Emission Abatement Costs Research Articles

Modeling myths: OnDICEand dynamic realism in integrated assessment models of climate change mitigation

AbstractWe analyze how stylized Integrated Assessment Models (IAMs), and specifically the widely‐used Dynamic Integrated Climate‐Economy model (DICE), represent the cost of emissions abatement. Many assume temporal independence—that abatement costs in one period are not affected by prior abatement. We contrast this with three dimensions of dynamic realism in emitting systems: (i) inertia, (ii) induced innovation, and (iii) path dependence. We review key evidence from the last quarter century on each of these three components. Studies of stock lifetime, dynamics of diffusion and past transitions suggest typical transition timescales of at least 20–40 years for the bulk emitting systems. The evidence that substantial innovation is induced by both prices and market deployment is unambiguous. Finally, both data and a rapidly growing literature demonstrate substantial path dependence in general, and specifically “carbon lock‐in and lock‐out.” Some stylized models in the past decade have incorporated technology learning, and others have considered inertia, but the combination of these factors is important and not yet evident. More complex hybrid IAMs with technology‐rich energy‐system models incorporate these factors, but their complexity has limited the wider understanding and influence of their underlying insights. Few if any global models fully represent path dependence. We conclude with likely implications drawing upon the empirical and modeling evidence accumulated, including results from extending DICE with a highly stylized representation of such dynamic factors. This suggests that dynamicinterdependencies could multiply several‐fold the optimal level of initial abatement expenditure. This is because early abatement then also directly facilitates subsequent emission savings. The diversity of dynamic linkages across sectors and technologies also implies more nuanced policy than a single global carbon price. Thus, the issues explored in this review can radically change the general policy conclusions drawn from models, which, like DICE, neglect dynamic realism.This article is categorized under:Climate Economics > Aggregation Techniques for Impacts and Mitigation Costs

International environmental agreements under an evolutionary mechanism of imitation and asymmetric countries

Under an often employed imitation mechanism, we investigate whether countries with different emission abatement benefits and costs can achieve an international environmental agreement. When the abatement efficiencies, ancillary benefits of abatement, and/or the numbers of countries are large, an international environmental agreement with full participation is the unique long-run equilibrium. For the remaining situations, either no agreement is the unique equilibrium or both equilibria above can emerge with positive probability. These results hold whatever the function forms of countries' abatement costs are, whether the transboundary pollution of emissions is considered, and whether the mutation rates depend on abatement costs and time.

Green transition pathways for cement industry in China

Cement industry is regarded as one of the most energy-intensive sectors, which generates large amount of greenhouse gas and pollutant emissions. Therefore, the realization of green development of cement industry is of great significance. A bottom-up National Energy Technology-Cement (NET-Cement) Model is developed for optimizing the green transition pathway of the cement industry. Based on China's empirical background, this study comprehensively evaluates the potentials of energy saving and emission reduction of four types of green transition measures, including improving energy efficiency, switching to alternative fuels, using alternative raw materials and implementing Carbon Capture and Storage (CCS) on the basis of meeting the demand of future cement products. The results show that simultaneous implementation of the above four measures would reach approximately 30.69% reduction in CO2 emissions by 2050 compared with the situation following the existing policies. The corresponding average emission abatement cost will be 183.12 CNY/tCO2. Regarding the energy saving and emission reduction effect of a single measure, improving energy efficiency (AT scenario) contributes the most energy saving (9 Mtce) and has a 3.04% emission reduction rate in 2050. Using calcium carbide as alternative raw materials has the lowest average abatement cost being 63.03 CNY/tCO2 in 2050. Pollutants such as SO2, NOX, PM2.5, smoke dust and fine dust can be largely reduced as well.

Assessment of renewable energy transition pathways for a fossil fuel-dependent electricity-producing jurisdiction

This research assesses the transition of a fossil fuel-based electricity production jurisdiction to a renewable-based electricity jurisdiction through an extensive scenario analysis. This fills a knowledge gap where a wide-range of fossil-to-renewable electricity generation pathways is compared within a single analysis framework. To conduct this study, a novel data-intensive electricity system model was developed with the Long-range Energy Alternatives Planning system and applied to evaluate alternative electricity generation mix scenarios to the year 2050. A case study for Alberta, a fossil fuels-based province in Canada, was conducted. A total of 382 scenarios were analyzed considering different renewable pathways and varying key uncertain future conditions. The greenhouse gas emission abatement and marginal greenhouse gas abatement costs of each scenario were evaluated and compared. Several renewable-based scenarios resulted in significant greenhouse gas abatement at lower costs than the fossil-fuel based business-as-usual scenario. The maximum greenhouse gas abatement possible at a net cost reduction compared to the business-as-usual scenario was found through a specific combination of wind, hydro, and solar power which resulted in over a 90% reduction from 2005 emission levels at −$1.8/t of carbon dioxide equivalent abated. The results of this study provide policy insight for jurisdictions transitioning away from fossil fuel-based electricity to renewables.

