MIT Economics Research Articles

Mitigating emissions in the global steel industry: Representing CCS and hydrogen technologies in integrated assessment modeling

We conduct a techno-economic assessment of two low-emissions steel production technologies and evaluate their deployment in emissions mitigation scenarios utilizing the MIT Economic Projection and Policy Analysis (EPPA) model. Specifically, we assess direct reduced iron-electric arc furnace with carbon capture and storage (DRI-EAF with CCS) and H2-based direct reduced iron-electric arc furnace (H2 DRI-EAF) which utilizes low carbon hydrogen to reduce CO2 emissions. Our techno-economic analysis based on the current state of technologies found that DRI-EAF with CCS increased costs ∼7% relative to the conventional steel technology. H2 DRI-EAF increased costs by ∼18% when utilizing Blue hydrogen and ∼79% when using Green hydrogen. The exact pathways for hydrogen production in different world regions, including the extent of CCS and hydrogen deployment in steelmaking are highly speculative at this point. In illustrative scenarios using EPPA, we find that, using base cost assumptions, switching from BF-BOF to DRI-EAF or scrap EAF can provide significant emissions mitigation within steelmaking. With further reductions in the cost of advanced steelmaking, we find a greater role for DRI-EAF with CCS, whereas reductions in both the cost of advanced steelmaking and hydrogen production lead to a greater role for H2 DRI-EAF. Our findings can be used to help decision-makers assess various decarbonization options and design economically efficient pathways to reduce emissions in the steel industry. Our cost evaluation can also be used to inform other energy-economic and integrated assessment models designed to provide insights about future decarbonization pathways.

A tool for air pollution scenarios (TAPS v1.0) to enable global, long-term, and flexible study of climate and air quality policies

Abstract. Air pollution is a major sustainability challenge – and future anthropogenic precursor and greenhouse gas (GHG) emissions will greatly affect human well-being. While mitigating climate change can reduce air pollution both directly and indirectly, distinct policy levers can affect these two interconnected sustainability issues across a wide range of scenarios. We help to assess such issues by presenting a public Tool for Air Pollution Scenarios (TAPS) that can flexibly assess pollutant emissions from a variety of climate and air quality actions, through the tool's coupling with socioeconomic modeling of climate change mitigation. In this study, we develop and implement TAPS with three components: recent global and fuel-specific anthropogenic emissions inventories, scenarios of emitting activities to 2100 from the MIT Economic Projection and Policy Analysis (EPPA) model, and emissions intensity trends based on recent scenario data from the Greenhouse Gas–Air Pollution Interactions and Synergies (GAINS) model. An initial application shows that in scenarios with less climate and pollution policy ambition, near-term air quality improvements from existing policies are eclipsed by long-term emissions increases – particularly from industrial processes that combine sharp production growth with less stringent pollution controls in developing regions. Additional climate actions would substantially reduce air pollutant emissions related to fossil fuel (such as sulfur and nitrogen oxides), while further pollution controls would lead to larger reductions for ammonia and organic carbon (OC). Future applications of TAPS could explore diverse regional and global policies that affect these emissions, using pollutant emissions results to drive global atmospheric chemical transport models to study the scenarios' health impacts.

Economic analysis of the hard-to-abate sectors in India

We assess the contribution of India's hard-to-abate sectors to the country's current emissions and their likely future trajectory of development under different policy regimes. We employ an enhanced version of the MIT Economic Projection and Policy Analysis (EPPA) model to explicitly represent the following hard-to-abate sectors: iron and steel, non-ferrous metals (copper, aluminum, zinc, etc.), non-metallic minerals (cement, plaster, lime, etc.), and chemicals. We find that, without additional policies, the Paris Agreement pledges made by India for the year 2030 still can lead to an increasing use of fossil fuels and corresponding greenhouse gas (GHG) emissions, with projected CO2 emissions from hard-to-abate sectors growing by about 2.6 times from 2020 to 2050. Scenarios with electrification, natural gas support, or increased resource efficiency lead to a decrease in emissions from these sectors by 15–20% in 2050, but without carbon pricing (or disruptive technology changes) emissions are not reduced relative to their current levels due to growth in output. Carbon pricing that makes carbon capture and storage (CCS) economically competitive is critical for achieving substantial emission reductions in hard-to-abate sectors, enabling emission reductions of 80% by 2050 relative the scenario without additional policies. Without a substantial government support, decarbonization of India's hard-to-abate sectors will not be achievable.

