Household welfare implications of fossil fuel subsidy reforms in developing countries

With over 200 countries reaching an agreement with the stated aim of restricting global warming to “well below 2° C above pre-industrial levels” – the most comprehensive climate change agreement was recently signed. Though most of the hard work lies ahead, it marks an important first step for the collective global community to address climate change. Fossil fuels continue to remain one of the largest contributors to greenhouse gas emissions and for many developing countries high levels fossil fuels continues to enable an overconsumption of fossil fuels. Given the sensitivity of governments to subsidy reforms, this study examines the household welfare implications of the removal of fossil fuel subsidies. It finds that while welfare implications are unambiguously positive for government the results are mixed for private households, although in an overwhelming majority of cases, the results are positive. However, even in the cases where the welfare implications are negative for private households we find that it is possible for governments to carry out the reforms in such a way as to be welfare improving to households incomes by compensating them with some of the fiscal savings gained from the subsidy reform.     

Historical carbon budget of the brazilian ethanol program

This work models the carbon neutralization capacity of Brazil's ethanol program since 1975. In addition to biofuel, we also assessed the mitigation potential of other energy products, such as, bioelectricity, and CO₂ emissions captured during fermentation of sugar cane's juice. Finally, we projected the neutralization capacity of sugar cane's bio-energy system over the next 32 years. The balance between several carbon stocks and flows was considered in the model, including the effects of land-use change. Our results show that the neutralization of the carbon released due to land-use change was attained only in 1992, and the maximum mitigation potential of the sugar cane sector was 128 tonnes of CO₂ per ha in 2006. An ideal reconstitution of the deployment of the sugar cane sector, including the full exploitation of bio-electricity's potential, plus the capture of CO₂ released during fermentation, shows that the neutralization of land-use change emissions would have been achieved in 1988, and its mitigation potential would have been 390 tCO₂/ha. Finally, forecasts of the sector up to 2039 shows that the mitigation potential in 2039 corresponds to 836 tCO₂/ha, which corresponds to 5.51 kg of CO₂ per liter of ethanol produced, or 55% above the negative emission level.     

Life cycle assessment and environmental life cycle costing analysis of lignocellulosic bioethanol as an alternative transportation fuel

The objective of this paper is to conduct Life Cycle Assessment (LCA) and Environmental Life Cycle Costing (ELCC) studies for lignocellulosic bioethanol blends [E10 and E85 (10% and 85% by volume of bioethanol with gasoline, respectively)] and conventional gasoline (CG). To compare the environmental performance and economic advantage of the selected fuel blends, the impact potentials and the cost of fuel applications per kilometer by a middle size car was evaluated. According the LCA results, one kilometer driven by E10 and E85 fueled vehicles could reduce the greenhouse gas (GHG) emissions by 4.3% and 47% and ozone layer depletion emissions by 3% and 66%, respectively, relative to CG. However, shifting from gasoline to bioethanol increases the emissions that contribute to eutrophication and photochemical ozone depletion. In terms of acidification potential, E85 shows a more favorable result relative to E10 and CG. According to the ELCC analysis, E85 fuel use provides a 23% lower driving cost relative to CG based on a-1 km driving distance. The results showed that E85 seems to be the best alternative in terms of both GHG emission and fuel production cost reduction compare to CG.     

Global land-use implications of first and second generation biofuel targets

Recently, an active debate has emerged around greenhouse gas emissions due to indirect land use change (iLUC) of expanding agricultural areas dedicated to biofuel production. In this paper we provide a detailed analysis of the iLUC effect, and further address the issues of deforestation, irrigation water use, and crop price increases due to expanding biofuel acreage. We use GLOBIOM – an economic partial equilibrium model of the global forest, agriculture, and biomass sectors with a bottom-up representation of agricultural and forestry management practices. The results indicate that second generation biofuel production fed by wood from sustainably managed existing forests would lead to a negative iLUC factor, meaning that overall emissions are 27% lower compared to the “No biofuel” scenario by 2030. The iLUC factor of first generation biofuels global expansion is generally positive, requiring some 25 years to be paid back by the GHG savings from the substitution of biofuels for conventional fuels. Second generation biofuels perform better also with respect to the other investigated criteria; on the condition that they are not sourced from dedicated plantations directly competing for agricultural land. If so, then efficient first generation systems are preferable. Since no clear technology champion for all situations exists, we would recommend targeting policy instruments directly at the positive and negative effects of biofuel production rather than at the production itself.     

