Low carbon economy: Modelling and more

CSEAt the South Asia Media Briefing Workshop

Delhi, August 27-28

Low carbon economy

An economy model with a minimal output of GHG emissions, specifically carbon dioxide

Energy efficiency, low carbon energy supply & terrestrial carbon (forestry and agriculture) –reducing consumption or lifestyle changes not considered

Abatement cost: (cost of new tech – old tech)/(GHG emissions from old – new) -- US$ 100/ Euro 60 per tonne of CO2e avoided

WGIII, AR4, IPCC, 2007

How much emission reductions can be done by 2030, by using technologies that will cost less than 100 US$/ CO2e abatement cost?

Potential: 16-30 billion tonne CO2e – 30-50% below business-as-usual in 2030

Building, agriculture and forestry sector – cheapest + maximum potential

65% of the total potential in the developing countries

McKinsey global GHG abatement cost curve

Potential of technologies with abatement cost below Euro 60/ CO2e.

Potential: 38 billion tonnes in 2030 – 70% below BAU or 35% below 1990 levels

Worldwide cost: Euro 200-350 billion/ yr by 2030 – 1% of Global GDP

Capital cost: 500-800 billion/yr above BAU investment

70% of total abatement potential in the developing countries

McKinsey GHG abatement cost curve

10 billion tonnes of CO2e by 2030 at negative cost + 20 billion tonnes between Euro 0-20 + 8 billion tonnes Euro 20-60

14 billion tonnes in energy efficiency in buildings, transport and industrial sectors + 12 billion tonnes in low carbon energy (nuclear+renewable+CCS) + 12 billion tonnes forestry and agriculture

World in 2030: 330 million ha. new forests + 70 percent renewable electricity + 40% hybrid cars ……………

Low carbon models for India

McKinsey’s India GHG abatement cost curve

India’s energy consumption would quadruple and GHG emissions would increase from about 1.5 billion tonnes CO2e in 2005 to 5-6.4 billion tonnes by 2030

Potential to restrict total emissions to 3.0 billion tonnes CO2e in 2030

But it will cost more than a trillion US$ -- 2-3% of GDP

McKinsey’s India GHG abatement cost curve

Cost of solar technologies and nuclear lower in India – highly debatable.

Some proposals ludicrous – afforest pasture land, anti-methanation vaccines to 140 million heads of livestocks

National Climate Change Policy Modelling Forum

India Computable General Equilibrium (CGE) Model: GDP growth, level of energy use and GHG emissions

India MARKAL Model: “optimal” choice of energy-technology combination and least cost options to satisfy end-use energy demands.

India Activity Analysis Model: GDP, poverty and impact of GHG mitigation policy on poverty

India SWAT Hydrology Model: impact on water resources

India ASWP Cropping Model: impact on agriculture

Preliminary results – CGE, MARKAL, AA Model

Reference scenario (Business as usual) India can achieve around 8 per cent GDP growth

rate till 2030 which will virtually eliminate poverty India’s commercial energy consumption increases

by 5.1 times – coal consumption increases by 4 times and petroleum by 5 times.

CO2 intensity of the economy (kg CO2e per US$ GDP) will decline by 3.7% per annum

India’s per capita CO2 emissions will be around 2.7 tonnes in 2030, much below the current global per capita emissions of 4.5 tonnes

Preliminary results – CGE, MARKAL, AA Model

Scenario studies:

1. Imposition of revenue positive carbon tax on the production sectors (US$ 10, 20, 40, 80 per tonne CO2e)

2. Imposition of revenue neutral carbon tax on the production sectors (US$ 10, 20, 40, 80 per tonne CO2e)

3. Binding emission reduction target of 20% from the reference scenario (deviation of 20% from business as usual)

Preliminary results – Impact of carbon tax

Preliminary results – Impact of carbon tax

Preliminary results – Impact of tax and binding targets

Carbon tax will reduce India’s GDP growth rate, reduce per capita consumption level and hence welfare and will therefore increase poverty

Carbon tax will have no significant impact on energy consumption, CO2 emissions or the commercial energy mix in the country

Binding emission reduction targets will reduce per capita consumption level and hence welfare much more than carbon tax and therefore will have larger impact on poverty levels

Modelling and more

Model outcomes highly depend on assumptions made, algorithm used and quality of data fed

The outcome of Indian models primarily hinges on two key assumptions they have made for the BAU scenario – Total factor productivity (TFG) growth rate of 3% per annum and Autonomous Energy Efficiency Index (AEEI) of 1.5% per annum.

We believe these are optimistic assumptions. lower these two and GDP decreases, emissions and per capita emissions increases