Energy Transition

The Impacts of the Brazilian NDC and their contribution to the Paris Agreement on Climate Change

Summary: As the seventh largest emitter of greenhouse gas emissions—primarily from agriculture (32%), land-use change and deforestation (28%) and fossil fuel consumption (27.7%)—Brazil plays a key role in global climate negotiations. In its Nationally Determined Contribution (NDC) to the Paris Agreement on climate change, the country has pledged to reduce its emissions by 37% in 2025 and 43% in 2030 (relative to 2005 levels). To meet these targets, the Brazilian NDC highlighted its intentions to decrease deforestation, reforest degraded land areas, expand the use of renewable energy sources, increase energy efficiency and expand the area of integrated cropland-livestock-forestry systems.

Using the MIT EPPA model, this study evaluates the costs associated with these and alternative policy instruments by 2030, as well as policy options to further reduce emissions after 2030.

The study projects that the cost of the Brazilian NDC will be just 0.7% of GDP in 2030. Further efforts to reduce carbon emissions beyond 2030 would require policy changes, since all potential emissions reductions from deforestation would be completed, and the capacity to expand renewable energy sources would be limited. Given these constraints, the study finds that an economy-wide carbon pricing system would help substantially to avoid higher compliance costs.

Carbon pricing is a strategy to help reverse climate change by incentivizing a transition from fossil-fuel-based energy sources to those that are low- and zero-carbon. Under carbon pricing, carbon emitters generally pay a charge per ton of carbon emissions they produce, thereby creating a market incentive for producers throughout the economy to choose lower-carbon energy sources.

Why carbon pricing is more economical than regulations in reducing greenhouse gas emissions
Advanced Technologies in Energy-Economy Models for Climate Change Assessment

Summary: Accounting for the likely contribution of advanced technologies to the future energy mix is critical in energy-economic modeling, as these technologies, while often not yet commercially viable, could substitute for fossil energy when favorable policies are in place. Simulating the transition from fossil energy to low-carbon substitutes turns out to be challenging, as many of these alternative energy sources have not been widely adopted. Evidence for how quickly they can be adopted at large scale must therefore be obtained mostly from small samples or analogous technologies. At the same time, the speed of being able to transform the energy system to reduce GHG emissions is an important determinant of climate mitigation costs.

This study aims to improve the representation of technology diffusion in integrated assessment models and ground that representation in empirical foundations. Toward that end, the researchers develop an approach to model the penetration of a low-carbon substitute within a global energy-economic computable general equilibrium (CGE) model. Their approach enables the simulation of multiple dynamics related to new technology diffusion, including sunk investments in existing technology, monopoly rents associated with the new technology, adjustment costs related to expanding the new technology, short- and long-run pricing of output of the new technology, and the rate of diffusion of the new technology and how it is influenced by economic factors.

Designing Successful Greenhouse Gas Emission Reduction Policies: A Primer for Policymakers – The Perfect or the Good?

This paper evaluates four types of greenhouse gas emission reduction policies—carbon taxes, cap and trade (C&T) programs, tradeable performance standards (TCES) and technology-neutral clean energy standards (CES)—with a focus on the design levers available to policymakers to shape their structure and impacts. These design elements include production metrics, pricing mechanisms, technological neutrality, uniform standards, scope of coverage, balancing emission and cost risks, and managing distributional impacts. The paper concludes that each of these four policy approaches could reasonably satisfy a comprehensive list of policy criteria and as such be environmentally effective, cost effective, equitable, robust and durable; and at the same time also be preferable to either command and control regulations or 100% renewable portfolio standards approaches to deep decarbonization. The paper ends by identifying several implications for policymakers.

