Including bottom-up emission abatement technologies in a large-scale global economic model for policy assessments

Economic models with global and economy-wide coverage can be useful tools to assess the impact of energy and environmental policies, but often disregard finer technological details of emission abatement measures. We present a framework for integrating and preserving detailed bottom-up information for end-of-pipe abatement technologies into a large-scale numerical model. Using an activity analysis approach, we capture non-linearities that typically characterise bottom-up abatement cost curves derived from discrete technology options. The model framework is flexible and can accommodate greenhouse gas and air pollution abatement, as well as modelling carbon capture and storage (CCS). Here, we illustrate this approach for non-CO₂ greenhouse gases in a large-scale Computable General Equilibrium (CGE) model and compare results with a fitted marginal abatement curve and with completely excluding non-CO₂ greenhouse gases. Results show that excluding non-CO₂ abatement options leads to an overestimation of the total abatement cost. When the detailed bottom-up technology implementation is replaced by a fitted smooth marginal abatement cost curve, significant over- or underestimations of abatement levels and costs can emerge for particular pollutant-sector-region combinations.     

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.     

Biomass co-firing options on the emission reduction and electricity generation costs in coal-fired power plants

Co-firing offers a near-term solution for reducing CO₂ emissions from conventional fossil fuel power plants. Viable alternatives to long-term CO₂ reduction technologies such as CO₂ sequestration, oxy-firing and carbon loop combustion are being discussed, but all of them remain in the early to mid stages of development. Co-firing, on the other hand, is a well-proven technology and is in regular use though does not eliminate CO₂ emissions entirely. An incremental gain in CO₂ reduction can be achieved by immediate implementation of biomass co-firing in nearly all coal-fired power plants with minimum modifications and moderate investment, making co-firing a near-term solution for the greenhouse gas emission problem. If a majority of coal-fired boilers operating around the world adopt co-firing systems, the total reduction in CO₂ emissions would be substantial. It is the most efficient means of power generation from biomass, and it thus offers CO₂ avoidance cost lower than that for CO₂ sequestration from existing power plants. The present analysis examines several co-firing options including a novel option external (indirect) firing using combustion or gasification in an existing coal or oil fired plant. Capital and operating costs of such external units are calculated to determine the return on investment. Two of these indirect co-firing options are analyzed along with the option of direct co-firing of biomass in pulverizing mills to compare their operational merits and cost advantages with the gasification option.     

Optimal greenhouse gas emissions in NGCC plants integrating life cycle assessment

The optimal design of an energy-intensive process involves a compromise between costs and greenhouse gas emissions, complicated by the interaction between optimal process emissions and supply chain emissions. We propose a method that combines generic abatement cost estimates and the results of existing (LCA) life cycle assessment studies, so that supply chain emissions are properly handled during optimization. This method is illustrated for a (NGCC) natural gas combined cycle power plant model with the following design and procurement options: procurement of natural gas from low-emissions producers, fuel substitution with (SNG) synthetic natural gas from wood, and variable-rate CO₂ capture and sequestration from both the NGCC and SNG plants. Using multi-objective optimization, we show two Pareto-optimal sets with and without the proposed LCA method. The latter can then be shown to misestimate CO₂ abatement costs by a few percent, penalizing alternate fuels and energy-efficient process configurations and leading to sub-optimal design decisions with potential net losses of the order of $1/MWh. Thus, the proposed LCA method can enhance the economic analysis of emissions abatement technologies and emissions legislation in general.     

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.     

Abatement costs of CO2 emissions in the Brazilian oil refining sector

This study aims at estimating the abatement costs of CO₂ emissions of the Brazilian oil refining sector. For greenfield refineries that will be built until 2030, mitigation options include the modification of refining schemes and efficiency gains in processing units. For existing refineries and those already under construction, only mitigation options based on efficiency gains in processing units are evaluated. The abatement cost of each mitigation option was determined on the basis of incremental costs compared with a reference scenario. Two discount rates were applied: one adopted by the Brazil’s government official long term plan (8% p.a.), and another typically adopted by the private oil sector (15% p.a.). Findings indicate that refineries face high abatement costs. The cost of changing the processing scheme of greenfield plants reaches US$100/tCO₂ at 15% p.a. discount rate. Even at 8% p.a. discount rate the abatement cost is higher than US$50/tCO₂. The most promising alternative is thermal energy management, whose abatement cost equals US$20/tCO₂ at 8% p.a. discount rate. However, private investors perceive this option at US$80/tCO₂, which is still high. This difference in cost indicates the need for public policies for promoting carbon mitigation measures in Brazilian oil refineries.     

