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Cost-Effective Global Carbon Abatement

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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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