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Greenhouse gas abatement, complementary
policies and oil prices
Paul Graham
Manager Energy Futures Research, CSIRO
IEW 2009, 19 June 2009
Presentation overview
• Australian Background
•Greenhouse gas emissions
•Climate policy
• Emission trading scenario overview
• Modelling framework
• Impact of complementary renewables policy
and oil prices assumptions
Australia: high emissions per capita
Country Tons CO2-e Rank
Qatar 67.9 1
United Arab Emirates 36.1 2
Kuwait 31.6 3
Australia 25.6 4
Bahrain 24.8 5
United States 24.5 6
Canada 22.1 7
Brunei 21.7 8
Luxembourg 21 9
Trinidad & Tobago 19.3 10
New Zealand 18.9 11
Japan 10.4 39
China 3.9 99
India 1.9 140
Source: World Resources Institute (2006)
Australia: high emissions per capita
Why?
• Electricity production is over 90% fossil fuel, most
of which is coal
• High proportion of energy intensive mining and
metals manufacturing, mostly for export
•e.g. 80% of all aluminium is exported but it accounts for 12
percent of Australian electricity consumption
• High ownership of relatively less fuel efficient road
vehicles
• Relatively wealthy population and therefore able to
have high material consumption
Australia‟s carbon footprint: small in global terms
Rest of World 21% United States 20.6%
Pakistan 0.8%
Argentina 0.9%
Saudi Arabia 1%
Turkey 1.1%
Poland 1.1%
Spain 1.1%
South Africa 1.2% China 14.7%
Iran 1.4%
Ukraine 1.4%
Australia 1.5%
Indonesia 1.5%
Mexico 1.5%
France 1.5%
South Korea 1.5% Russia 5.7%
Italy 1.6%
United Kingdom 1.9%
Source: World Resources Canada 2% India 5.6%
Institute (2006)
Brazil 2.5%
Germany 3% Japan 3.9%
Australian greenhouse gas reduction policies
• Australian emission trading proposals
• The Garnaut Review examined 450ppm and 550ppm
CO2-e concentration mitigation paths
• The Australian Government proposed two paths
consistent with 510-550ppm CO2-e concentration
• Major complementary policies
• The Mandatory Renewable Energy Target (MRET) is
proposed to require 20% renewable electricity
generation by 2020
• Low emission technology funding
Carbon Pollution Reduction Scheme
• The government‟s emission cap and trading scheme
• Target between 5 and 15% reduction below 2000
emission levels in 2020 and 60% reduction by 2050
(called CPRS-5 and CPRS-15)
• Final legislated targets depend on outcome of
international negotiations
• The government recently announced it is now
prepared to reduce emission to 25% below 2000
levels by 2020 if other developed countries agree to
similar cuts
Mitigation: Treasury / Garnaut abatement paths
1200
Reference
CPRS -5
CPRS -15
1000
Garnaut -10
Garnaut -25
800
Mt CO2-e
600
400
200 60%
80%
90%
0
(below
2010 2015 2020 2025 2030 2035 2040 2045 2050
2000
levels)
Source: Commonwealth of Australia (2008)
Carbon prices projected to achieve the abatement
250
Garnaut-25
200 Garnaut-10
CPRS-5
CPRS-15
150
$/tCO2e
100
50
0
2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: Commonwealth of Australia (2008)
Mitigation: where will we reduce emissions (CPRS-5)
Mt CO2-e
700
600
500
400
Source: Commonwealth of Australia (2008)
300
Study objectives
• Focus on electricity and transport sector
abatement
• Examine how abatement in those sectors is
effected by
• The 20% by 2020 renewables target
• Oil price assumptions
• Determine the implications for scenario
construction and model result reporting
Model framework
• Using CSIRO‟s Energy Sector Model (ESM)
• A partial equilibrium model of the electricity
and transport sectors
• Other parts of the energy sector not included
• Electricity and transport account for 36 and
14 percent of Australia‟s GHG emissions
respectively
Electricity generation projection – No 20% target
500 Hot fractured
rocks
450 Solar
photovoltaics
Solar thermal
400
Wind
350
Biomass
300
Gas peak
TWh
250 Gas CCS
200 Gas combined
cycle
Black coal CCS
150
Black coal pf
100
Brown coal CCS
50
Brown coal pf
0 Hydro
2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050
Source: CSIRO projection
Electricity generation projection – with 20% target
500 Hot fractured
rocks
450 Solar
photovoltaics
Solar thermal
400
Wind
350
Biomass
300
Gas peak
TWh
250 Gas CCS
200 Gas combined
cycle
Black coal CCS
150
Black coal pf
100
Brown coal CCS
50
Brown coal pf
0 Hydro
2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050
Source: CSIRO projection
Sources of abatement or abatement “wedges”
No 20% renewables target With 20% renewables target
450 450
Reduced travel Reduced travel
400 400 Alternative transport fuels
Alternative transport fuels
Electricity efficiency/demand reduction Electricity efficiency/demand reduction
350 350
Renewables Renewables
Natural gas 300 Natural gas
300
Coal & gas + CCS Coal & gas + CCS
Mt CO2e
250
Mt CO2e
250
200 200
150 150
100 100
50 50
0 0
2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050
• The CPRS-5 policy appears to achieve more
abatement in the left hand side (LHS) diagram
because reference case emissions are higher
• 30% more abatement in 2020 on LHS
Level of emissions
350
300
250
200
MtCO2e
150 MRET policy on
100 MRET policy off
50
0
2010 2015 2020 2025 2030 2035 2040 2045 2050
Impact of 20% renewables policy
• Undoubtedly accelerates abatement to 2020
and reduces total cumulative emissions
• Can have the unintended effect of making the
emission trading policy appear to have less
impact – in wedges diagram
• No long term emission reduction projected
but this is a deficiency of the model which
does not include endogenous technological
change (ETC)
• Although ETC effect might be small effect unless
Australia can impact global learning
Oil price assumptions
150
EIA Reference 2008
IEA Reference 2007
120
IEA Reference 2008
90
Real US$/bbl
60
30
0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Gap between EIA (2008) and IEA (2008) equivalent to $A200/tCO 2e in 2030
Impact of oil price assumptions on technology market
shares in 2050
50%
EIA (2008)
IEA (2008)
40%
30%
20%
10%
0%
Plug-in electric vehicles Biofuel Diesel fuel Natural gas fuel
Sources of abatement or abatement “wedges”
EIA price IEA price
20 20
18 18
Reduced travel Reduced travel
16 16
Alternative transport fuels
14 14 Alternative transport fuels
12 12
Mt CO2e
Mt CO2e
10 10
8 8
6 6
4 4
2 2
0 0
2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050
• The higher oil price leads to more abatement
relative to the reference case when combined
with an emission trading scheme
• Oil price impact is different because it is sustained
where as MRET policy is not
Level of emissions
350
300
250
200
MtCO2e
150 EIA (2008)
100 IEA (2008)
50
0
2010 2015 2020 2025 2030 2035 2040 2045 2050
Conclusions
• The oil price assumption had a greater impact than
the MRET policy
• Oil price change was equivalent to doubling carbon price
• The MRET policy can be expected to accelerate the
uptake of renewable electricity generation
technologies
• Long term impact could not be fully assessed in this
modelling framework.
• Care must be taken when presenting emission levels
and relative or abatement „wedge‟ diagrams
• Reference case assumptions are important
• Reporting both types of diagrams is desirable
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