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Cost-Effective Global Carbon
Abatement
UKNEE Seminar
Martine Clark
14th October 2010
Context: the challenge of a 2oC target
In December 2009, the UK and over 130 countries associated with the Copenhagen
Accord, which included a target to limit global temperature increase to 2oC
Figure 1: Global GHG emissions under a reference and 2oC scenario
Reference Emissions Level
2oC Trajectory
Source: AVOID trajectories and DECC’s Global Carbon Finance Model, September 2010
The estimated emissions reductions to achieve this target are significant;
increasing from around 9Gt CO2e in 2020 to 29Gt CO2e in 2030
We need to identify where cost-effective
abatement opportunities lie
• Under a global trading scheme, we assume the market will identify and realise the lowest cost
abatement
• In the meantime, we need to know where low-cost abatement opportunities lie:
• For prioritising fast-start finance
• To help prioritise engagement with both developed and developing countries
• To ensure domestic policies are consistent with enabling these opportunities
• To inform the design of a global deal on climate change
How do we identify low-cost abatement?
(£/MtCO2e)
Marginal Abatement Cost
• Marginal Abatement Cost curves
• Show, for a given year, the incremental
cost of reducing additional units of GHG
emissions from climate change models
• Underpin the results from a large number Abatement
of climate change models; (MtCO2e)
• We used the curves from DECC’s GLOCAF
model…
DECC’s GLOCAF model
GLOCAF: Global Carbon Finance Model
• Developed by the Office of Climate Change to provide estimates of costs and international
financial flows under various post-2012 global deal scenarios
• Largely bottom-up model, based on Marginal Abatement Cost (MAC) Curves from the
following sources:
– POLES energy model for CO2 emissions: partial equilibrium energy model
– G4M and GLOBIOM models for land use emissions: these are opportunity cost models
– IMAGE model for non-CO2 emissions: bottom-up dataset
• Contains technological detail, and assumes no negative costs
Marginal cost of last
unit of abatement sets
the global carbon price
Using these MAC Curves, we get a cost effective
combination of regions and sectors for a 2oC
scenario
Strong Caveats to the results:
Marginal Abatement Cost
(£/MtCO 2e)
Abatement
(MtCO 2e)
• These results reflect just this group of MAC
Curves; there are many different models which
would arrive at very different results
2oC emissions MAC Curves for
trajectory regions and • No consideration of political realities or
sectors transaction costs
• GLOCAF is a largely static model; the results do
Optimise by not necessarily reflect the lowest cost path to a
cost up the 2oC world
MAC Curves • Energy prices are exogenous; no demand-side
response
• There are a number of possible 2oC trajectories
Theoretical
cost-effective • Bottom-up MAC Curves: implies lower costs than
combination of more top-down models
regions & sectors
• These results do not imply who should pay for
the abatement, only where it could take place
At a regional level, there is significant abatement
opportunity in China, the USA and India
Cost-effective abatement potential for a 2oC scenario, by region out to 2030
Market Clearing Price
in 2020: $30/tCO2e
[US$ 2005] Market Clearing Price
in 2030: $209/tCO2e
[US$ 2005]
Source: DECC’s Global Carbon Finance Model, September 2010
At a sectoral level, abatement in the power sector
crucial, particularly in the longer term
Cost-effective abatement potential for a 2oC scenario, by sector out to 2030
Market Clearing Price
in 2020: $30/tCO2e
[US$ 2005] Market Clearing Price
in 2030: $209/tCO2e
[US$ 2005]
Source: DECC’s Global Carbon Finance Model, September 2010
Forestry, industry and non-CO2 emissions
are also important, particularly in the shorter
term
Total Abatement: 9 Gt CO2e
Agriculture International Bunkers
Residential & Services Transport
F-gases Other
Agriculture – non CO2 Industry
Waste – non CO2
Power
Energy & Industry – non CO2
Forestry
2020
Note: this shows where the lowest cost abatement could be achieved in 2020; it does not
reflect where investment should take place to reduce the overall cost of mitigation.