The marginal abatement cost curve and optimized abatement trajectory of CO2 emissions from China’s petroleum industry

Assessing the marginal abatement costs (MACs) of emissions improves the understanding of the extent of current CO2 mitigation and provides regions and industries with information on how to mitigate emissions cost-effectively. This study proposes a hybrid method to evaluate the MAC. It combines the strengths of bottom-up engineering methods and top-down economy-wide methods. A parametric directional distance function is employed to estimate the MAC from an economic perspective, and the abatement level is further incorporated to generate increasing curves, similar to the outcomes derived from an engineering perspective. In addition, this method takes into consideration whether the abatement level exceeds the abatement potential with current production technologies so as to provide a more realistic estimation of the MAC curves. The proposed technique is applied in estimating the carbon emission MAC in China’s petroleum industry. The estimation results indicate that (i) the MAC of China’s petroleum industry would change from 9821 to 16,307 yuan/ton when the abatement level increases from 1 to 50%; (ii) this industry would spend 36.5 to 42.5 billion Chinese yuan annually to achieve China’s CO2 reduction target proposed in its Intended Nationally Determined Contributions (NDCs); (iii) assigning the CO2 reduction targets based on the estimated MAC curves instead of the traditional grandfathering abatement target assignment would help to save China’s petroleum industry an additional 29.97 to 33.65% in abatement costs when achieving the NDCs. The MAC curves estimated in this study indicate more accurate relationships between abatement levels and abatement costs, and hence provide decision-makers in industries and governments with a more reliable instrument to determine the prices of emissions permits, total abatement costs, and implementation strategies in an emissions trading scheme.

Climate change mitigation and agriculture: measures, costs and policies – A literature review

We review the literature on climate change mitigation in agriculture with a focus on the use of climate policy instruments to incentivize the adoption of greenhouse gas mitigation measures. We develop an economic model characterizing the production decisions in animal and crop production farms and link our discussion on policy instruments to them. We review mitigation measures and their cost-effectiveness in reducing emissions. Given the multiple sources of agricultural emissions, the literature finds carbon taxes and emissions trading to perform best. The challenges involved in measuring and verifying changes in emissions make the implementation of policies targeting all sources of emissions difficult. Second-best policies addressing a subset of emissions, such as those from ruminants or mineral fertilizers, are more feasible but less efficient. Carbon sequestration in arable soils, while technically promising, faces the problems of heterogeneity in sequestration capacity, measurement, verification and permanence of sequestration. The variation of estimates on emissions reduction, abatement costs and differences in model simulations is large. A better basis for policy designs is needed.

Sustainability indicators of a naturally ventilated photovoltaic façade system

Building Integrated Photovoltaic (BIPV) systems have been increasingly used as a means to generate electricity on-site, and their diffusion will increase in the near future. The objective of this article is to carry out a sustainability assessment of a BIPV system installed in Turkey regarding the three pillars: environmental, economic and social potential impact, in order to develop different indicators. For the socioeconomic analysis, a Multiregional Input-Output (MRIO) method was used to estimate production of goods and services, value added creation and employment opportunities. For the environmental evaluation, an Environmental Footprint (EF) analysis was performed. The levelized electricity costs and the greenhouse gas emissions abatement costs were also calculated. Results showed that the socioeconomic effects are relevant, although only a 23% of these effects remain in Turkey. The environmental profile is also good in terms of climate change impacts, showing substantial reductions in greenhouse gas emissions compared to fossil fuel alternatives for electricity generation. Regarding the life cycle stages of the technology, the highest environmental impacts are produced in the PV manufacturing processes. The electricity produced is still more costly than fossil-based technologies and in the highest range of PV technologies, but greenhouse gases abatement costs are not so high when compared to other references.

