Regional Analysis

The economic and emissions benefits of engineered wood products in a low-carbon future

Summary: To meet the long-term goals of the Paris Agreement on climate change—keeping global warming well below 2°C and ideally capping it at 1.5°C—humanity will ultimately need to achieve net zero emissions of greenhouse gases (GHGs) into the atmosphere. To date emissions reduction efforts have largely focused on decarbonizing the two economic sectors responsible for the most emissions, electric power and transportation. Other approaches aim to remove carbon from the atmosphere and store it through carbon capture technology, biofuel cultivation and massive tree planting.  

As it turns out, planting trees is not the only way forestry can help in climate mitigation; how we use wood harvested from trees may also make a difference. Recent studies have shown that engineered wood products—composed of wood and various types of adhesive to enhance physical strength—involve far fewer carbon dioxide emissions than mineral-based building materials, and at lower cost. Now new research explores the potential environmental and economic impact in the U.S. of substituting lumber for energy-intensive building products such as cement and steel, which account for nearly 10 percent of human-made GHG emissions and are among the hardest to reduce.

Comparing the economic and emissions impacts of replacing CO2-intensive building materials (e.g. steel and concrete) with lumber products in the U.S. under an economy-wide cap-and-trade policy consistent with the nation’s Paris Agreement GHG emissions reduction pledge, the study found that the CO2-intensity (tons of CO2 emissions per dollar of output) of lumber production is about 20 percent less than that of fabricated metal products, under 50 percent that of iron and steel, and under 25 percent that of cement. In addition, shifting construction toward lumber products lowers the GDP cost of meeting the emissions cap by approximately $500 million and reduces the carbon price.

As the Paris Agreement nears the four-year mark and signatories prepare to account for progress to date on national pledges to reduce climate-warming greenhouse gas (GHG) emissions, it’s important to note that some countries have a much heavier lift than others. A case in point is Taiwan, where more than 95 percent of the total energy supply comes from fossil fuels, nearly all of which are imported.

How climate mitigation abroad can affect domestic economies
Will Greenhouse Gas Mitigation Policies Abroad affect the Domestic Economy? The Case of Taiwan

Summary: As the Paris Agreement nears the four-year mark and signatories prepare to account for progress to date on national pledges to reduce climate-warming greenhouse gas (GHG) emissions, it’s important to note that some countries have a much heavier lift than others. A case in point is Taiwan, where more than 95 percent of the total energy supply comes from fossil fuels, nearly all of which are imported. Fulfilling its Nationally Defined Contribution (NDC) to the Paris Agreement—to reduce its greenhouse gas emissions by 50% from the business-as-usual level (428 metric tons of carbon dioxide-equivalent emissions) by 2030—may impact Taiwan’s economy due to its heavy dependence not only on imported carbon-intensive energy sources but also on international trade. The combined effect of nearly 200 other countries’ efforts to fulfill their NDCs could alter Taiwan’s trading channels and costs, and hence its domestic economic performance. To assess the overall potential impact of the Paris Agreement on the island nation’s economy therefore requires a modeling framework that takes into account the economic effects of both domestic and international GHG reduction policies.

Overcoming the limitations of previous studies of Taiwan’s economy based on a single-country modeling framework, researchers at the MIT Joint Program on the Science and Policy of Global Change have developed and applied a global, economy-wide, computable general equilibrium (CGE) model with energy use and emissions details where Taiwan is explicitly represented. The MIT model, which provides global coverage and explicit modeling for international trade, can simulate the economic effects of foreign policies including the Paris Agreement. In a study appearing in Climate Change Economics, the researchers compared the impact on Taiwan’s economy of the Paris Agreement under two scenarios—one in which Taiwan fulfills its NDC unilaterally, the other in which Taiwan does so in the context of a global effort. The study also considered the impact on Taiwan’s economy of a third scenario in which the U.S., which recently set in motion its withdrawal from the international climate accord, partially achieves its NDC through state-level efforts.

Herding Cats: Firm Non-Compliance in China’s Industrial Energy Efficiency Program

Summary: Few studies have empirically analyzed the performance and limitations of major energy efficiency programs at the firm level in the developing world. This study perform a detailed analysis of firm compliance behavior in a large-scale Chinese energy efficiency program, focused on the Top 1000 Enterprises Energy-Saving Program (T1000P) during the Eleventh Five-Year Plan (2006-2010) and the (expanded) Top 10000 Enterprises Energy-Saving Program (T10000P) during the Twelfth Five-Year Plan (2011-2015). Guided by a simple analytical framework to illustrate the relationship among the probability of non-compliance, the probability of data manipulation, and the perceived return to energy efficiency investments considering a profit-maximizing firm, the authors focus on two sets of characteristics. First, of firm size (measured in terms of annual revenue) and state ownership, which they theorize would have opposing effects on non-compliance, and second, of a firm’s location, such as local economic growth and per-capita GDP.

The study reports three main findings: (1) evidence that firms deliberately exaggerated performance during the first phase of the program; (2) firms’ reported compliance, while in general high, decreased significantly after the program expanded under the Twelfth Five-Year Plan; and (3) larger firms, especially larger non-state-owned firms, and firms in cities with low growth tended to fail to comply. The authors suggest that some of these findings may apply to other developing countries. They recommend that incentives and resources to support accurate reporting should be made available when a policy is introduced, and that stronger, broad-based enforcement of environmental directives, combined with mechanisms for equalizing marginal compliance costs across firms, will be important to limit non-compliance as policy stringency increases.

Thirteen researchers and affiliates of the MIT Joint Program on the Science and Policy of Global Change plan to deliver or contribute to eight oral and poster presentations at the American Geophysical Union (AGU) 2019 Fall Meeting on December 9-13 at the Moscone Center in San Francisco. The largest Earth and space science conference in the world, the AGU Fall Meeting provides a platform for new research and emerging trends in more than 25 disciplines, including global environmental change.

Assessing changes and risks to the oceans, land and atmosphere

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