Bild 1

1
Economic Losses of Using Global Warming
Potentials
International Energy Workshop June 22-24 2004,
Paris, France Christian Azar Daniel J.A.
Johansson Martin U. Persson Dept. of Physical
Resource Theory, Chalmers / Gothenburg University
2
GWPs Points of departure

• The metric used for determining the trade-off
  between different gases should
• (i) ensure equivalence regarding climate impacts
  for a given time frame
• (ii) ensure that a given climate target is
  reached in a cost effective way

Scientific
Economic
3
GWPs Critique

• Scientific
• Arbitrary time horizon (20, 100, 500 years)
• Constant background atmosphere
• Impulse emission
• Equal emission reductions in CO2-equivalent may
  lead to very different climate responses

• Economic
• The GWP-formulation takes no economic
  considerations into account, e.g.
• - cost of mitigation
• - cost of climate change
• - climate target

4
This study sets out to answer the following
question

• What is the cost of using the wrong metric,
  that is todays GWPs, instead of making a cost
  effective trade-off between the three main
  greenhouse gases, carbon dioxide, methane and
  nitrous oxide?

5
The MiMiC model(Multigas Mitigation Climate
model)
Reference scenario (IS92a) Emissions of CO2, CH4
N2O
Economic module Calculates abatement costs for
CO2, CH4 N2O
Climate module Calculates concentrations,
radiative forcing and subsequent temperature
response
6
The MiMiC model(Multigas Mitigation Climate
model)
Reference scenario (IS92a) Emissions of CO2, CH4
N2O
Objective Minimize total discounted abatement
costs to stabilize the temperature at 2C above
the pre-industrial level
Economic module Calculates abatement costs for
CO2, CH4 N2O
Climate module Calculates concentrations,
radiative forcing and subsequent temperature
response
7
Shadow price ratio between between methane CO2
in the cost effective trade off case
8
Shadow price ratio between between nitrous oxide
CO2 in the cost effective trade off case
9
Results
10
Results
Loss 2
11
Results
Loss 2
Loss 61
12
Monte Carlo Analysis

• Parameters are randomly varied
• A wide range of various parameter combinations
  are tested
• The parameters randomly varied in the Monte Carlo
  Analysis are
• Climate sensitivity, 1.5 - 4.5 K/Wm-2
• Marginal abatement cost curves
• Reference scenario for each gas
• Overlap between reference scenario and abatement
  for CO2 and CH4

13
Reference Scenario in the Monte Carlo
14
CO2 MAC in the Monte Carlo
15
MAC for CH4 in the Monte Carlo
16
Shadow price ratio between between CH4 CO2 in
the Monte Carlo Analysis
17
Histogram of the relative economic loss of using
GWP
18
Results discussion

• The cost of using the wrong metric in the trade
  off between CO2, CH4 and N2O is small in relative
  terms especially compared to the economic gains
  the metric gives by facilitating a multi-gas
  strategy
• The losses are not unsubstantial in absolute
  terms and national economic consequences of
  changing metric can be large
• The political cost of changing the metric is
  likely to be large

19
Conclusion

• This study finds the economic losses of using
  GWPs to be small
• Subsequently finds no strong economical reasons
  to abandon the current GWP-formulation
• Finding ways to deal with uncertain, non-point
  source emissions of CH4 N2O probably holds a
  greater economic potential than finding an
  optimal metric