Hard-to-Abate Sectors: The role of industrial carbon capture and storage (CCS) in emission mitigation

Carbon capture and storage (CCS) technology is an important option in the portfolio of emission mitigation solutions in scenarios that lead to deep reductions in greenhouse gas (GHG) emissions. We focus on CCS application in hard-to-abate sectors (cement industry, iron and steel, chemicals) and introduce industrial CCS options into the MIT Economic Projection and Policy Analysis (EPPA) model, a global multi-region multi-sector energy-economic model that provides a basis for the analysis of long-term energy deployment. We use the EPPA model to explore the potential for industrial CCS in different parts of the world, under the assumptions that CCS is the only mitigation option for deep GHG emission reductions in industry and that negative emission options are not available for other sectors of the economy. We evaluate CCS deployment in a scenario that limits the increase in average global surface temperature to 2 °C above preindustrial levels. When industrial CCS is not available, global costs of reaching the target are higher by 12% in 2075 and 71% in 2100 relative to the cost of achieving the policy with CCS. Overall, industrial CCS enables continued growth in the use of energy-intensive goods along with large reductions in global and sectoral emissions. We find that in scenarios with stringent climate policy, CCS in the industry sector is a key mitigation option, and our approach provides a path to projecting the deployment of industrial CCS across industries and regions.

The cost of CO2 transport and storage in global integrated assessment modeling

This paper assesses the range of CO2 transport and storage costs and evaluates their impact on economy-wide modeling results of decarbonization pathways. Much analytic work has been dedicated to evaluating the cost and performance of various CO2 capture technologies, but less attention has been paid to evaluating the cost of CO2 transport and storage. Many integrated assessment modeling studies assume a combined cost for CO2 transport and storage that is uniform in all regions, commonly estimated at $10/tCO2. Realistically, the cost of CO2 transport and storage is not fixed at $10/tCO2 and varies across geographic, geologic, and institutional settings. We surveyed the literature to identify key sources of variability in transport and storage costs and developed a method to quantify and incorporate these elements into a cost range. We find that onshore pipeline transport and storage costs vary from $4 to 45/tCO2 depending on key sources of variability including transport distance, scale (i.e. quantity of CO2 transported and stored), monitoring assumptions, reservoir geology, and transport cost variability such as pipeline capital costs. Using the MIT Economic Projection and Policy Analysis (EPPA) model, we examined the impact of variability in transport and storage costs by applying a range of uniform costs in all regions in a future where global temperature rise is limited to 2°C. We then developed three modeling cases where transport and storage costs vary regionally. In these latter cases, global cumulative CO2 captured and stored through 2100 ranges from 290 to 377 Gt CO2, compared to 425 Gt CO2 when costs are assumed to be uniformly $10/t CO2 in all regions. We conclude that the widely used assumption of $10/tCO2 for the transport and storage of CO2 is reasonable in some regions, but not in others. Moreover, CCS deployment is more sensitive to transport and storage costs in some regions than others, particularly China. More analysis is needed to further quantify CO2 transport and storage costs at a regional level.

The economics of bioenergy with carbon capture and storage (BECCS) deployment in a 1.5 °C or 2 °C world