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.     

Long-term CO2 emissions reduction target and scenarios of power sector in Taiwan

This study analyses a series of carbon dioxide (CO₂) emissions abatement scenarios of the power sector in Taiwan according to the Sustainable Energy Policy Guidelines, which was released by Executive Yuan in June 2008. The MARKAL-MACRO energy model was adopted to evaluate economic impacts and optimal energy deployment for CO₂ emissions reduction scenarios. This study includes analyses of life extension of nuclear power plant, the construction of new nuclear power units, commercialized timing of fossil fuel power plants with CO₂ capture and storage (CCS) technology and two alternative flexible trajectories of CO₂ emissions constraints. The CO₂ emissions reduction target in reference reduction scenario is back to 70% of 2000 levels in 2050. The two alternative flexible scenarios, Rt4 and Rt5, are back to 70% of 2005 and 80% of 2005 levels in 2050. The results show that nuclear power plants and CCS technology will further lower the marginal cost of CO₂ emissions reduction. Gross domestic product (GDP) loss rate in reference reduction scenario is 16.9% in 2050, but 8.9% and 6.4% in Rt4 and Rt5, respectively. This study shows the economic impacts in achieving Taiwan's CO₂ emissions mitigation targets and reveals feasible CO₂ emissions reduction strategies for the power sector.     

Scenario analysis on CO2 emissions reduction potential in China's iron and steel industry

The international climate community has begun to assess a range of possible options for strengthening the international climate change effort after 2012. Analysis of the potential for sector-based emissions reduction and relevant mitigation options will provide the necessary background information for the debate. In order to assess the CO₂ abatement potential of China's steel industry, a model was developed using LEAP software to generate 3 different CO₂ emission scenarios for the industry from 2000 to 2030. The abatement potentials of different scenarios were compared, and their respective feasibilities were assessed according to the cost information. High priority abatement measures were then identified. The results show that the average CO₂ abatement per year in the Recent Policy scenario and in the New Policy scenario, compared with the reference scenario, are 51 and 107 million tons, respectively. The corresponding total incremental costs are 9.34 and 80.95 billion dollars. It is concluded that there is great potential for CO₂ abatement in China's steel industry. Adjusting the structure of the industry and technological advancement will play an important role in emissions reduction. Successful implementation of current sustainable development policies and measures will result in CO₂ abatement at a low cost. However, to achieve higher levels of abatement, the cost will increase dramatically. In the near future, specific energy conservation technologies such as dry coke quenching, exhaust gas and heat recovery equipment will be of great significance. However, taking a long term perspective, emissions reduction will rely more on the adjustment of production processes and the application of more modern large scale plants. Advanced blast furnace technology will inevitably play an important role.     

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.     

Reductions in greenhouse gas emissions and cost by shipping at lower speeds

CO₂ emissions from maritime transport represent a significant part of total global greenhouse gas (GHG) emissions. According to the International Maritime Organization (Second IMO GHG study, 2009), maritime transport emitted 1046 million tons (all tons are metric) of CO₂ in 2007, representing 3.3% of the world's total CO₂ emissions. The International Maritime Organization (IMO) is currently debating both technical and market-based measures for reducing greenhouse gas emissions from shipping. This paper presents investigations on the effects of speed reductions on the direct emissions and costs of maritime transport, for which the selection of ship classes was made to facilitate an aggregated representation of the world fleet. The results show that there is a substantial potential for reducing CO₂ emissions in shipping. Emissions can be reduced by 19% with a negative abatement cost (cost minimization) and by 28% at a zero abatement cost. Since these emission reductions are based purely on lower speeds, they can in part be performed now.     

Income risk of EU coal-fired power plants after Kyoto

Coal-fired power plants enjoy a significant advantage relative to gas plants in terms of cheaper fuel cost. This advantage may erode (or turn into disadvantage) depending on CO₂ emission allowance price. Financial risks are further reinforced when the price of electricity is determined by natural gas-fired plants’ marginal costs. We aim to empirically assess the risks in EU coal plants’ margins up to the year 2020. Parameter values are derived from actual market data. Monte Carlo simulation allows compute the expected value and risk profile of coal plants’ earnings. Future allowance prices may spell significant risks on utilities’ balance sheets.     