Forestry, industry and non-CO2 emissions
are also important, particularly in the shorter
term
Total Abatement: 9 Gt CO2e
Agriculture International Bunkers
Residential & Services Transport
• Largely energy intensive
F-gases Other
industries; cement, iron & steel
Agriculture – non CO2 and chemicals
Industry
• Landfill gas; mainly • Abatement relies on adoption
methane Waste – non CO2 of Best Available Technologies,
• Can be captured and and CCS in the longer term
used as an energy Power
source with
significant co-benefits
Reductions driven by:
Energy & Industry – non CO2 • Increases in end-use and power
station efficiency
• Increased use of renewable and
• Methane emissions from coal
nuclear energy
mining
Forestry • Use of spare gas capacity over
• Methane emissions from oil
oil
and gas
• Carbon Capture and Storage
• Nitrous oxide emissions from
transport and industrial sources
2020
The top 15 region-sector combinations in 2020 show the
large potential in forestry in South America, and China’s
power and industry sectors
Cost-effective abatement potential for a 2oC scenario, by region and sector in 2020
10
Source: DECC’s Global Carbon Finance Model, September 2010
In 2030, the message is similar but more
heavily dominated by reductions in the
power industry
Cost-effective abatement potential for a 2oC scenario, by region and sector in 2030
11
Source: DECC’s Global Carbon Finance Model, September 2010
Is a focus on non-CO2 gases appropriate?
Methane and Global Warming Potential
Methane’s global warming potential: F-gases
N2O (nitrous oxide)
• Around 25 times higher than CO2 over a 100
year period
CH4 (methane)
• Much shorter atmospheric lifespan: 12 years
compared to around 100 (5 – 200) for CO2 Total
42.4 Gt CO2e
CO2 LULUCF
Reducing methane emissions could limit:
• Near-term increases in temperature CO2 industrial
processes
CO2 energy
• Near-term impacts and adaptation costs
• Potentially beneficial in slowing ice melt in the
Anthropogenic greenhouse-gas emissions
Arctic by source, 2005
But abatement has less impact on the long-term Source: OECD and IEA databases and modelling; IPCC
(2007a); OECD (2009); EPA (2006)
temperature target
If CO2 abatement is substituted for methane abatement,
it could increase the risk of exceeding a 2 degrees target in the longer term
What do these results mean for policy
makers? (1)
Governments will need the full range of policy
tools to reduce emissions effectively
Subsidies Regulation Taxation Cap and trade
Other policy tools will be needed to:
• Guarantee long-term low carbon investments.
• Drive technological innovation and finance R&D - carbon markets are best
suited to promote existing and proven technologies.
• Trigger behavioural change and promote energy efficiency of end users.
What do these results mean for policy
makers? (2)
In the shorter term, there are low cost opportunities for non-CO2 abatement
• This may limit near-term increases in temperature
• Abatement in methane from energy & industry, and waste, offers particularly high potential:
• Can lead significant co-benefits and profits; but initial investment can be high
• Transfer of knowledge & skills to major developing countries is crucial
• Infrastructure considerations for increased profitability
• Legislative issues over ownership (particularly in the USA)
• As with renewables, transport and interconnection of energy to the grid is a consideration
In the longer term, decarbonisation of the Power sector is fundamental
• Particularly in large or growing economies; China, the USA and India
• This will require a comprehensive mix of policies:
• Decrease in demand
• Increase in renewables and nuclear energy
• Transformative technologies, such as Carbon Capture and Storage
• Achieving this abatement requires large scale, up-front investment
What do these results mean for policy
makers? (3)
There are a number of questions and trade-offs to consider
• Abatement of CO2 versus other greenhouse gases
• How should abatement be financed?
• Fast start and longer-term climate finance: where should this focus?
• What can we assume about carbon market funds; will they flow to the lowest cost
opportunities?
• In general, should governments focus on enabling low-cost abatement, or more
transformative (expensive) activities?
Summary
• These results show one possible combination of abatement by region and sector
which could be consistent with a 2oC scenario
• Global coordination is essential to enable mitigation at the lowest overall cost
• The opportunities for low-cost abatement in non-CO2 gases should be explored
• Investment in the decarbonisation of the power sector must be prioritised across
all major and developing economies
• This should be used in conjunction with other similar studies (for example the IEA’s
World Energy Outlook) for a more comprehensive view of the global opportunities for
abatement
• Next Steps:
• How can this abatement be achieved?
• What policy levers are there to realise these opportunities; what scope does the
UK have for global influence?
QUESTIONS?
Appendix A: Projected Emissions by region in the
reference scenario
Historical and projected emissions by region under a reference scenario
Source: DECC’s Global Carbon Finance Model, September 2010
Appendix B: Projected Emissions by sector in the
reference scenario
Historical and projected emissions by sector under a reference scenario
Source: DECC’s Global Carbon Finance Model, September 2010
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