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Technology Assessment and Climate Policy
(IAM, WP4.1, NCCR-Climate)
Alexander Wokaun (PI), Socrates Kypreos (Co-PI), Leonardo Barreto, Peter Rafaj, Daniel Krzyzanowski,
Hal Turton
Energy Economics Group
General Energy Research Department (ENE) Paul Scherrer Institute (PSI)
NCCR-Climate Boxenstopp, Bern, May, 17, 2005
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Outline
•Integrated assessment models
•The impact of endogenized technological learning
•Flexible climate policy instruments
•Stimulating technological learning
•Fuel cells and hydrogen in the automobile sector
•Conclusions
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Integrated Assessment Models (IAM)
• Two overarching questions:
• Which policy mix will insure that the most efficient options are selected and promoted?
• What is the portfolio of efficient technological and other options to mitigate climate change?
• In order to answer these two questions an adequate representation of technology dynamics within the IAM framework was developed (MERGE-ETL, GMM, ERIS) and alternative policy instruments that could enhance the flexibility of climate policies were examined.
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Endogenized Technological Learning
Cumulative Undiscounted GWP Losses in a 450 ppmv case relative to BaU Case with Learning (BAU-S)
Source: Kypreos, 2005: Optimal Economic Growth under Climate Threats. Kluwer Publishers (submitted)
0 0.3 0.6 0.9 1.2
BAU-S BAU-N 450 ppmv-S 450 ppmv-N
Percentage Relative to BAU-S (%)
S denotes cases with endogenized learning N denotes cases without learning
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Endogenized Technological Learning
CO2 Marginal Cost for a 450 ppmv Target
Source: Kypreos, 2005: Optimal Economic Growth under Climate Threats. Kluwer Publishers (submitted)
0 300 600 900 1200 1500
2000 2005 2010 2015 2020 2030 2040 2050 2060 2070 2080 2090 2100
Marginal Cost of CO2 (U$/tC)
450 ppmv S 450 ppmv N
S denotes cases with endogenized learning N denotes cases without learning
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Flexible Climate Policy Instruments
•Climate policy should exploit a combination of
“where”, “when”, “what” and technology-related flexibilities.
•A combination of policy instruments may help exploiting potential synergies
•Policy instruments must be designed to stimulate technological change in the long run
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Multi-GHG Mitigation Strategies
• Consideration of non-CO2 GHGs (e.g. CH4, N2O) leads to noticeable cost reductions and changes in the composition of mitigation strategies
• The “what” flexibility in climate policy could shift the introduction of capital-intensive technologies into the future
• But, in the long term, CO2 reduction must remain at the core of GHG mitigation efforts
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Multi-GHG Mitigation Strategies
Change in Cumulative Discounted Energy System Cost and Welfare Loss relative to the Baseline Scenario
Source: Rafaj, Barreto, Kypreos 2005: The Role of Non-CO2 Gases in Flexible Climate Policy (submitted)
1.59
1.44
1.92
1.18
0.0 0.5 1.0 1.5 2.0
Baseline Soft landing Multigas Multigas / CO2-only
Multigas / Cumulative
%
CO2 abatement CO2 abatement
CO2+CH4+N2O abatement CO2+CH4+N2O abatement
W here flexibility
W here + W hat + W hen flexibility
Baseline
W here flexibility
W here + W hat flexibility
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Combining Policy Instruments:
CO2 Reduction, Renewable Portfolio, Local Externalities
•It is necessary to examine the effects of combining climate-change policy instruments with measures in other policy domains
•Synergies between CO2 reduction, renewable
portfolio standards and policies to curb air pollution could be exploited
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Combining Policy Instruments:
CO2 Reduction, Renewable Portfolio, Local Externalities
Source: Rafaj, Barreto, Kypreos, 2005: Combining Policy Instruments for Sustainable Energy Systems
-50 -40 -30 -20 -10 0
2000 2010 2020 2030 2040 2050
Reduction in CO2 emissions over Baseline
CO2-cap&trade Renewable portfolio Local externality
CO2-cap&trade + Local externality Renewable portfolio + Local externality
%
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Combining Policy Instruments:
Change in Cumulative Discounted Energy System Cost relative to the Baseline Scenario
Source: Rafaj, Kypreos, Barreto, 2005: Combining Policy Instruments for Sustainable Energy Systems
2.79
3.31
4.52
1.59
1.20
1.72
2.21
2.66
3.21
0 1 2 3 4 5
Baseline Soft landing Renewable portfolio Externalities Soft landing + Renewable portfolio Soft landing + Externalities Soft landing + Externalities + Renewable portfolio
%
Single policies
Combined policies
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Combining Security of Energy Supply and Climate Change Policies
• Climate change and energy supply disruptions are two major risks linked to the energy system
• Both important to long-term energy sustainability
• There may be synergies and trade-offs between pursuing GHG abatement and security of supply ->
possible shift to H2 economy
• Both are affected by technological change
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Combining Security of Energy Supply and Climate Change Policies
Global H2 Production
Source: Turton and Barreto (2005), Long-term security of energy supply and climate change
0 20 40 60 80 100 120 140 160
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
Global Hydrogen Production (EJ)
Baseline Supply policy Weak GHG cap
Supply policy and weak GHG cap 650 ppmv GHG cap
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Security of Supply and Climate Change
Policy Impact on Energy System Cost
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
No policy Supply policy Weak GHG cap Supply policy and weak GHG cap
650 ppmv GHG cap
Policy instruments Impact on energy system cost (% relative to baseline)
9.1 %
10.6
Source: Turton and Barreto (2005), Long-term security of energy supply and climate change
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Stimulating Technological Learning
•The portfolio of policy instruments must include R&D and demonstration and deployment (D&D) programs in order to stimulate technological learning of clean
emerging technologies
•“No silver bullet”: a broad portfolio of technologies is needed to achieve long-term climate policy goals.
Options range from renewable and nuclear energy to efficiency improvements along the whole chain and CO2 capture and storage
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Fuel Cells and Hydrogen in the Passenger Car Sector
•Fuel-cell vehicles and hydrogen could be promising options to satisfy energy needs in the long term but require targeted and consistent support in the form of R&D, demonstration and deployment (D&D) programs, adequate CO2 price signals and targeted measures, among others
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Influence of Fuel Cell Cost (USD/kW) and Learning Rates in Market Share of H2 Fuel Cell Cars
Source: Krzyzanowski, Kypreos, Barreto (2005): Assessment of Market Penetration Potential of Fuel Cell Vehicles
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Conclusions - 1
•An affordable CO2 mitigation policy requires:
• Combination of “where”, “when”, “what” and technology- related flexibilities
• Exploitation of synergies with other policy domains (air pollution, promotion of renewable energy, security of energy supply, etc)
• Adequate and sufficiently funded R&D and demonstration and deployment (D&D) programs to stimulate
technological learning of cleaner emerging technologies
• Technologies that build a bridge to low-emissions energy systems are essential
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Conclusions - 2
•A “hydrogen+electricity” economy could be
attractive in the long run, provided a number of hurdles are surmounted and environmentally compatible pathways can be implemented
•Climate policy solutions require combining knowledge in science, policy, economics and
technology, implemented under societal constraints