The synthesis of bottom-up and top-down approaches to climate policy modeling: Electric power technologies and the cost of limiting US CO2 emissions

In the US, the bulk of CO₂ abatement induced by carbon taxes comes from electric power. This paper incorporates technology detail into the electricity sector of a computable general equilibrium model of the US economy to characterize electric power's technological margins of adjustment to carbon taxes and to elucidate their general equilibrium effects. Compared to the top-down production function representation of the electricity sector, the technology-rich hybrid specification produces less abatement at a higher welfare cost, suggesting that bottom-up models do not necessarily generate lower costs of abatement than top-down models. This result is shown to be sensitive to the elasticity with which technologies’ generating capacities adjust to relative prices.     

Energy and greenhouse gas emission effects of corn and cellulosic ethanol with technology improvements and land use changes

Use of ethanol as a transportation fuel in the United States has grown from 76 dam³ in 1980 to over 40.1 hm³ in 2009 — and virtually all of it has been produced from corn. It has been debated whether using corn ethanol results in any energy and greenhouse gas benefits. This issue has been especially critical in the past several years, when indirect effects, such as indirect land use changes, associated with U.S. corn ethanol production are considered in evaluation. In the past three years, modeling of direct and indirect land use changes related to the production of corn ethanol has advanced significantly. Meanwhile, technology improvements in key stages of the ethanol life cycle (such as corn farming and ethanol production) have been made. With updated simulation results of direct and indirect land use changes and observed technology improvements in the past several years, we conducted a life-cycle analysis of ethanol and show that at present and in the near future, using corn ethanol reduces greenhouse gas emission by more than 20%, relative to those of petroleum gasoline. On the other hand, second-generation ethanol could achieve much higher reductions in greenhouse gas emissions. In a broader sense, sound evaluation of U.S. biofuel policies should account for both unanticipated consequences and technology potentials. We maintain that the usefulness of such evaluations is to provide insight into how to prevent unanticipated consequences and how to promote efficient technologies with policy intervention.     

The benchmarks of carbon emissions and policy implications for China's cities: Case of Nanjing

The development of urbanization is accelerating in China, and there are great pressures and opportunities in cities to reduce carbon emissions. An emissions inventory is a basic requirement for analyzing emissions of greenhouse gases (GHGs), their potential reduction and to realize low-carbon development of cities. This study describes a method to establish a GHGs emissions inventory in Chinese cities for 6 emission sources including industrial energy consumption, transportation, household energy consumption, commercial energy consumption, industrial processes and waste. Nanjing city was selected as a representative case to analyze the characteristics of carbon emissions in Chinese cities. The results show that carbon emissions in Nanjing have increased nearly 50% during the last decade. The three largest GHGs contributors were industrial energy consumption, industrial processes and transportation, which contributed 37–44%, 35–40% and 6–10%, respectively, to the total GHGs emissions. Per GDP carbon emissions decreased by 55% from 2002 to 2009, and the per capita and per GDP carbon emissions were comparable or even lower than the world average levels. These results have important policy implications for Chinese cities to control their carbon emissions.     

Scenarios for shale gas development and their related land use impacts in the Baltic Basin,Northern Poland

Scenarios for potential shale gas development were modelled for the Baltic Basin in Northern Poland for the period 2015–2030 using the land allocation model EUCS100. The main aims were to assess the associated land use requirements, conflicts with existing land use, and the influence of legislation on the environmental impact. The factors involved in estimating the suitability for placement of shale gas well pads were analysed, as well as the potential land and water requirements to define 2 technology-based scenarios, representing the highest and lowest potential environmental impact. 2 different legislative frameworks (current and restrictive) were also assessed, to give 4 combined scenarios altogether. Land consumption and allocation patterns of well pads varied substantially according to the modelled scenario. Potential landscape fragmentation and conflicts with other land users depended mainly on development rate, well pad density, existing land-use patterns, and geology. Highly complex landscapes presented numerous barriers to drilling activities, restricting the potential development patterns. The land used for shale gas development could represent a significant percentage of overall land take within the shale play. The adoption of appropriate legislation, especially the protection of natural areas and water resources, is therefore essential to minimise the related environmental impact.     