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%.     

High efficiency electric power generation: The environmental role

Electric power generation system development is reviewed with special attention to plant efficiency. It is generally understood that efficiency improvement that is consistent with high plant reliability and low cost of electricity is economically beneficial, but its effect upon reduction of all plant emissions without installation of additional environmental equipment, is less well appreciated. As CO₂ emission control is gaining increasing acceptance, efficiency improvement, as the only practical tool capable of reducing CO₂ emission from fossil fuel plant in the short term, has become a key concept for the choice of technology for new plant and upgrades of existing plant. Efficiency is also important for longer-term solutions of reducing CO₂ emission by carbon capture and sequestration (CCS); it is essential for the underlying plants to be highly efficient so as to mitigate the energy penalty of CCS technology application. Power generating options, including coal-fired Rankine cycle steam plants with advanced steam parameters, natural gas-fired gas turbine-steam, and coal gasification combined cycle plants are discussed and compared for their efficiency, cost and operational availability. Special attention is paid to the timeline of the various technologies for their development, demonstration and commercial availability for deployment.     

Targeting existing power plants: EPA emission reduction with wind and demand response

Electricity generation accounts for 40% of CO₂ emissions from fossil fuel combustion in the United States. Section 111 of the Clean Air Act (CAA) allows for greenhouse gas emission regulation by the US Environmental Protection Agency (EPA). In June 2014, EPA issued the Clean Power Plan that proposes regulation of existing power plants via a “best system of emission reduction” or BSER. Reducing carbon dioxide emissions caused by electricity generation is one of the main motivations for increasing wind power and other renewable energy use, and this option is included in the BSER. This paper applies Monte Carlo simulation with a two-stage power flow optimization framework to analyze the potential CO₂ emission reduction with 10% and 20% wind penetration using the proposed BSER. The results show that EPA's BSER does achieve significant emission reduction, but an increase in cost of electricity and load curtailment can result if significant wind is installed without other measures. These concerns are eliminated by including recourse to real-time demand response along with EPA's BSER, suggesting that the proposed BSER, implemented alone, could be insufficient for reaching EPA's target CO₂ reductions while also safeguarding power system reliability and cost.     

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.     

The European power plant infrastructure—Presentation of the Chalmers energy infrastructure database with applications

This paper presents a newly established database of the European power plant infrastructure (power plants, fuel infrastructure, fuel resources and CO₂ storage options) for the EU25 member states (MS) and applies the database in a general discussion of the European power plant and natural gas infrastructure as well as in a simple simulation analysis of British and German power generation up to the year 2050 with respect to phase-out of existing generation capacity, fuel mix and fuel dependency. The results are discussed with respect to age structure of the current production plants, CO₂ emissions, natural gas dependency and CO₂ capture and storage (CCS) under stringent CO₂ emission constraints.     

Use of wastes as option for the mitigation of CO2 emissions in the Brazilian power sector

The present study presents an analysis of the options available for the mitigation of CO₂ emissions in the Brazilian power sector. The objective is to verify the potential use of wastes for electrical energy generation and its competitiveness in comparison with other sources of renewable energy. A comparison was made using marginal abatement cost curves derived from a reference scenario obtained from earlier studies dealing with the expansion of the Brazilian power sector. The results showed that the availability of wastes is significant and that they can be used at a cost 20–60% lower than that of wind power generation, a subsidized source of energy in Brazil. It can therefore be concluded that it would be more efficient if incentives were applied to the use of wastes for electrical power generation since it offers socio-environmental benefits which go far beyond the reduction of CO₂ emissions.     

Potential cost savings from internal/external CO2 emissions trading in the Korean electric power industry

Korea plans to introduce an emissions trading scheme for the controlling greenhouse gas emissions in 2015. Using Shephard's (1970) output distance function, we first estimate the shadow price of CO₂ for power generators in the Korean fossil-fueled electric generation industry. Then, by assuming that each power generator is required to reduce CO₂ emissions by one ton, we compute the potential cost savings from internal trading among generators within the same plant and from external trading across plants at prevailing market prices. The results indicate that, on average, the generators paid $14.63 to abate one ton of CO₂ emissions in 2007. Plants realized additional gains through external trading. In particular, cost savings from trades between different fuel-fired plants were substantial.