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The Deployment of Low Carbon
Technologies in Energy Intensive Sectors
A GCE Analysis for Europe, China and India
Stefan Nabernegg
Birgit Bednar-Friedl
Fabian Wagner
Janusz Cofala
Thomas Schinko
Yadira Mori-Clement
International Energy Workshop June 1, 2016
International Energy Workshop June 1, 2016
Introduction
• 40% of global GHG emissions stem from industrial sectors
• Strong emission reductions for 2°C target (-24% (IEA 2010)) while
increasing demand (double (Allwood et al. 2010))
• Low carbon technologies in energy intensive sectors
– Differences in reduction potential
– Differences in trade exposure
• Other studies
– Descriptive perspective (e.g. Cai et al. 2009)
– Single or subset of sectors (e.g. Schinko et al. 2014)
Introduction Methodology LCT Macroeconomic Analysis Conclusion
International Energy Workshop June 1, 2016
Model link of technological and macroeconomic model
Introduction Methodology LCT Macroeconomic Analysis Conclusion
Model calibration
Reduced technology representation
• Fuel cost reductions FCs,r(PCO2)
• Investment costs Is,r(PCO2)
• Operation and maintenance costs O&Ms,r(PCO2)
Detailed technology
information by sector
and region
GAINS model (Wagner et al. 2012, 2013)
Macroeconomic
linkages of sectors
and regions
CGE model (Bednar-Friedl et al.
2012a, b)
International Energy Workshop June 1, 2016
No. Aggregated Region Model code
1 Central EU 27 + Switzerland CEU
2 Mediterranean EU 27 MEU
3 Northern EU 27 NEU
4 China CHN
5 India IND
6 Southeastern and Rest of Europe SROE
7 North America NAM
8 Rest of industrialized countries ROI
9 Other emerging economies ECO
10 Latin America LAM
11 Oil and gas exporting countries OIGA
12 Rest of South & South East Asia RASI
13 Africa AFR
CGE model (Bednar-Friedl et al. 2012a, 2012b; Schinko et al. 2014)
Introduction Methodology LCT Macroeconomic Analysis Conclusion
International Energy Workshop June 1, 2016
No. Aggregated Region Model code
1 Central EU 27 + Switzerland CEU
2 Mediterranean EU 27 MEU
3 Northern EU 27 NEU
4 China CHN
5 India IND
6 Southeastern and Rest of Europe SROE
7 North America NAM
8 Rest of industrialized countries ROI
9 Other emerging economies ECO
10 Latin America LAM
11 Oil and gas exporting countries OIGA
12 Rest of South & South East Asia RASI
13 Africa AFR
CGE model (Bednar-Friedl et al. 2012a, 2012b; Schinko et al. 2014)
Introduction Methodology LCT Macroeconomic Analysis Conclusion
No. Aggregated Sectors
Model
Code No. Aggregated Sectors
Model
Code
Energy intensive (EIS) 10 Transport TRN
1 Refined oil products P_C Water
2 Electricity ELY Air
3 Iron and steel I_S Road and Rail
4 Cement, lime, glass etc. NMM Extraction
5 Paper, pulp and paper
products PPP 11 Other Extraction EXT
6 Chemicals, rubber and
plastic CRP 12 Coal COA
Non-energy intensive (NEIS) 13 Crude Oil OIL
7 Tech industries TEC 14 Natural Gas GAS
8 Food and textile industries FTI 15 Agriculture AGRI
9 Other services and utilities SERV 16 Capital Goods CGDS
International Energy Workshop June 1, 2016
CGE model (Bednar-Friedl et al. 2012a, 2012b; Schinko et al. 2014)
Introduction Methodology LCT Macroeconomic Analysis Conclusion
Oth
er r
egio
ns,
O
ther
reg
ion
s,
Reg
ion
al h
ou
seh
old Armington aggregate,Domestic supply,
Domestic production,
Resource extracting
Process emission
ElectricityOther
sectors Oth
er r
egio
ns,
International Energy Workshop June 1, 2016
GAINS model (Wagner et al. 2012, 2013, Amann et al. 2009, 2011)
• Packages of individual technologies
• technology simulations with different carbon prices
• Reduced-form representation of fuel cost curves and investment
curves
Introduction Methodology LCT Macroeconomic Analysis Conclusion
International Energy Workshop June 1, 2016
Investment and fuel savings by sector (GAINS simulations)
Introduction Methodology LCT Macroeconomic Analysis Conclusion
0102030405060708090
0 100 200 300
Chemicals
Energyindustries
Iron and Steel
non-ferrousmetals
non-metallicminerals
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
0 100 200 300
Inve
stm
ent
req
uir
emen
ts
[mill
ion
Eu
r]
Carbon price [Eur/tCO2]
-3,000
-2,500
-2,000
-1,500
-1,000
-500
0
0 100 200 300
Re
du
ced
fu
el c
ost
[m
illio
n E
ur/
yr]
Carbon price [Eur/tCO2]
Ind
ia
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
0 100 200 300
Inve
stm
ent
req
uir
emen
ts
[mill
ion
Eu
r]
Carbon price [Eur/tCO2]
-12,000
-10,000