Tracing China's inter-regional cost transfer of air pollution through domestic supply chains

Abstract: Provinces that provide emission-intensive products now are facing huge financial pressure to control regional air pollutant emissions. Assessing the actual regional air emission abatement costs of each province from the consumer perspective can help to clarify regional pollution abatement responsibilities and formulate sound monetary compensation policies between consumers and producers in China. In this study, we employ a multiregional input-output model to estimate the total air pollution abatement costs and economic benefits caused by interregional trade for each region in 2012. The results indicate that regions with higher GDP per capita, such as the Beijing-Tianjin, East Coast, and South Coast regions, outsourced total pollution abatement costs (TPAC) for air emissions to undeveloped central and western regions via interregional trade within China. Based on a comparison of the cost-benefit index among regions, wealthy regions left nearly 80% of their consumption-based value added locally but outsourced more than 50% of their consumption-based TPAC to other regions, especially to northwestern and central regions with lower GDP per capita. Such a mismatch necessitates in-depth cross-boundary collaboration for control of air pollutant emissions in regions suffering terrible haze problems, such as the North China Plain.

Cost-Effectiveness of Carbon Emission Abatement Strategies for a Local Multi-Energy System—A Case Study of Chalmers University of Technology Campus

This paper investigates the cost-effectiveness of operation strategies which can be used to abate CO 2 emissions in a local multi-energy system. A case study is carried out using data from a real energy system that integrates district heating, district cooling, and electricity networks at Chalmers University of Technology. Operation strategies are developed using a mixed integer linear programming multi-objective optimization model with a short foresight rolling horizon and a year of data. The cost-effectiveness of different strategies is evaluated across different carbon prices. The results provide insights into developing abatement strategies for local multi-energy systems that could be used by utilities, building owners, and authorities. The optimized abatement strategies include: increased usage of biomass boilers, substitution of district heating and absorption chillers with heat pumps, and higher utilization of storage units. The results show that, by utilizing all the strategies, a 20.8% emission reduction can be achieved with a 2.2% cost increase for the campus area. The emission abatement cost of all strategies is 36.6–100.2 (€/tCO 2 ), which is aligned with estimated carbon prices if the Paris agreement target is to be achieved. It is higher, however, than average European Emission Trading System prices and Sweden’s carbon tax in 2019.

Estimation of abatement potentials and costs of air pollution emissions in China

Understanding the air pollution emission abatement potential and associated control cost is a prerequisite to design cost efficient control policies. In this study, a linear programming algorithm model, International Control Cost Estimate Tool, was updated with cost data for applications of 56 types of end-of-pipe technologies and five types of renewable energy in 10 major sectors namely power generation, industry combustion, cement production, iron and steel production, other industry processes, domestic combustion, transportation, solvent use, livestock rearing, and fertilizer use. The updated model was implemented to estimate the abatement potential and marginal cost of multiple pollutants in China. The total maximum abatement potentials of sulfur dioxide (SO2), nitrogen oxides (NOx), primary particulate matter (PM2.5), non-volatile organic compounds (NMVOCs), and ammonia (NH3) in China were estimated to be 19.2, 20.8, 9.1, 17.2 and 8.6 Mt, respectively, which accounted for 89.7%, 89.9%, 94.6%, 74.0%, and 80.2% of their total emissions in 2014, respectively. The associated control cost of such reductions was estimated as 92.5, 469.7, 75.7, 449.0, and 361.8 billion CNY in SO2, NOx, primary PM2.5, NMVOCs and NH3, respectively. Shandong, Jiangsu, Henan, Zhejiang, and Guangdong provinces exhibited large abatement potentials for all pollutants. Provincial disparity analysis shows that high GDP regions tend to have higher reduction potential and total abatement costs. End-of-pipe technologies tended be a cost-efficient way to control pollution in industries processes (i.e., cement plants, iron and steel plants, lime production, building ceramic production, glass and brick production), whereas such technologies were less cost-effective in fossil fuel-related sectors (i.e., power plants, industry combustion, domestic combustion, and transportation) compared with renewable energy. The abatement potentials and marginal abatement cost curves developed in this study can further be used as a crucial component in an integrated model to design optimized cost-efficient control policies.

Marginal abatement cost, air pollution and economic growth: Evidence from Chinese cities

Abstract The directional distance function (DDF) with multiple bad outputs allows estimation of conditional marginal abatement cost (MAC) that would be more informative than the unconditional MAC estimated with a single pollutant. Applying a multi-pollutant parametric output DDF approach, we estimate the MACs of CO2, SO2, and NOx emissions for 105 Chinese cities in 2006–2014. It is found that the period medians of the MACs for the three emissions all increase over time, while the medians of the MACs for different cities tend to vary significantly. A goodness-of-fit criterion is developed and used to evaluate the fit of alternative models, which demonstrates the superiority of the multi-pollutant model. We have also shown that there exists a positive relationship between MAC and economic growth. Finally, several policy implications are suggested for reducing the overall emission abatement costs of China.