Bioenergy with carbon capture and storage (BECCS) and afforestation are key negative emission technologies suggested in many studies under 2 °C or 1.5 °C scenarios. However, these large-scale land-based approaches have raised concerns about their economic impacts, particularly their impact on food prices, as well as their environmental impacts. Here we focus on quantifying the potential scale of BECCS and its impact on the economy, taking into account technology and economic considerations, but excluding sustainability and political aspects. To do so, we represent all major components of BECCS technology in the MIT Economic Projection and Policy Analysis model. We find that BECCS could make a substantial contribution to emissions reductions in the second half of the century under 1.5 and 2 °C climate stabilization goals, with its deployment driven by revenues from carbon dioxide permits. Results show that global economic costs and the carbon prices needed to hit the stabilization targets are substantially lower with the technology available, and BECCS acts as a true backstop technology at carbon prices around $240 per tonne of carbon dioxide. If driven by economics alone, BECCS deployment increases the use of productive land for bioenergy production, causing substantial land use changes. However, the projected impact on commodity prices is quite limited at the global scale, with global commodity price indices increasing by less than 5% on average. The effect is larger at the regional scale (up to 15% in selected regions), though significantly lower than previous estimates. While BECCS deployment is likely to be constrained for environmental and/or political reasons, this study shows that the large-scale deployment of BECCS is not detrimental to agricultural commodity prices and could reduce the costs of meeting stabilization targets. Still, it is crucial that policies consider carbon dioxide removal as a complement to drastic carbon dioxide emissions reductions, while establishing a credible accounting system and sustainable limits on BECCS.

The Cost of CO2 Transport and Storage in Global Integrated Assessment Modeling

This paper assesses the range of CO2 transport and storage costs and evaluates their impact on economy-wide modelling results of decarbonization pathways. Much analytic work has been dedicated to evaluating the cost and performance of various CO2 capture technologies, but less attention has been paid to evaluating the cost of CO2 transport and storage. Many integrated assessment modeling studies assume a combined cost for CO2 transport and storage that is uniform in all regions, commonly estimated at $10/tCO2. Realistically, the cost of CO2 transport and storage is not fixed at $10/tCO2 and varies across geographic, geologic, and institutional settings. We surveyed the literature to identify key sources of variability in transport and storage costs and developed a method to quantify and incorporate these elements into a cost range. We find that onshore pipeline transport and storage costs vary from $4 to 45/tCO2 depending on key sources of variability including transport distance, scale (i.e. quantity of CO2 transported and stored), monitoring assumptions, reservoir geology, and transport cost variability such as pipeline capital costs. Using the MIT Economic Projection and Policy Analysis (EPPA) model, we examined the impact of variability in transport and storage costs by applying a range of uniform costs in all regions in a future where global temperature rise is limited to 2°C. We then developed three modeling cases where transport and storage costs vary regionally. In these latter cases, global cumulative CO2 captured and stored through 2100 ranges from 290 to 377 Gt CO2, compared to 425 Gt CO2 when costs are assumed to be uniformly $10/t CO2 in all regions. We conclude that the widely used assumption of $10/tCO2 for the transport and storage of CO2 is reasonable in some regions, but not in others. Moreover, CCS deployment is more sensitive to transport and storage costs in some regions than others, particularly China. More analysis is needed to further quantify CO2 transport and storage costs at a regional level.

SCENARIOS FOR THE DEPLOYMENT OF CARBON CAPTURE AND STORAGE IN THE POWER SECTOR IN A PORTFOLIO OF MITIGATION OPTIONS

Using the MIT Economic Projection and Policy Analysis (EPPA) model, we explore factors influencing carbon capture and storage (CCS) deployment in power generation and its role in mitigating carbon emissions. We find that in the 2∘C scenario with EPPA’s base-case technology cost and performance assumptions, CCS plays an important role in the second half of the century: by 2100 CCS is applied to almost 40% of world electricity production, with a third coming from coal with CCS and the other two-thirds from gas with CCS. Results on CCS deployment depend on the assumed fraction of carbon captured in CCS power plants, as emissions constraints get tighter and the carbon price rises. Adding options for higher capture fractions or offsetting uncaptured emissions leads to greater deployment of CCS than in the 2∘C base case. We provide a sensitivity analysis by making favorable assumptions for CCS, nuclear and renewables. We also explore regional differences in the deployment of CCS. We find that US and Europe mostly rely on gas CCS, whereas China relies on coal CCS and India pursues both options. We also assess how these projections align with assessment of CO2 storage potential, and find that storage potential is larger than storage demand at both global and regional scales. Ultimately, we find that under stringent mitigation scenarios, the power sector relies on a mix of technological options, and the conditions that favor a particular mix of technologies differ by region.

