Workshop on Mitigation of CO2 emissions by the agricultural sector, Bergen, 3 Oct 2011 Taran Fæhn,...
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Transcript of Workshop on Mitigation of CO2 emissions by the agricultural sector, Bergen, 3 Oct 2011 Taran Fæhn,...
Workshop on Mitigation of CO2 emissions by the agricultural sector,
Bergen, 3 Oct 2011
Taran Fæhn, Statistics Norway:Taran Fæhn, Statistics Norway:
Climate policy aims and Climate policy aims and emissions pricing in Norway.emissions pricing in Norway.
2
Carbon pricing - Some principles• Social benefit = sum of marginal damage= emissions price
Global 1.best: same price (ETS)Distribution: Allocation of qoutasNecessary global price 2020 (IEA/OECD): 50$ (250NOK) – sharply increasing towards 2050: 150-250$
• 2. best: Rich countries: Lower marginal benefit from emitting ->higher price (i.e. use carbon pricing as distributional instrument)
• Norwegian climate policies?• The Olsen commission:
– The EU price is a reasonable point of departure– Cost efficiency: All sources uniform price like EU’s – It is not cost efficient to have a national target– If national target desirable, use a uniform price (even if carbon leakage and EU ETS)– Only if market failures, supplement with appropriate standards, regulation, subsidies…
• A national targetoptimal price = the necessary price to meet target
under: no damage over: unacceptable damage
3
The Climate Agreement and Norway’s pledges post-Copenhagen:• Overfulfill the Kyoto commitments by 10% (quotas/CDM)
• Within 2020: Cut the globale climate gas emissions equivalent
to 30% of our 1990 emissions
• Participate in EU ETS phase 2 (2008-12) and 3 (2013-2020)
• 2/3s of the reduction from a specified 2020 benchmark ”seem
obtainable” domestically
• Carbon neutrality within 2030, if other industrial countries
make considerable commitments, too
4
A quantitative interpretation of the domestic goal in 2020 (in our mandate):
12-14 million tons ”non-forest”(15-17 incl. forest measures)
45-47 million tons ”non-forest”(42-44 incl. forest measures)
New measuresNew measures
BenchmarkObserved (until 2008)Global contribution capDomestic target
5
The Climate Cure 2020 Two approaches:
TOP-DOWN approach (Statistics Norway):Macroeconomic CGE analysis :Computations of totale and marginal costs of the sum of measures necessary – Drawback : excisting technologies– Innovation: integrating information from 1)
BOTTOM-UP approach:Sector-by-sector analyses:
Detailed information on costs and
abatement potentials of different
measures
6
The macroeconomic scenariosA. The international commitments and pledges, only
– The Kyoto commitments– The aims on global contributions post-Kyoto– The EU ETS participation phase 2 and 3
B. Adding a national target– uniform pricing =
approximating a cost-effective regime
C. Sheltering the EU ETS sector– No additional policies in the EU ETS sector
Cost-efficient EU ETS market Protect cornerstone enterprises Avoid carbon leakage
– Same international and domestic targets:burden-shifting to non-EU ETS
7
THE MODEL MSG-TECH of the Norwegian economy
Top-down features:
- Economy-Energy-Emission CGE model (6 Kyoto-gases and 6 local pollutants)
- Small, open economy features (no terms-of-trade effects)
- Relatively disaggregate (40 industries, 60 goods) to capture substitution and composition effects
- Second-best features of the real economy (market failures and policy distortions)
- Recycling through labour taxation and endogenous labour supply responses
8
THE MODEL MSG-TECH
Bottom-up features:
- Current and future technological options modelled within:- four process manufacturing industries (metals, chemicals, mineral products, pulp and paper) - petroleum industry- road transport within industries, households, public sector
- Data and modelling: - detailed, plant-specific project studies of costs and abatement
potentials- marginal abatement cost curves attributed to each industry- simultaneous determination of technological adaptation and other
adjustments to GHG policy instruments
(- Other technological change: Exogenous TFP growth and substitution (estimated on historical data)
9
Modelling technological abatement costsill: Petroleum industry:
VVVX
CVV
XU
DUU
UUdccfcDC
UUcfD
/~
)( )6(
~ )5(
/ )4(
~ )3(
0./)( )2(
0./)( )1(
D = 9E-07c2 - 0,0003c + 0,0118
R2 = 0,9696
-1
0
1
2
3
4
5
6
7
8
9
10
0 500 1000 1500 2000 2500 3000 3500
Marginal cost
Aba
tem
ent m
ill to
nnes
The detailed projects:Electrification
Wind power installations
Power efficiency improvements
CCS
The equations:
The abatement curve:
A) International commitments/ aimsA) International commitments/ aimsEuropean: Industries:
2008-12: Petroleum, Refining, Process industries (not aluminium), Power
(= 40% of emissions)
From 2013: Also aluminium
( >50% of emissions)
(From 2012: Aviation market (not modelled))
Global:KYOTO COMMITMENTS 2008-2012Target: 10% Over-fulfillment = 44,9 mill tons CO2-eq annually
PLEDGES FOR 2020 TO UNTarget: 2020: cap of 35 millioner tonn CO2-ekvivalenter2013-2020: Assumed: As in Kyoto-period
11
0
10
20
30
40
50
60
70
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Mil
lio
ner
to
nn
CO
2-ek
viva
len
ter
Referansebane totalt
Globalt bidrag
Referansebane EU-ETS
Europeisk bidrag
International contributions- benchmarks- commitments/pledges
Benchmark total
Global contribution
Benchmark EU ETS
European contribution
12
The international quota prices
-50
50
150
250
350
450
550
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
eu-ets
f leksible mek
offshore
Flexible mechanisms
GHG emissions in 2020 reduced by 3 mill tons (dvs. ¼-way)• Only in the EU ETS sector•Technology measures: 1,1 mill tons
Permit purchases: 18 millt. in 2020; i.e. 86% total global target
Social costs: 1,6 bill. NOK yearly (annuity) • Primarily permit purchases• NOTE: No transition costs
International commitments/aims International commitments/aims
ResultsResults
14
Policy B: Uniform emission price
The domestic, uniform emission price :
-
50,00
100,00
150,00
200,00
250,00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
EU
RO
/to
nn
CO
2-ek
v.
