clean power plan proposal climate (co ) benefits...– behind each value significant aggregation –...

Steven RoseEnergy and Environmental Analysis Research Group, EPRI

RFF/EPRI WebinarDecember 16, 2014

Clean Power Plan Proposal Climate (CO2) Benefits

2© 2014 Electric Power Research Institute, Inc. All rights reserved.

-$20

$0

$20

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Low High

3% DR Health Ben.

billi

ons 2

011$

Air pollution health co-benefits

Climate (CO2) benefits

Total compliance costs

Net benefits

Clean Power Plan Benefits & Costs

Figure developed from U.S. EPA Clean Power Plan Proposed Rule, June 2, 2014, http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule.

Estimated 2020 Benefits & Compliance Costs for Proposed Option 1 State Compliance Approach

Low/high =

lowest/highest climate & air pollution benefit

estimates

Climate (CO2) benefits the minority or majority of

benefits.

However, issues to

consider with Social Cost of Carbon (SCC) estimation & application.

Highest SCC2020

X

CO2 reduction2020

Lowest SCC2020

X

CO2 reduction2020


Two Topics

• Social Cost of Carbon Estimation– US Government SCCs

• Social Cost of Carbon Application– CO2 benefits– Cost-benefit analysis


Two Topics

• Social Cost of Carbon Estimation– US Government SCCs



The Social Cost of Carbon (SCC)

Definition: The net present value of global climate change impacts from one additional net global tonne of carbon dioxideemitted to the atmosphere at a particular point in time

SCC in 2020 is the discounted value of the additional net damages from the marginal

emissions increase in 2020

2000 2300

2000 2300

2000 2300

2000 2300 2000 2300

Population

Income

Emissions (CO2, etc.) Temperature Climate damages

CO2 pulse

Socioeconomics

2000 2300 2000 2300 2000 2300

2000 2300

Dashed = after CO2 pulse


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2010 2020 2030 2040 2050

2007

$ /

CO2

US Government SCC Values

3% (95th

percentile)

US Government Social Costs of Carbon by Discount Rate

2.5%

3%

5%

Source: Developed from USG (2010) and USG (2013)

“Central” values

Solid = USG (2013) estimates

Dashed = USG (2010) estimates

$12 to $128/tCO2

What do these mean?


EPRI SCC Technical Assessment Study –Trying to Better Understand the SCC Modeling

• Currently difficult to interpret and evaluate the SCCs– Behind each value significant aggregation – models, scenarios, time,

regions, sectors

• Making sense of the SCCs requires delving into the details– We examine inner workings of the models and assess raw

modeling and results (undiscounted, disaggregated)– Elucidating and assessing components & overall approach

2000 2300

2000 2300

2000 2300

2000 2300 2000 2300

Population

Income

Emissions (CO2, etc.) Temperature Climate damages

CO2 pulse

Socioeconomics

2000 2300 2000 2300 2000 2300

2000 2300

Component 1 Component 2 Component 3

Reviewing modeling, programming

components, running diagnostic scenarios, comparing, exploring many perspectives

Dashed = after CO2 pulse


Significant Differences in Climate Responses e.g., Projected Incremental Temperatures for a 1 billion tC pulse in 2020

0

0.0005

0.001

0.0015

0.002

0.0025

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

deg

C

DICE

FUND

PAGE

USG5

USG2

For the same incremental emissions scenario, significant differences in the

incremental temperature change over time

Always higher response off lower emissions scenario

Driven by modeling differences in carbon cycle, non-CO2 forcing,

forcing to temperature translation, climate sensitivity responsiveness,

and implementation


Significant Differences in Damage Responses e.g., Projected Incremental Global Damages for Incremental Climate Signal

Driven by differences in damage modeling

structure & parameterization

For the same incremental temperature

change scenario, ~4x variation in

incremental damages


0.0000

0.0005

0.0010

0.0015

0.0020

0.0025

0.0030

2000 2050 2100

degr

ees

C

DICE - USG2

0.0000

0.0005

0.0010

0.0015

0.0020

0.0025

0.0030

2000 2050 2100

degr

ees C

FUND - USG2

-0.0005

0.0000

0.0005

0.0010

0.0015

0.0020

0.0025

0.0030

2000 2050 2100

degr

ees C

1%

5%

25%

50%

75%

95%

99%

Mean

Det

PAGE - USG2

Models Considering Significantly Different Climate & Damage Uncertainty

FUND PAGEDICE

FUND has broader damage

distribution Means

Incremental global damages

Incremental global temperature PAGE has broader temp distribution

Results for USG2 scenarios with climate sensitivity 3˚C

PAGE has higher mean


Overall Observations

• Significant structural & response differences across models –need to evaluate if they reflect differences in expert opinion

• Some uncertainty is captured, however reasonable alternative specifications, additional uncertainties, and artificial variation

• Inconsistencies across modeling & inter-model relationships –raises issue of statistical comparability (required for approach)

• Results sensitive & reasonable alternative assumptions and modeling – should evaluate robustness of current results (i.e., sensitivity to alternatives)

• Issues with the overall framework, in particular the multi-model approach (consistency and comparability)

Study Reference: Understanding the Social Cost of Carbon: A Technical Assessment, http://epri.co/3002004657.


Two Topics

• Social Cost of Carbon Estimation– USG SCCs



SCC Application Issues

• Estimating net global CO2 changes– SCC is the value of a net incremental change in GLOBAL CO2

– Policies applying USG SCCs typically do not estimate– Do we need to revise CO2 benefits estimates? For CPP, CO2 leakage

beyond the US power sector? (x% = x% lower CO2 benefits)

• Consistency between estimated benefits and costs– Do we need consistency in socioeconomic & emissions assumptions in

estimating compliance costs, CO2 reductions, and SCC estimates?– Can we compare levelized costs to annual benefits? Want to compare

net present values to capture temporal profiles of costs & benefits.

• Use of multiple SCC values– Which SCC should be used? In this rule, across rules, across agencies?– Need guidance


Consistency in Socioeconomic & Emissions Assumptions

Inconsistency in assumptions for compliance costs, CO2 reductions, & SCCs?

Costs & CO2 reductions: 1 future (AEO2013 Reference Case)

SCC: 5 futures (USG1, USG2, USG3, USG5, USG5)

Socioecon/emissions assumptions matter for the SCC

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USG1 USG2 USG3 USG4 USG5 Official SCC

2007

$ pe

r tCO

2

Average across models 2020 SCCs by socio/emissions scenario (DR=3%)

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USG1

USG2

USG3

USG4

USG5

USG1

USG2

USG3

USG4

USG5

USG1

USG2

USG3

USG4

USG5

DICE FUND PAGE

2007

$ pe

r tCO

2

Mean & 1st - 99th percentile 2020 SCCs by model and socio/emissions scenario (DR=3%)

~55% variationEven more variation with

individual models

(60-100% in the means)

Figures developed from USG (2013)


Concluding Remarks

• Social Cost of Carbon Estimation– The social cost of carbon (SCC) is important– However, current estimates are difficult to interpret & assess – Greater technical clarity on what underlies and drives the

estimates is needed – We undertook a research effort designed to better understand

the current modeling and facilitate future modeling and application and climate research more broadly

– From our detailed technical assessment, we observe some fundamental challenges and issues

• Social Cost of Carbon Application– There are also methodological issues related to application of

SCC values in CO2 benefits calculations & cost-benefit assessment


Thank You!

Questions/comments:

Steven Rose

[email protected]

202-293-6183

clean power plan proposal climate (co ) benefits...– behind each value significant aggregation –...

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