• Energy Research

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.

Abstract 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.

Distributional impacts of environmental policies have become an increasingly important consideration in policymaking. To evaluate the distributional impacts of carbon pricing with different revenue recycling schemes for the USA, we integrate national economic model for the USA with household microdata that provides consumption patterns and other socio-economic characteristics for thousands of households. Using this combined model, we explore the distributional impacts and the possible trade-offs between equity and efficiency of different revenue recycling schemes. We find that the choice of revenue recycling scheme has a limited effect on efficiency of the policy, but significant distributional impacts. Our analysis indicates that policy makers can mitigate negative distributional impacts with positive synergies on efficiency. Xaquin Garcia-Muros acknowledges financial support from the European Union's H2020-MSCA-IF-2017 Actions No 796650 (CHANCE project).

Abstract We estimate the potential synergy between pollution and climate control in the U.S. and China, summarizing the results as emissions cross-elasticities of control. In both countries, ancillary carbon reductions resulting from SO 2 and NO x control tend to rise with the increased stringency of control targets, reflecting the eventual need for wholesale change toward non-fossil technologies when large reductions are required. Under stringent pollution targets, the non-target effects tend to be higher in China than in the U.S., due to China's heavy reliance on coal. This result suggests that China may have greater incentives to reduce SO 2 and NO x with locally apparent pollution benefits, but related efforts would at the same time reduce CO 2 emissions significantly. We also find strong non-target effects of CO 2 abatement in both countries, but the cross effects in this direction depend less on the stringency of control and are stronger in the U.S. than in China.

This paper estimates the value of international emissions trading, focusing on a here-to-fore neglected component; its value as a hedge against uncertainty. Much analysis has been done of the Kyoto Protocol and other potential international greenhouse gas mitigation policies comparing the costs of achieving emission targets with and without trading. These studies often show large cost reductions for all Parties under trading compared to a no trading case. We investigate the welfare gains of including emissions trading in the presence of uncertainty in economic growth rates, using both a partial equilibrium model based on marginal abatement cost curves and a computable general equilibrium model. We find that the hedge value of international trading is small relative to its value in reallocating emissions reductions when the burden sharing scheme does not resemble a least cost allocation. We also find that the effects of pre-existing tax distortions and terms of trade dominate the hedge value of trading. We conclude that the primary value of emissions trading in international agreements is as a burden sharing or wealth transfer mechanism and should be judged accordingly.

Land can be used in several ways to mitigate climate change, but especially under changing environmental conditions there may be implications for food prices. Using an integrated global system model, we explore the roles that these land-use options can play in a global mitigation strategy to stabilize Earth's average temperature within 2 °C of the preindustrial level and their impacts on agriculture. We show that an ambitious global Energy-Only climate policy that includes biofuels would likely not achieve the 2 °C target. A thought-experiment where the world ideally prices land carbon fluxes combined with biofuels (Energy+Land policy) gets the world much closer. Land could become a large net carbon sink of about 178 Pg C over the 21st century with price incentives in the Energy+Land scenario. With land carbon pricing but without biofuels (a No-Biofuel scenario) the carbon sink is nearly identical to the case with biofuels, but emissions from energy are somewhat higher, thereby results in more warming. Absent such incentives, land is either a much smaller net carbon sink (+37 Pg C - Energy-Only policy) or a net source (-21 Pg C - No-Policy). The significant trade-off with this integrated land-use approach is that prices for agricultural products rise substantially because of mitigation costs borne by the sector and higher land prices. Share of income spent on food for wealthier regions continues to fall, but for the poorest regions, higher food prices lead to a rising share of income spent on food.

In 2007 the US Congress began considering a set of bills to implement a cap-and-trade system to limit the nation's greenhouse gas (GHG) emissions. The MIT Integrated Global System Model (IGSM)—and its economic component, the Emissions Prediction and Policy Analysis (EPPA) model—were used to assess these proposals. In the absence of policy, the EPPA model projects a doubling of US greenhouse gas emissions by 2050. Global emissions, driven by growth in developing countries, are projected to increase even more. Unrestrained, these emissions would lead to an increase in global CO2 concentration from a current level of 380 ppmv to about 550 ppmv by 2050 and to near 900 ppmv by 2100, resulting in a year 2100 global temperature 3.5–4.5°C above the current level. The more ambitious of the Congressional proposals could limit this increase to around 2°C, but only if other nations, including developing countries, also strongly controlled greenhouse gas emissions. With these more aggressive reductions, the economic c...

In 2003 Japan proposed a Climate Change Tax to reduce its CO2 emissions to the level required by the Kyoto Protocol. If implemented, the tax would be levied on fossil fuel use and the revenue distributed to encourage the purchase of energy efficient equipment. Analysis using the MIT Emissions Prediction and Policy Analysis (EPPA) model shows that this policy is unlikely to bring Japan into compliance with its Kyoto target unless the subsidy encourages improvement in energy intensity well beyond Japan’s recent historical experience. Similar demand-management programs in the US, where there has been extensive experience, have not been nearly as effective as they would need to be to achieve energy efficiency goals of the proposal. The Tax proposal also calls for limits on international emission trading. We find that this limit substantially affects costs of compliance. The welfare loss with full emissions trading is 1/6 that when Japan meets its target though domestic actions only, the carbon price is lower, and there is a smaller loss of energy-intensive exports. Japan can achieve substantial savings from emissions trading even under cases where, for example, the full amount of the Russian allowance is not available in international markets.