place in the power and heat, household and transport sectors, to support renewable energy development, increase buildings’ energy efficiencies, replace inefficient stoves and improve heating systems and encourage changes in public transportation systems. Furthermore, improving energy statistics and setting appropriate sectoral energy intensity reduction targets are crucial for achieving real efficiency improvements in the economy.     

Fuel price and technological uncertainty in a real options model for electricity planning

Electricity generation is an important source of total CO₂ emissions, which in turn have been found to relate to an acceleration of global warming. Given that many OECD countries have to replace substantial portions of their electricity-generating capacity over the next 10–20 years, investment decisions today will determine the CO₂-intensity of the future energy mix. But by what type of power plants will old (mostly fossil-fuel-fired) capacity be replaced? Given that modern, less carbon-intensive technologies are still expensive but can be expected to undergo improvements due to technical change in the near future, they may become more attractive, especially if fossil fuel price volatility makes traditional technologies more risky. At the same time, technological progress is an inherently uncertain process itself. In this paper, we use a real options model with stochastic technical change and stochastic fossil fuel prices in order to investigate their impact on replacement investment decisions in the electricity sector. We find that the uncertainty associated with the technological progress of renewable energy technologies leads to a postponement of investment. Even the simultaneous inclusion of stochastic fossil fuel prices in the same model does not make renewable energy competitive compared to fossil-fuel-fired technology in the short run based on the data used. This implies that policymakers have to intervene if renewable energy is supposed to get diffused more quickly. Otherwise, old fossil-fuel-fired equipment will be refurbished or replaced by fossil-fuel-fired capacity again, which enforces the lock-in of the current system into unsustainable electricity generation.     

The production of hydrogen fuel from renewable sources and its role in grid operations

Understanding the scale and nature of hydrogen's potential role in the development of low carbon energy systems requires an examination of the operation of the whole energy system, including heat, power, industrial and transport sectors, on an hour-by-hour basis. The Future Energy Scenario Assessment (FESA) software model used for this study is unique in providing a holistic, high resolution, functional analysis, which incorporates variations in supply resulting from weather-dependent renewable energy generators. The outputs of this model, arising from any given user-definable scenario, are year round supply and demand profiles that can be used to assess the market size and operational regime of energy technologies. FESA was used in this case to assess what - if anything - might be the role for hydrogen in a low carbon economy future for the UK.In this study, three UK energy supply pathways were considered, all of which reduce greenhouse gas emissions by 80% by 2050, and substantially reduce reliance on oil and gas while maintaining a stable electricity grid and meeting the energy needs of a modern economy. All use more nuclear power and renewable energy of all kinds than today's system. The first of these scenarios relies on substantial amounts of ‘clean coal’ in combination with intermittent renewable energy sources by year the 2050. The second uses twice as much intermittent renewable energy as the first and virtually no coal. The third uses 2.5 times as much nuclear power as the first and virtually no coal.All scenarios clearly indicate that the use of hydrogen in the transport sector is important in reducing distributed carbon emissions that cannot easily be mitigated by Carbon Capture and Storage (CCS). In the first scenario, this hydrogen derives mainly from steam reformation of fossil fuels (principally coal), whereas in the second and third scenarios, hydrogen is made mainly by electrolysis using variable surpluses of low-carbon electricity. Hydrogen thereby fulfils a double facetted role of Demand Side Management (DSM) for the electricity grid and the provision of a ‘clean’ fuel, predominantly for the transport sector. When each of the scenarios was examined without the use of hydrogen as a transport fuel, substantially larger amounts of primary energy were required in the form of imported coal.The FESA model also indicates that the challenge of grid balancing is not a valid reason for limiting the amount of intermittent renewable energy generated. Engineering limitations, economic viability, local environmental considerations and conflicting uses of land and sea may limit the amount of renewable energy available, but there is no practical limit to the conversion of this energy into whatever is required, be it electricity, heat, motive power or chemical feedstocks.     

Supplementing an emissions tax by a feed-in tariff for renewable electricity to address learning spillovers

In the presence of learning spillovers related to renewable energy technologies, an optimal strategy to mitigate climate change should complement an emissions tax by a subsidy for renewables. This article addresses the question how such subsidy should be designed. It is shown that the widely-used approach of a revenue-neutral fixed feed-in tariff can yield an optimal outcome under restrictive conditions only. It has to be adapted continuously as the electricity price changes. Moreover, funding the tariff by a surcharge on the electricity price has important implications for the design of the emission tax. The optimal tax rate has to be below the Pigovian level, differentiated across fossil fuels and adapted over time as the patterns of technological development change. These requirements may pose a formidable challenge for practical decision-making. However, it is important to point out that the eventual choices made with respect to the design and funding of a feed-in tariff have to be based on a careful and more comprehensive policy assessment, including, inter alia, economic effects beyond the electricity sector and existing institutional constraints.