Marginal abatement cost under the constraint of carbon emission reduction targets: An empirical analysis for different regions in China

As the global climate and environmental issues become increasingly serious, low-carbon development has become a consensus among countries to seek new economic growth pathway. As an important emitter of carbon dioxide, China has put forward “Thirteenth Five-Year Plan” (TFYP) outline that carbon dioxide emissions per unit of gross domestic product (GDP) will be 18% lower in 2020 than that in 2015. To measure the policy effects on CO2 emission reduction and abatement costs, the directional distance function model is introduced in this paper, and the sensitivity analysis is conducted to verify the rationality of our index formulation. The results show the areas with the highest carbon emission control target level have significantly higher marginal abatement costs than that of other areas. In the short term, the reduction targets policy effect on decreasing carbon abatement cost is not significant. Through sensitivity analysis, we further discovered that the carbon emission reduction cost is less sensitive to the carbon emission reduction target, and the impact in the short term is smaller. However, as time goes by, the impact increases. We suggest that the government should guide interregional enterprises to cooperate and play a synergistic role. Implementing the multilevel emission reduction targets and expanding the scope of trading in the national carbon trading market are especially important to optimize the allocation.

Carbon quota allocation at the provincial level in China under principles of equity and efficiency

Allocating emission quotas among provinces fairly and efficiently is a critical issue for China. We developed a carbon quota allocation framework at the provincial level considering both the equity and efficiency principles based on a multi-objective non-linear programming model. We established a carbon Gini coefficient and an emission abatement cost function to measure the equity and efficiency of quota allocation, respectively. We then introduced them as objectives into a multi-objective non-linear programming model and obtained the optimal emission quota allocation for 30 provinces in China, by realizing the trade-off between the equity and efficiency principles. Our analysis revealed that Chinese carbon emissions have not yet peaked and that the proportion of carbon emission in each province is similar. Moreover, provinces with higher GDP per capita, carbon intensity, and historical accumulated carbon emissions should shoulder more burden of carbon intensity reduction and higher marginal reduction costs. The rationality analysis indicates that our method outperforms traditional methods according to the principles of both equity and efficiency. We conclude by offering policy recommendations for the establishment of a national unified carbon market.

Measuring the Welfare Gains from Optimal Incentive Regulation

AbstractI empirically measure the welfare gains from optimal incentive regulation in the context of electric utilities facing both emissions and rate of return regulation (RORR). I provide evidence that RORR induces lower fuel efficiency, leading to greater coal consumption and higher emissions abatement costs. Replacing RORR with the optimal mechanism of Laffont and Tirole (1986) yields annual welfare gains of $686 million or a 11% reduction in electricity prices. I construct a much simpler two-contract menu that can achieve more than 65% of these welfare gains.

Can applying renewable energy for Australian sugarcane irrigation reduce energy cost and environmental impacts? A case study approach

Abstract In Australian sugarcane production, 90% of irrigation pumps are connected to the national electricity grid. In regional Queensland, where irrigated sugarcane is grown, both the retailer and distribution network service providers are government owned and highly regulated. This study investigates options for on-farm embedded generation from a range of commercially available components, to reduce energy costs of furrow, centre pivot, and Big Gun® irrigation. This study confirms that demand-side management crucially affects the economic feasibility of embedded generation. Connection rules, such as feed-in tariffs and export limits affecting renewable embedded generation can also influence emissions abatement costs and investment returns. When export limits are allowed on larger sites (solar PV systems >40 kW), abatement costs fall from $109/t CO2e to $18/t CO2e and the present value of the investment improves substantially. The analysis reveals economically feasible opportunities exist for small-scale solar PV system installations (under 40 kW), reducing NPC of pumping from 12 to 25% and emission reductions ranging from 1245 t CO2e to 1314 t CO2e per installation over 25 years. Where a site is not eligible for a feed-in tariff, high renewable energy utilisation rates are required to make the site feasible. Batteries did not feature as an optimal component, even when battery storage and replacement values were discounted by 60%, indicating that seasonal load profiles under-use a battery investment. Therefore, batteries are inefficient and can be avoided in an irrigation microgrid.