190€/t (1500 NOK/t)
15
0
10
20
30
40
50
60
70
1 2 3 4 5 6 7 8 9 10 11 12 13
Mill
ione
r to
nn
CO
2-ek
viva
lent
er
Referansebane totalt
Innenlandsk bidrag totalt
Globalt bidrag
Referansebane EU-ETS
Innenlandsk bidrag EU-ETS
Europeisk bidrag
Policy B: Uniform emission price
Benchmark total
Domestic contribution
Global contribution
Benchmark EU ETS
Domestic contribution EU ETS
European contribution
16
The abatement composition:
- 50/50 technological investments and others (within technol)
Policy B: Uniform emission price
-12000000
-10000000
-8000000
-6000000
-4000000
-2000000
0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Non-tech: Residual
Non-tech: EU ETS
Tech: Residual
Tech: EU ETS other
Tech: Offshore
Mill to CO2 eq
17
The abatement costs:
Policy B: Uniform emission price
• Welfare loss: 5 bill NOK, i.e. more than tripled
• Important preconditions:– Equal emission prices for all!– Global and European contribution targets in excess are met through quota
purchase– Revenue is fed back as reduced labour tax, which improves efficiency– Subsidised onshore process industries are crowded out and they are relatively
unproductive– No abatement nor downscaling of primary industries
18
Information from the bottom-up studies:Some technological measures/adaptations are omitted
Buildings: Many more than free measures (conversion and efficiency measures) ca 2 millt
Other manufacturing: conversion and efficiency ca ½ millt
Agriculture: diffuse emissions/sinks ca 1 millt Skogbruk: Sinks ca ½ millt
ca 4 millt
Foto: Marianne Gjørv
Can it be even more cost effective?
19
Nr Measure Potential (2020)(tonn CO2-ekv)
Unit cost (kr/tonn CO2-
ekv)1 Biogass trinn 1: 30 prosent
husdyrgjødsel136 500 1700
2 Biogass trinn 2: 30 - 60 prosent husdyr gjødsel
136 500 3100
3 Biogass trinn 1 + sambehand ling[2] med 200 000 tonn våtorgan isk avfall
147 500 1200
4 Biogass trinn 2 + sambehand ling med 200 000 tonn våtorgan isk avfall
147 500 2700
5 Optimalisering av spredningstidspunkt og -metode for husdyrgjødsel og oppfølging av gjødselplan
113 000 540
6 Redusert norm for gjødsling og tiltak for drenering og redusert jordpakking
93 000 -1200
7 Stans i nydyrking av myr og restaurering av dyrket myr
78 000 145
8 Produksjon av biokull fra halm og lagring i jordbruksjord
560 000 900
9 Erstatning av olje, propan og el-kjel i veksthus med forbrenning av 260 000 m3 flis
45 500 300
10 Biogass fra 60 prosent tilgjengelig hus dyrgjødsel i Rogaland innført på gassnettet
62 000[6] 500
11 Innblanding av 10 prosent vol bio diesel i merket diesel[7]
42 000 1050
20
C: Sheltering the EU ETS sector
Emissions price in non-EI ETS (2020): 3400 NOK/t
0
500
1000
1500
2000
2500
3000
3500
400020
08
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
NO
K/t
on
n C
O2-
ekv.
utslippspris rest
utslippspris EU-ETS
Non EU ETS
EU ETS
21
C: Sheltering the EU ETS sector
-7,00
-6,00
-5,00
-4,00
-3,00
-2,00
-1,00
0,00
teknologitiltakkvotepliktige
andretilpasningerkvotepliktige
teknologitiltakrestsektor
andretilpasningerrestsektor
mil
lio
ner
to
nn
CO
2-ek
viva
len
ter
lik pris for alle
kvotepliktige skjermes
Emission abatement 2020 (mill tons)
Uniform priceEU ETS sheltered
22
• Social costs: Doubling from B– 10 bill/year (annuity). – Permit purchases cost more (less EU-ETS-red -> more EU-quotas)– Domestic abatement much more expensive– More revenue (high price an inelastic emission sources) (-)– More technological adaptation in transport (extrapolation)
C: Sheltering the EU ETS sector
23
Main results
• Only the international commitments/pledges– At least two prices apply– Costs are nevertheless low towards 2020 (Climate cure
overestimated the price 40€ in 2020?)– Post-2020?.. depending on the global efforts
• Domestic target– Marginal cost in 2020: 1500 NOK /200 €– More than tripling the total cost
• Domestic target and sheltering– Another doubling of marginal and total costs
24
Several targets imply several emission prices
Illustrated by the computations:– Global target, only: Use the global marginal cost – EU ETS participation: EU-ETS price– Extra expectations from offshore EU ETS + tax– National target: Domestic marginal cost (=1500,- NOK)– National only for non-EU ETS: nonEU ETS marginal cost (=3400,-)
• The more objectives in the climate policy, the more costly and the higher number of prices/marginal costs
• The reasonable emission price/marginal cost estimate for agriculture???