Accounting for quality: Issues with modeling the impact of R&D on economic growth and carbon emissions in developing economies

The literature on climate policy modeling has paid scant attention to the important role that R&D is already playing in industrializing countries such as China, where R&D investments are targeting not only productivity improvements but also enhancements in the quality and variety of products. We focus here on the effects of quality-enhancing innovation on energy use and GHG emissions in developing countries. We construct an analytical model to show that efficiency-improving and quality-enhancing R&D have opposing influences on energy and emission intensities, with the efficiency-improving R&D having an attenuating effect and quality-enhancing R&D having an amplifying effect. We find that the balance of these opposing forces depends on the elasticity of upstream output with respect to efficiency-improving R&D, the elasticity of downstream output with respect to upstream quality-enhancing R&D occurring upstream, and the relative shares of emissions-intensive inputs in the costs of production of upstream versus downstream industries. We employ a computable general equilibrium (CGE) simulation of the Chinese economy to illustrate the difficulties that arise in incorporating these results into models for climate policy analysis, and we offer a simple remedy.     

Imported palm oil for biofuels in the EU: Profitability,greenhouse gas emissions and social welfare effects

We examine the social desirability of renewable diesel production from imported palm oil in the EU when greenhouse gas emissions are taken into account. Using a partial market equilibrium model, we also study the sectoral social welfare effects of a biofuel policy consisting of a blend mandate in a small EU country (Finland), when palm oil based diesel is used to meet the mandated quota for biofuels. We develop a market equilibrium model for three cases: i) no biofuel policy, ii) biofuel policy consisting of socially optimal emission-based biofuel tax credit and iii) actual EU biofuel policy. Our results for the EU biofuel market, Southeast Asia and Finland show very little evidence that a large scale use of imported palm oil in diesel production in the EU can be justified by lower greenhouse gas emission costs. Cuts in emission costs may justify extensive production only if low or negative land-use change emissions result from oil palm cultivation and if the estimated per unit social costs of emissions are high. In contrast, the actual biofuel policies in the EU encourage the production of palm oil based diesel. Our results indicate that the sectoral social welfare effects of the actual biofuel policy in Finland may be negative and that if emissions decrease under actual biofuel policy, the emission abatement costs can be high regardless of the land use change emissions.     

Policies for improving the efficiency of the Brazilian light-duty vehicle fleet and their implications for fuel use,greenhouse gas emissions and land use

The increase in greenhouse gas concentrations in the atmosphere, energy security issues and competition for land use are putting pressure on governments and policymakers. However, these three subjects are not usually treated in integrated form. This paper shows that the implementation of energy efficiency policies combined with policies to encourage use of biofuels can help reduce greenhouse gases emissions while easing land use competition from sugarcane ethanol in Brazil. By adapting the ADVISOR (Advanced Vehicle Simulator) software to evaluate vehicle efficiency, and by estimating the Brazilian light-duty vehicle market share based on historical data, this paper estimates the possible levels of GHG emissions and area planted with sugarcane in 2030 in the country. The findings indicate that reductions from 8% to 20% in greenhouse gas emissions and 0.9–1.8 million ha in sugarcane planted area are possible with no significant technological breakthroughs over the horizon to 2030 in comparison with a baseline scenario.     

Strategies for carbon dioxide emissions reductions: Residential natural gas efficiency,economic, and ancillary health impacts in Maryland

As part of its commitments to the Regional Greenhouse Gas Initiative (RGGI), the State of Maryland, USA, auctions emission permits to electric utilities, creating revenue that can be used to benefit consumers and the environment. This paper explores the CO₂ emissions reductions that may be possible by allocating some of that revenue to foster efficiency improvements in the residential sector’s use of natural gas. Since these improvements will require changes to the capital stock of houses and end use equipment, efficiency improvements may be accompanied by economic and ancillary health impacts, both of which are quantified in this paper.     