Representing a Deployment of Light-Duty Internal Combustion and Electric Vehicles in Economy-Wide Models

Representing the fleet of light-duty vehicles (LDV) in economy-wide models is important for projections of transportation demand, energy use, and resulting emissions. This paper presents a methodology for incorporating private transportation details into an economy-wide model and (using an example of the MIT Economic Projection and Policy Analysis (EPPA) model) a description of calibrating the model to the data. The authors provide results both for light-duty internal combustion engine (ICE) vehicles and electric vehicles (EV). For the EV fleet, both plug-in hybrid vehicles (PHEV) and battery electric vehicles (BEV) are considered. First, they find that the global LDV stock increased by about 45% in ten years, from 735 million in 2005 to 1.1 billion in 2015; over the same period in China (the fastest growing market), LDV stock increased from 20 million to 140 million. Second, they assess relative costs of ICE, PHEV and BEV vehicles. Based on consumer prices and battery pack/vehicle components cost estimates in the U.S., they find that compared to ICEs, PHEVs are about 30-60% more expensive and BEVs are about 40-90% more expensive. Finally, they project that global LDV stock will grow from 1.1 billion vehicles in 2015 to 1.8 billion in 2050, while global EV stock will grow from approximately one million to 500 million over the same period. The study’s methodology can be applied in other energy-economic models to test the sensitivity of the results to different input assumptions and specifications.

Implications of Updating the Input-output Database of a Computable General Equilibrium Model on Emissions Mitigation Policy Analyses

Large-scale economy-wide equilibrium models are widely used for assessing energy or climate policies. As different models often produce diversified outcomes for similar policies, researchers have been trying to understand reasons behind this observation, including cost assumptions for mitigation options, model structure, policy design, and timing. In this study, we focus on analyzing how updating the input-output database of a CGE model could inadvertently change the model output, which has not been carefully examined but could also be an important source that accounts for variations in simulation results of distinct models.

To answer the research question, we provide an analytical framework that elucidates how using a database with a higher energy price raises the CO2 mitigation cost when the substitution between inputs is relatively limited in the short-run, or when the price hike is considered as temporary. We also provide a numerical example for the analysis, and propose an adjustment that could, under the same percentage reduction in emissions, address the concerns of using the input-output data with prices for fossil fuels and their consumption levels deviating from a more sustainable state.

Assessing the Impacts of Increasing Transmission Capacity on the Electric Power Sector in New England

This thesis explores the evolution of the electric power sector in New England under the expansion of transmission capacity and under policy with increasing Clean Energy Standards (CES). I use EleMod, a Capacity Expansion Planning model, to compare (1) the reference case of current transmission assets, (2) increasing transmission interface capacities within New England, (3) increasing interconnection capacities with Canada, and (4) both capacity expansions. Transmission expansion allows electricity trade between states and enables them to take advantage of localized, intermittent resources like wind power. Increasing the interconnection capacity with Canada allows the system to optimally allocate the available hydropower energy for imports in the hours of highest net demand. Both transmission expansions together make even stronger use of their contributions.

For the capacity expansion model, I choose a set of generation technologies available in New England, and supply cost and operational data from public domain sources. My contributions to EleMod include: (1) the representation of transmission interfaces for New England; (2) the addition of an CES policy standard forcing generation shares from a subset of CES-eligible resources; (3) the modeling of an external hydro reservoir resource in Canada that can be used to supply the load in New England based on cross-border interconnection constraints and the total available energy per year; and (4) the detailed state-level representation of the New England power sector with generation technologies, installed capacities, transmission interface capacities, and CES targets.

Policy scenarios increase CES from an average of 25% in 2018 in the base scenario to 95% in 2050 in the decarbonization scenario. Through all policy scenarios, combined-cycle gas plants (GasCC) with carbon capture and storage (CCS) technology dominate the capacity expansions. Increases in transmission capacity lead to higher shares of wind in generation, especially when both transmission and interconnection are expanded. Natural gas, in the form of GasCC with and without CCS, takes shares of the generation mix of up to 85% by 2050. Thus, I also assess the role of pipeline capacities into New England. Because other natural gas uses like residential heating demand have priority over generators, gas-fired power plants cannot expect to meet all their demand during critical periods of shortage in the winter. However, this issue is part of a larger integrated resource planning process.

Both transmission and interconnection expansion reduce total system costs by an annual 3.95% and 4.29%, respectively. Because transmission costs are not included in the model, I separately assess the costs and benefits of both transmission expansion scenarios. Transmission expansions from Maine to Massachusetts of 2,000 MW and interconnection expansions to Canada of 3,000 MW and 4,500 MW from Maine and Vermont, respectively, allow for optimal allocation of flows across lines in over 90% of the hours. For interconnection, the calculation estimates costs to be about 1% higher than the benefits, and for transmission within the region the benefits exceed the costs by about 40%.

Pages

Subscribe to Energy Transition