Use of natural gas and oil as a source of feedstocks

Abstract Greenhouse gas (GHG) implication of natural gas and oil differ when they are used for combustion or as a feedstock. In addition to the growing demand for feedstocks that are converted into products (such as plastics and fertilizers), climate policies that penalize GHG emissions may incentivize a switch from burning natural gas and oil to their feedstock use. Using an enhanced version of the MIT Economic Projection and Policy Analysis (EPPA) model, we examine several scenarios to assess natural gas and oil use as feedstock and find that global feedstock use grows 2–3 times by 2050 relative to 2015 levels. In a scenario consistent with reaching 2 °C goal set by the Paris Agreement, the share of natural gas used as a feedstock grows from about 5% in 2015 to about 15% in 2050 and the share of oil used as a feedstock grows from about 10% in 2015 to about 17% in 2050. In this scenario, the share of natural gas used as a feedstock in 2050 is 86% larger than in the no-policy Reference. The corresponding increase in a share of oil used as a feedstock is 40%. USA, Europe, and the Middle East remain as the major regions for feedstock use, but China, India, and Africa grow fast to become major feedstock use centers.

Impacts of climate change policies worldwide on the Russian economy

ABSTRACT Because the Russian economy relies heavily on exports of fossil fuels, the primary source of human-induced greenhouse gas (GHG) emissions, it may be adversely impacted by Paris Agreement-based climate policies that target reductions in GHG emissions. Applying the MIT Economic Projection and Policy Analysis (EPPA) model to assess the impacts on the Russian economy of the efforts of the main importers of Russian fossil fuels to follow the global goals of the Paris Agreement, we project that climate-related actions outside of Russia will lower the country's GDP growth rate by about one-half of a percentage point. The Paris Agreement is also expected to raise Russia's risks of facing market barriers for its exports of energy-intensive goods, and of falling behind in the development of low-carbon energy technologies that most of the world is increasingly adopting. Key policy insights Regardless of its domestic emissions reduction efforts, Russia will not be able to sustain its current trajectory of fossil fuel export-based development due to climate policies worldwide. To address the challenge of climate-related energy transition, Russia needs a new comprehensive development strategy that accounts for the post-Paris Agreement global energy landscape. The key elements of such a strategy include diversification of the economy, moving to low-carbon energy sources, and investing in human capital development. Our diversification scenarios show that redistribution of income from the energy sector to the development of human capital would benefit the economy. The largest impact of investment re-orientation from the fossil fuel sector would be on manufacturing, services, agriculture and food production.

Representing the costs of low-carbon power generation in multi-region multi-sector energy-economic models

Multi-region multi-sector energy-economic models are often used to analyze long-term scenarios of energy development, however, these models usually rely on a simplified representation of technological details in power generation. To strengthen this representation, we develop a method for modeling the economic competition between different advanced technologies in multi-region multi-sector dynamic energy-economic models based on a markup approach, which represents the measure of the cost of a technology relative to the price received for electricity generation. The markup includes capital costs, fixed and variable operating and maintenance (O&M) costs, fuel costs, and transmission and distribution (T&D) costs. For intermittent technologies, it also includes a backup requirement to make these technologies effectively dispatchable. For carbon capture and storage (CCS) technologies, it also includes the costs of CO2 capture, transportation and storage. We provide a standardized markup calculation for generation technologies for different regions of the world, including USA, China, India, EU, Japan and others. Then we analyze the sensitivity of the calculation to critical inputs, including capital costs, fuel costs, carbon prices and capacity factors. We provide a detailed calculation of the relative costs of the following technologies: new pulverized coal, new pulverized coal with CCS, natural gas combined cycle, natural gas with CCS, biomass-fueled plant, biomass with CCS, advanced nuclear, wind (for small and medium penetration levels), solar, wind with backup (for large penetration levels), co-firing of coal and biomass combined with CCS, and advanced CCS on natural gas. For illustration, we incorporate the markups into the MIT Economic Projection and Policy Analysis (EPPA) model, a global multi-sector multi-sector dynamic energy-economic model with a detailed representation of power generation technologies, and run several scenarios. Our analysis and results provide insight on the deployment of different low-carbon power generation technologies depending on assumptions about carbon policy stringency.

