Combining options for commitments: results from modelling exercises

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Combining options for commitments results from
modelling exercises
Patrick Criqui, LEPII-EPE, CNRS-UPMF Alban
Kitous, ENERDATA Cédric Philibert, IEA
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Outline

• The POLES model key features
• The Baseline projection
• A Carbon Constraint Case to 2050
• Exploring alternative scenarios
• Impacts of non-binding targets for DCs
• Introducing price caps
• Introducing indexed targets
• Strengthening the carbon constraint

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The POLES model key features

• A partial equilibrium model for the world energy
  system
• with a year-by-year recursive simulation process
  from 2004 to 2050
• and 46 key countries and regions
• Endogenous supply and demand on international
  energy markets and prices
• Low-emission technologies introduced

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The 2050 Baseline projection

• Supposes no major change in world energy and
  environmental policies
• World energy consumption in 2030 is nearly the
  same as in WEO but fuel mix differs, with more
  coal, less oil and gas
• 2030 energy-related CO2 emissions 43 GtCO2
  against 38 GtCO2 in WEO
• In 2050 more than 50 GtCO2 from energy, i.e.
  twice current levels close to IPCC scenarios
  leading to 1000 ppmv CO2 or more (e.g. A1B)

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The Carbon Constraint Case

• US carbon intensity decreases by 2/year, with
  technology policies
• On top of pre-existing efficiency improvements
  and price effects
• Revival of the nuclear option
• Full-scale phase-in of CCS technologies
• The rest of Annex 1 (or Annex 1) adopts fixed
  targets in 2050, at 50 of 1990 emissions
• Non Annex 1 countries accept non-binding targets
  slightly under their BaU emissions
• 90 of their baseline 2030 emissions
• 80 of their baseline 2050 emissions

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World CO2 emissions in the CCC

• Emissions peak at 40 GtCO2 in 2040, close to IPCC
  scenarios for stabilisation at 750 ppmv
• Reduction from Baseline 25 in 2050
• Emissions Trading is allowed among the Annex 1
  and developing countries
• A carbon value of 19 /tCO2 in 2030 and 44 /tCO2
  in 2050
• Emissions trading largely compensates the
  abatement costs for developing countries

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1. Impacts of non-binding targets for DCs

• Assumption one key non Annex 1 region gets a
  higher-than-expected economic growth
• As a result, this region renounces to fully meet
  its non-binding target and cannot sell CO2
  surplus
• Global emissions increase
• by 7 in the Baseline
• by up to 18 in the CCC
• But the permit price increases only from 44 to 46
  /tCO2 as higher energy prices partly offset
  reduced permit supply

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2. Introducing a high price cap

• Assumes a price-cap is introduced for Annex 1
  with a linear increase to 50 /tCO2 in 2050 (i.e.
  above forecasted costs)
• and a key developing region experiences a
  higher-than-expected economic growth and
  renounces to meet its non-binding target and to
  trade CO2 surplus
• then despite the absence of cheap reduction
  from this country, marginal abatement costs may
  not reach the price cap level, due to indirect
  effects on energy markets
• This case reveals no domino effect of non
  binding targets on the other countries emissions

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3. Introducing indexed targets

• In case of economic surprises, indexed targets
  would result in the same global emissions as
  non-binding targets, but with relatively lower
  abatement costs for Annex I countries, as all
  countries would continue to trade
• The risk for the other regions of reaching a
  possible price cap level set above forecasted
  costs is in that case lower than with non-binding
  targets

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4. Strenghthening the carbon constraint

• Assumes that Annex I countries strengthen their
  targets, down to 25 of 1990 levels ( Factor
  4 )
• Global emissions are reduced to 37.5 GtCO2 with a
  permit price of 58 /tCO2 (i.e. a 700 ppmv
  profile)
• The relatively limited impact results from the
  small share of Annex 1 countries in global 2050
  emissions (19 )
• A price cap may make this commitment easier. If
  it is set at 50 /tCO2 and if abatement costs
  are
• as forecasted (58 /tCO2), the price cap level is
  reached, but emissions remain almost unaffected
  at 38 vs. 37.5 GtCO2
• lower than forecasted, then the more stringent
  target is reached at lower costs
• higher than forecasted, emissions increase beyond
  the initial scenario

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Preliminary conclusions

• Combined options scenarios may result in global
  reductions in the range of 25 from Baseline in
  2050
• In case of unexpectedly high economic growth,
  non-binding targets or dynamic targets will
  indeed entail deviation from targets
• But may not have a strong effect on the emissions
  of the parties under a price cap, due to
  interactions with energy markets
• Price cap may also help strengthening the
  constraint with however limited effects on
  global emissions if the corresponding region is
  too small