Energy balance and greenhouse gas emissions from the production and sequestration of charcoal from agricultural residues

Agricultural residues (wheat/barley/oat straw) can be used to produce charcoal, which can then be either landfilled off-site or spread on the agricultural field as a means for sequestering carbon. One centralized and five portable charcoal production technologies were explored in this paper. The centralized system produced 747.95 kg-CO₂eq/tonne-straw and sequestered 0.204 t-C/t-straw. The portable systems sequestered carbon at 0.141–0.217 t-C/t-straw. The net energy ratio (NER) of the portable systems was higher than the centralized one at 10.29–16.26 compared to 6.04. For the centralized system, the carbon sequestration and the cumulative energy demand were most sensitive to the charcoal yield. Converting straw residues into charcoal can reduce GHG emissions by 80% after approximately 8.5 years relative to the baseline of in-field decomposition, showing these systems are effective carbon sequestration methods.     

Dynamics of the oil transition: Modeling capacity,depletion, and emissions

The global petroleum system is undergoing a shift to substitutes for conventional petroleum (SCPs). The Regional Optimization Model for Emissions from Oil Substitutes, or ROMEO, models this oil transition and its greenhouse gas impacts. ROMEO models the global liquid fuel market in an economic optimization framework, but in contrast to other models it solves each model year sequentially, with investment and production optimized under uncertainty about future prevailing prices or resource quantities. ROMEO includes more hydrocarbon resource types than integrated assessment models of climate change. ROMEO also includes the carbon intensities and costs of production of these resources. We use ROMEO to explore the uncertainty of future costs, emissions, and total fuel production under a number of scenarios. We perform sensitivity analysis on the endowment of conventional petroleum and future carbon taxes. Results show incremental emissions from production of oil substitutes of ≈ 0–30 gigatonnes (Gt) of carbon over the next 50 years (depending on the carbon tax). Also, demand reductions due to the higher cost of SCPs could reduce or eliminate these increases. Calculated emissions are highly sensitive to the endowment of conventional oil and less sensitive to a carbon tax.     

Life cycle greenhouse gas emissions impacts of the adoption of the EU Directive on biofuels in Spain. Effect of the import of raw materials and land use changes

The objective of this paper is to evaluate the greenhouse gas (GHG) emissions impacts of the use of different alternative biofuels in passenger vehicles in Spain in order to meet EU biofuel goals. Different crop production alternatives are analysed, including the possible import of some raw materials. Availability of land for national production of the raw materials is analysed and indirect land use changes and associated GHG emissions are quantified.There are important differences in GHG emissions of biofuels depending on the raw material used and whether this is domestically produced or imported. Ethanol production using imported cereals and FAME production using domestic rapeseed have the highest GHG emissions per kilometre driven. Fatty acid methyl ester (FAME) production from sunflower has shown the lowest emissions. When taking into account the results of GHG emissions savings per hectare, these findings are somehow reversed. Production of ethanol and around 12% of FAME can be done domestically. The rest will need to be imported and will cause indirect land use change (ILUC). Therefore, ethanol production will not displace any land, whereas FAME production will displace some amounts of land. Calculated ILUC factors are 29%-34%. The additional GHG emissions due to these indirect land use changes are significant (67%-344% of life cycle GHG emissions).Standalone, the EU biofuel targets can have important benefits for Spain in terms of global warming emissions avoided. However, when considering the impact of land use change effects, these benefits are significantly reduced and can even be negative.     

Comparison of the technical potential for hydrogen,battery electric,and conventional light-duty vehicles to reduce greenhouse gas emissions and petroleum consumption in the United States