Developing a Consistent Database for Regional Geologic CO2 Storage Capacity Worldwide

Assessments of the geologic storage capacity of carbon dioxide in the current literature are incomplete and inconsistent, complicating efforts to assess the worldwide potential for carbon dioxide capture and storage (CCS). We developed a method for generating first-order estimates of storage capacity requiring minimal data to characterize a geologic formation. We show this simplified method accounts for the majority of the variance in storage capacity found in more detailed studies conducted in the United States. We apply our method to create a worldwide database of storage capacity, disaggregated into 18 regions, and compare this storage capacity to CCS deployment in the MIT Economic Prediction and Policy Analysis (EPPA) model. Globally, we estimate there are between 8,000 and 55,000 gigatonnes (Gt) of practically accessible geologic storage capacity for carbon dioxide. For most of the regions, our results indicate storage capacity is not a limiting factor for CCS deployment through the rest of this century even if stringent emissions reductions are required.

Marginalizing Maclaurin: The Attempt to Develop an Economics of Technological Progress at Mit, 1940–50

This article traces the attempts of W. Rupert Maclaurin to improve the research profile of economics at MIT through establishing a research project on the economics of innovation, funded by the Rockefeller Foundation. The project is important because it marks a significant stage in the transition of economics at MIT from being a department focused exclusively on providing courses for engineers and scientists to one that was to become a major location for research in economics. Through examination of papers held in the Rockefeller archives it documents the difficulties Maclaurin encountered and the failure of the project to draw on the resources of MIT's scientists and engineers in the way he and Rockefeller officials had hoped and reflects on his marginalization in a department increasingly dominated by Paul Samuelson. Maclaurin's interdisciplinary approach to research fell out of favor, and the research profile of the MIT economics department became increasingly monodisciplinary.

Climate change policy in Brazil and Mexico: Results from the MIT EPPA model

Based on an in-depth analysis of results from the MIT Economic Projection and Policy Analysis (EPPA) model of climate policies for Brazil and Mexico, we demonstrate that commitments by Mexico and Brazil for 2020—made during the UN climate meetings in Copenhagen and Cancun—are reachable, but they come at different costs for each country. We find that Brazil's commitments will be met through reduced deforestation, and at no additional cost; however, Mexico's pledges will cost 4 billion US dollars in terms of reduced GDP in 2020. We explore short- and long-term implications of several policy scenarios after 2020, considering current policy debates in both countries. The comparative analysis of these two economies underscores the need for climate policy designed for the specific characteristics of each country, accounting for variables such as natural resources and current economic structure. Our results also suggest that both Brazil and Mexico may face other environmental and economic impacts from stringent global climate policies, affecting variables such as the value of energy resources in international trade.

Introduction: Telling the Story of MIT Economics in the Postwar Period

Over the past twenty-five years the Duke history of economics faculty, together with the collection development librarians in the David M. Rubenstein Rare Book and Manuscript Library, have been gathering the papers of notable (mostly) twentieth century economists in what is now called The Economists Papers Project (EPP). Over time that archive has grown and become central to historical research on economics in the postwar period. The papers of Edwin Burmeister, Evsey Domar, Franklin Fisher, Duncan Foley, Lawrence Klein, Franco Modigliani, and Robert Solow, all MIT faculty or students, have attracted scholars from around the world. After Paul Samuelson’s death in December 2009, his papers, by prior arrangement, came to the EPP and quickly became a magnet for historians of economics. In response, early in 2010 I was encouraged by my colleagues Kevin Hoover, Bruce Caldwell, Craufurd Goodwin, and Neil De Marchi to plan a conference in the History of Political Economy Annual Conference series to examine the history of MIT economics. After a year’s worth of conversations and emails, I invited a number of individuals to consider a variety of projects exploring MIT’s role in the transformation of American economics in the postwar period. That conference, held in April 2013 at the R. David Thomas Conference Center at Duke University, was sponsored as usual by the Duke University Press. However the very generous financial support of the Alfred P. Sloan Foundation made possible the expansion of the “standard” HOPE Conference into one that included a larger number of participants and papers. In the end the conferees learned that telling the story of MIT’s role in the postwar period required attending to both the particular circumstances that shaped MIT and the various ways in which economics itself was changing.