-8,000
-6,000
-4,000
-2,000
0
0 100 200 300
Re
du
ced
fu
el c
ost
[m
illio
n E
ur/
yr]
Carbon price [Eur/tCO2]
Ch
ina
Corresponds to WEO 450 ppm scenario
International Energy Workshop June 1, 2016
CGE implementation
Introduction Methodology LCT Macroeconomic Analysis Conclusion
Changes in sectoral inputs and unit costs (carbon price 110$/tCO2eq)
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
P_C EL
Y
I_S
NM
M
PP
P
CR
P
P_C EL
Y
I_S
NM
M
PP
P
CR
P
P_C EL
Y
I_S
NM
M
PP
P
CR
P
CEU CHN IND
CAP
p_c
gas
oil
coa
Unit Costs
35.7%
17.8%
International Energy Workshop June 1, 2016
Macroeconomic analysis - Scenarios
Introduction Methodology LCT Macroeconomic Analysis Conclusion
EUINCH_TECH LCT in EU, China and India; Baseline emission level
EU CHN IND
Baseline 2030 calibrated to GDP growth, CO2 price, fossil fuel prices as in WEO 450 ppm
EU_TECH LCT in EU; Baseline emission level diff
diff
International Energy Workshop June 1, 2016
Macroeconomic analysis - Results
Introduction Methodology LCT Macroeconomic Analysis Conclusion
EU_TECH LCT in EU; Baseline emission level
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
P_C ELY I_S NMM PPP CRP
Output change (Q)
EU CHN IND
-4%
-2%
0%
2%
4%
6%
8%
CHN IND ECO NAM rest
EU trade flows [%diff]
EU Export Q EU Import Q
International Energy Workshop June 1, 2016
Macroeconomic analysis - Results
Introduction Methodology LCT Macroeconomic Analysis Conclusion
EU_TECH LCT in EU; Baseline emission level
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
P_C ELY I_S NMM PPP CRP
Output change (Q)
EU CHN IND
-15%
-10%
-5%
0%
5%
EU CHN IND rest Total
EU_Tech
CO2 emissions [%diff]
%diff EIS %diff NEIS
International Energy Workshop June 1, 2016
Macroeconomic analysis - Results
• Sectoral output in energy intensive sectors
– EU: 3 out of 6 sectors decline
– China, India: negligible effects
• EU Trade
– Exports decline
– Imports from China, India, North America increase
• CO2 emissions
– -13% in EU
Introduction Methodology LCT Macroeconomic Analysis Conclusion
EU_TECH LCT in EU; Baseline emission level
International Energy Workshop June 1, 2016
-30%
-20%
-10%
0%
10%
20%
30%
P_C ELY I_S NMM PPP CRP
Output change (Q)
EU CHN IND
Macroeconomic analysis - Results
Introduction Methodology LCT Macroeconomic Analysis Conclusion
EUINCH_TECH LCT in EU, China and India; Baseline emission level
-8%-6%-4%-2%0%2%4%6%8%
CHN IND ECO NAM rest
EU trade flows
EU Export Q EU Import Q
International Energy Workshop June 1, 2016
-30%
-20%
-10%
0%
10%
20%
30%
P_C ELY I_S NMM PPP CRP
Output change (Q)
EU CHN IND
Macroeconomic analysis - Results
Introduction Methodology LCT Macroeconomic Analysis Conclusion
EUINCH_TECH LCT in EU, China and India; Baseline emission level
-20%-15%-10%
-5%0%5%
10%15%
EU CHN IND rest Total
EUINCH_Tech
CO2 emissions [%diff]
%diff EIS %diff NEIS
International Energy Workshop June 1, 2016
Macroeconomic analysis - Results
• Sectoral output in energy intensive sectors
– EU: 5 out of 6 sectors decline
– China, India: strongly positive effects
• Trade EU
– Exports redirected to China and India
– Imports from India decline strongly
– Imports from North America increase
• CO2 emissions
– Decline in Europe, China and India
– China, India: Strong decline in EIS, counterbalanced (~25%) in NEIS
Introduction Methodology LCT Macroeconomic Analysis Conclusion
EUINCH_TECH LCT in EU, China and India; Baseline emission level
International Energy Workshop June 1, 2016
Conclusion
• Costs of low carbon technologies in energy intensive sectors
– Sectoral and regional differences: larger potential in China and India, than in EU because of lower investment costs
– Most of energy savings potential is realized at carbon prices below $110 /tCO2eq
• Low carbon technologies in EU
– difference in sectoral output depend on technology savings and investment, as well as international trade and sectoral substitution
• Low carbon technologies also in India and China
– Positive output effect of LCTs in all EIS in India and China
– CO2 reduction in EIS partly offset by CO2 increase in NEIS
– Spillover effect on EU trade flows
Introduction Methodology LCT Macroeconomic Analysis Conclusion
Thank you for your attention!
Questions, Comments, Suggestions…
Stefan Nabernegg
stefan.nabernegg@uni-graz.at
Birgit Bednar-Friedl
Fabian Wagner
Janusz Cofala
Thomas Schinko
Yadira Mori-Clement
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