Light-duty vehicles (LDV) are responsible for a large fraction of petroleum use and are a significant source of greenhouse gas (GHG) emissions in the United States. Improving conventional gasoline-powered vehicle efficiency can reduce petroleum demand, however efficiency alone cannot reach deep GHG reduction targets, such as 80% below the 1990 LDV GHG emissions level. Because the cost and availability of low-GHG fuels will impose limits on their use, significant reductions in GHG emissions will require combinations of fuel and vehicle technologies that both increase efficiency and reduce the emissions from fuel production and use. This paper examines bounding cases for the adoption of individual technologies and then explores combinations of advanced vehicle and fuel technologies. Limits on domestic biofuel production—even combined with significant conventional combustion engine vehicle improvements—mean that hydrogen fuel cell electric or battery electric vehicles fueled by low-GHG sources will be necessary. Complete electrification of the LDV fleet is not required to achieve significant GHG reduction, as replacing 40% of the LDV fleet with zero-emission hydrogen vehicles while achieving optimistic biofuel production and conventional vehicle improvements can allow attainment of a low GHG emission target. Our results show that the long time scale for vehicle turnover will ensure significant emissions from the LDV sector, even when lower emission vehicles and fuels are widely available within 15 years. Reducing petroleum consumption is comparatively less difficult, and significant savings can be achieved using efficient conventional gasoline-powered vehicles.     

On sustainability of bioenergy production: Integrating co-emissions from agricultural intensification

Biomass from cellulosic bioenergy crops is seen as a substantial part of future energy systems, especially if climate policy aims at stabilizing CO₂ concentration at low levels. However, among other concerns of sustainability, the large-scale use of bioenergy is controversial because it is hypothesized to increase the competition for land and therefore raise N₂O emissions from agricultural soils due to intensification. We apply a global land-use model that is suited to assess agricultural non-CO₂ GHG emissions. First, we describe how fertilization of cellulosic bioenergy crops and associated N₂O emissions are implemented in the land-use model and how future bioenergy demand is derived by an energy-economy-climate model. We then assess regional N₂O emissions from the soil due to large-scale bioenergy application, the expansion of cropland and the importance of technological change for dedicated bioenergy crops. Finally, we compare simulated N₂O emissions from the agricultural sector with CO₂ emissions from the energy sector to investigate the real contribution of bioenergy for low stabilization scenarios.As a result, we find that N₂O emissions due to energy crop production are a minor factor. Nevertheless, these co-emissions can be significant for the option of removing CO₂ from the atmosphere (by combining bioenergy use with carbon capture and storage (CCS) options) possibly needed at the end of the century for climate mitigation. Furthermore, our assessment shows that bioenergy crops will occupy large shares of available cropland and will require high rates of technological change at additional costs.     

Designing an electricity tax system in presence of international regulations and multiple public goals: An empirical assessment

The European competition rules restrict governments’ opportunity to differentiate terms of energy accessibility among firms and industries. This easily runs counter with regional and industrial goals of national energy policies. Norway levies a tax on use of electricity, but exempts main industrial usages. This analysis assesses alternative, internationally legal, designs of the system in terms of their effects on efficiency and distribution, including industrial objectives. Among the reforms we explore, removing the exemptions would be the most effective way of raising revenue, but it would be politically costly by deteriorating the competitiveness of today's favoured industries. An entire abolishment of the electricity tax, and replacing revenue by increased VAT, would generate a more equal distribution of standard of living and, at the same time, avoid the trade-off between efficiency and competitiveness.     

An optimal mix of solar PV,wind and hydro power for a low-carbon electricity supply in Brazil

Brazil has to expand its power generation capacities due to significant projected growth of demand. The government aims at adding hydropower capacities in North–Brazil, additional to wind and thermal power generation. However, new hydropower may affect environmentally and socially sensitive areas in the Amazon region negatively while thermal power generation produces greenhouse gas emissions. We therefore assess how future greenhouse gas emissions from electricity production in Brazil can be minimized by optimizing the daily dispatch of photovoltaic (PV), wind, thermal, and hydropower plants. Using a simulation model, we additionally assess the risk of loss of load. Results indicate that at doubled demand in comparison to 2013, only 2% of power production has to be provided by thermal power. Existing reservoirs of hydropower are sufficient to balance variations in renewable electricity supply at an optimal mix of around 37% of PV, 9% of wind, and 50% of hydropower generation. In a hydro-thermal only scenario, the risk of deficit increases tenfold, and thermal power production four-fold. A sensitivity analysis shows that the choice of meteorological data sets used for simulating renewable production affects the choice of locations for PV and wind power plants, but does not significantly change the mix of technologies.