Mit’s Rise to Prominence: Outline of a Collective Biography

The core question of the MIT economics department’s history—why has MIT economics risen to prominence so quickly?—requires an approach to the history of economics that focuses on the role of the networks within which economists operate and how their ideas diffuse and gain scientific credit. By reconstructing the network of MIT economics PhDs and their advisers, this article furnishes evidence of how MIT rose to prominence as documented by the numerous ties of Nobel laureates, Clark medalists, elected officials of the American Economic Association or the Council of Economic Advisers to the MIT network. It also reveals the MIT economics department as a community of self-replicating economists who are largely trained by a few key advisers who were mostly trained at MIT as well. MIT has a disproportionate share of graduates who remain in American academe, which may be an important factor in MIT’s rise to prominence. On a methodological level this article introduces collective biography, or prosopography, a well-established historiographical method, to the field of the history of economics.

Negotiating the “Middle-of-the-Road” Position: Paul Samuelson, Mit, and the Politics of Textbook Writing, 1945-55

Previous contributions to the history of economics have tried to assess Paul Samuelson’s political positioning by tracing it in the subsequent editions of his famous textbook Economics. By contrast, this article depicts the making of Economics itself as a political process. It argues that the “middle-of-the-road” position that Samuelson adopted in the book was consciously constructed by the MIT economist, with the help of his home institution and his publishing company McGraw-Hill, in response to conservative criticisms of the textbook and pressures from members of the Corporation—MIT’s Board of Trustees. Though Samuelson first intended to write a policy-oriented textbook with a strong Keynesian inclination, the changes he introduced, while keeping most of the substance, made it a more theoretically inclined text, in which policy recommendations were presented in a softened fashion. These events, far from being anecdotal, should rather be seen as foundational in the identity of what historians are trying to identify as “MIT economics.”

Decisions and Dynamics: Postwar Theoretical Problems and the MIT Style of Economics

This article examines certain issues in postwar economic theory and compares them with related issues in the nascent fields of cybernetics, industrial dynamics, and operations research. Because all these fields had close connections to MIT, the comparison provides an opportunity to assess to what degree a peculiar MIT “style” of economics, developed particularly by Paul Samuelson and Robert Solow, could be attributed to the MIT context, and to what degree this style developed in dialogue with a larger conversation taking place in and around the American economic profession as a whole. It is concluded that there were significant affinities in theoretical interest running between MIT economics and other fields at MIT, which revolved around the emergence of macro-scale phenomena out of the dynamic interplay of local decision-making processes. However, the methodology through which Samuelson and Solow, in particular, addressed these issues was peculiar to economic discourse.

MIT and Money

The Treasury-Fed Accord of 1951 and the subsequent rebuilding of private capital markets, first domestically and then globally, provided the shifting institutional background against which thinking about money and monetary policy evolved within the MIT economics department. Throughout that evolution, a constant, and a constraint, was the conception of monetary economics that Paul Samuelson had himself developed as early as 1937, a conception that informed the decision to bring in Franco Modigliani in 1962, as well as Duncan Foley and Miguel Sidrauski in 1965.

Introduction: Telling the Story of MIT Economics in the Postwar Period

Over the past twenty-five years the Duke history of economics faculty, together with the collection development librarians in the David M. Rubenstein Rare Book and Manuscript Library, have been gathering the papers of notable (mostly) twentieth-century economists in what is now called the Economists’ Papers Project (EPP). Over time that archive has grown and become central to historical research on economics in the postwar period. The papers of Edwin Burmeister, Evsey Domar, Franklin Fisher, Duncan Foley, Lawrence Klein, Franco Modigliani, and Robert Solow, all MIT faculty or students, have attracted scholars from around the world. After Paul Samuelson’s death in December 2009, his papers were deposited in the EPP and quickly became a magnet for historians of economics. In response, I invited a select group of scholars to consider a variety of projects exploring MIT’s role in the transformation of American economics in the postwar period. A conference was held April 26-28, 2013, at Duke University, sponsored by Duke University Press and with generous financial support from the Alfred P. Sloan Foundation. In the end the conferees learned that telling the story of MIT’s role in the postwar period required attending to both the particular circumstances that shaped MIT and the various ways in which economics itself was changing.