The Practical Operation of Japan’s Joint Crediting Mechanism

The Paris Agreement proposed a new measure to replace the Kyoto Protocol’s Clean Development Mechanism (CDM) (and Joint Implementation) at the end of the Protocol’s second compliance period in 2020. The Japanese government has developed the Joint Crediting Mechanism (JCM) with the inadequacies of the CDM in mind. The JCM, therefore, deserves close study. In a previous paper the author outlined the features of the JCM. This paper draws on interviews with government officials, consultants and corporate participants to assess the practical application of the JCM. It concludes that for the program to better achieve its full potential from an environmental perspective it would be preferable for JCM credits to be of value. Furthermore, although the JCM also has diplomatic and commercial mandates these ends are substantially achieved by the complementary funding program for JCM projects. Moves to better interline the two programs, with an emphasis on funding criteria that makes reference to a project’s cost of emissions abatement, should enhance the environmental effectiveness (of the two programs) provided priority is given to this criterion over other (diplomatic/commercial) criteria. The introduction of an emissions trading scheme in Australia in the future (or extension of the current safeguard mechanism) would be expected to provide a market for carbon credits generated from offset schemes. Given that the current Australian offset scheme is solely domestic focused a case could be made to also introduce at that time a JCM type scheme that awarded credits to Australian entities engaged in foreign joint ventures achieving low cost emissions reductions.

Carbon emissions efficiency and abatement cost under inter-region differentiated mitigation strategies: A modified DDF model

The assessment of carbon emissions efficiency and abatement cost is crucial to formulate environmental policies. We focus on this issue based on the consideration that different regions have alternative mitigation strategies, which be defined as “natural strategy” and “managerial strategy” in this study. In order to realize this, we develop a directional distance function (DDF) model under natural and managerial disposability to assess the carbon emission efficiency of China’s 29 regions from the 9th to 12th Five-Year Plan. Then the nonparametric method is applied to estimate directional distance function and evaluate the carbon abatement cost. The empirical results indicate that, comparing with our approach, traditional method may overestimate efficiency and underestimate abatement cost. Besides, China’s carbon emissions efficiency remains relatively stable from the 9th to 12th Five-Year Plan, and can be improved by at least 25%. In terms of abatement cost, the value under high regulation for most regions are higher than that under low regulation, which is 246 yuan/ton and 224 yuan/ton respectively, and shows a declined trend. Moreover, given the large gaps on abatement costs between different Chinese regions, it is necessary and possible for establishing a regional emissions trading system at national level.

Valued forest carbon sinks: How much emissions abatement costs could be reduced in China

Abstract: Carbon sink is an effective measure to balance the contradiction between economic development and mitigating climate change in China. This paper reveals that environmental performance of forest carbon sinks reflects in economic value by reducing the emissions abatement cost. The carbon trading system is used to demonstrate the environmental and economic value of forests. The forest carbon sequestrations are estimated and predicted in different regions of China. Furthermore, a market model has been established to assess how the emission reduction costs can be reduced among all regions by the year 2030 to achieve the goal of carbon emissions intensity in China. The results show that carbon sequestration trades can reduce the emissions reduction costs and it can represent the value of forest carbon sinks. In particular, when economic growth is maintained in moderate and low level in China, the national carbon trading market with carbon sequestration will decrease the carbon emissions reduction costs more effectively. Besides, carbon sink can bring economic benefits to under-developed regions where there are rich forest resources.

Investment analysis of solar energy in a hybrid diesel irrigation pumping system in New South Wales, Australia

Off-grid groundwater cotton irrigators using traditional technologies have had few options to reduce water extraction costs. New options of blending of Alternating Current and Direct Current through an all-in-one soft start converter/controller offer opportunities to lower costs, diversify fuel sources and continuous off-grid power in remote locations. Diesel energy can be replaced by renewable fuel sources through installing an electric submersible pump powered by solar photovoltaic in combination with a diesel generator. An investment analysis using a discounted cashflow over 25 years showed a 23% internal rate of return and payback over 5 years. Benefits of installing a renewable fuel source included lower greenhouse gas emissions per bale of cotton produced and less labour to monitor and service traditional diesel irrigation plant. Emissions calculations reveal a reduction of 26%, or 35 kg CO2e per cotton lint bale, and an abatement of 2665 t/CO2e for the life of the project. The cost of emissions abatement under the Renewable Energy Target to displace almost one million litres of diesel was found to be $31 t CO2e.

On the cost-effectiveness of national economy-wide greenhouse gas emissions abatement measures

This paper explores cost-effective greenhouse gas abatement options for the European Union Member State of Cyprus, for those sectors of the national economy that are not subject to the European Emissions Trading System. The analysis leads to the construction of a baseline and several alternative marginal emission abatement cost curves. It addresses all economic sectors and considers all different types of mitigation measures – improving energy efficiency, switching to low- or zero-carbon fuels, and inducing behavioural change towards public transport modes. We apply nationally appropriate data that are mainly derived from local market information and judgement of national experts. Finally, we present results of several sensitivity analyses, which address main shortcomings of marginal abatement cost curves that have been identified in the literature, and discuss the policy implications of each one of them. Apart from its relevance for EU Member States, this assessment is useful for all countries seeking guidance in their decarbonisation strategies.