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© 2016 Electric Power Research Institute, Inc. All rights reserved.
Steven Rose
IEA-IETA-EPRI Annual Workshop on GHG Emissions Trading, OECD, Paris
October 19, 2016
Insights for Emissions Trading Partnerships
2 © 2016 Electric Power Research Institute, Inc. All rights reserved.
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US EU Other G20 China India Other Countries
bill
ion
to
nn
es C
O2eq
/ y
ear
BaselineNDC onlyNDC +NDC ++Level 1Level 2Level 3
What’s Required? Regional Emissions Effort.
• Even leveling off after NDCs or peaking are non-trivial
• For a chance at < 2˚C, significant mid-century abatement needed
preliminary
3 © 2016 Electric Power Research Institute, Inc. All rights reserved.
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2000 2050 2100 2150 2200
Deg
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Cel
sius
abo
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tria
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Global Emissions & Temperature Global Emissions Global Temperature
US/EU/OG20/China
Adding India & OC
Baseline
NDC only
NDC +
NDC ++
Shading reflects some of the uncertainty in the climate response to emissions
(shown for only a few scenarios)
2˚C
Peaking global emissions requires more than NDCs, and more than developed
countries
Precipitous drop post-2030 for pursuing a medium
likelihood of < 2˚C
NDC ++ w/ Level 1
NDC ++ w/ Level 2
NDC ++ w/ Level 3
preliminary
4 © 2016 Electric Power Research Institute, Inc. All rights reserved.
Emissions Trading Partnerships – Possible International Cooperation
China
50%
2010 emissions
USA
EU: 40% below 1990 by 2030, 80% by 2050
EU
US: 28% below 2005 by 2025, 80% by 2050
China: 2030 peaking with 2050 60% below 2050 BAU
* “NDC ++” policies & all include 4.5% per year reduction after 2050 preliminary
5 © 2016 Electric Power Research Institute, Inc. All rights reserved.
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$ b
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EU
China
There Are Partnership Opportunities, e.g…
Different partners, different outcomes, but welfare benefits
Annual Permit Trade Volume NPV gains (reduced costs) in regional
consumption to 2100 relative to no trade, $2005
preliminary Policies: NDC ++ ambition
Seller
Buyer
US
EU
China
6 © 2016 Electric Power Research Institute, Inc. All rights reserved.
Opportunities Shaped by Ambition & Available Technology
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EU
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NPV gains in regional consumption
Annual Permit Trade Volume
preliminary Policies: “higher amb” = NDC ++, “lower amb” = NDC +
7 © 2016 Electric Power Research Institute, Inc. All rights reserved.
Larger Partnerships – More Value, But Whose Value?
$-
$50
$100
$150
$200
$250
$300
$350
$400
EU-US US-China EU-US-China
$ b
illi
on
s
US
EU
China
preliminary
NPV gains in regional consumption
Policies: NDC ++ & Level 3 ambition
8 © 2016 Electric Power Research Institute, Inc. All rights reserved.
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$200Ko
rea
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$ b
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Strategic Perspectives – Alternative Trading Partners
preliminary
For the US For the EU For China
NPV gains in regional consumption (all countries pursuing higher ambition policies)
Darker/lighter shade indicates
average annual net seller/buyer
EU avg. net buyer
EU avg. net seller
Policies: NDC ++ & Level 3 ambition
9 © 2016 Electric Power Research Institute, Inc. All rights reserved.
0%
20%
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100%
US
EU
Jap
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ada
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'Ivoi
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Indo
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Investment Intl C market
Country Risks Could Affect Partner Appeal
Country risks represent
uncertainty and additional costs
No risk =
preliminary
Country risk factors
10 © 2016 Electric Power Research Institute, Inc. All rights reserved.
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bill
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Emissions Trading a Means for Increasing Ambition?
May be possible in particular circumstances
– e.g., US increases ambition and starts
trading partnership with India
Potential India emissions
Level 1 policy w/o trading
Level 2 policy w/o trading
preliminary
11 © 2016 Electric Power Research Institute, Inc. All rights reserved.
Emissions Trading a Means for Increasing Ambition?
May be possible in particular circumstances
– e.g., US increases ambition and starts
trading partnership with India
India reduces more to sell credits, lower total emissions, lower US costs, India revenues
Repeatable with US-India? Likely limited
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600 to 1400 MtCO2e/yr
7 to 400 MtCO2e/yr
Potential India emissions
Level 1 policy w/o trading
Level 2 policy w/o trading
Dashed = with increased US
ambition & trading
preliminary
12 © 2016 Electric Power Research Institute, Inc. All rights reserved.
There May be Limits to Domestic Abatement
Additional ambition may require international cooperation
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S7: NDC ++ | Level 3
S7: NDC ++ | Level 3 w/o CCS
As caps become very tight…
(a) Countries willing to pay to relax emissions caps (e.g., at $1000/tCO2e), and
(b) With trading partnerships may not need to do so
Safety valve use @$1000/tCO2e
preliminary
13 © 2016 Electric Power Research Institute, Inc. All rights reserved.
Concluding Remarks
The international climate goal implies enormous effort for all countries – Paris pledges just a beginning, but even they are non-trivial
International emissions trading partnership opportunities exist – Ambition (individual & relative) and technology will define relationships Opportunities with higher or lower ambition, but ambition disincentives Technology R&D incentives
– Larger partnerships increase total benefits, but can affect distribution – Not all partnerships equal – strategic incentives – Trading a means for lowering costs, but also potentially for increasing ambition
This analysis assuming known inventories and trading between countries with domestic energy system caps. Other forms of cooperation?
International cooperation may be vital to the ambitions of COP21
14 © 2016 Electric Power Research Institute, Inc. All rights reserved.
Thank you!
Steven Rose
Together…Shaping the Future of Electricity
15 © 2016 Electric Power Research Institute, Inc. All rights reserved.
BAU
Level 1:
Post-2050
leveling off
Level 2:
Mid-century
peak and decline
Level 3:
Earlier peak and
stronger decline
BAU 1
NDC only 2 2a
NDC + 3 3a 3b
NDC ++ 4 5 6 7
US EU OG20 China Post-2050
reductions
NDC only NDC NDC NDCs NDC 0%/yr
NDC + NDC, 2050
50% (2005) NDC, 2050
50% (1990) NDCs, 2050
20% (1990) NDC, 2050 =
2030 1.5%/yr
NDC ++ NDC, 2050
80% (2005) NDC, 2050
80% (1990) NDCs, 2050
50% (1990)
NDC, 2050
60% < 2050
BAU 4.5%/yr
India peak
year OC peak
year Post-peak
reductions
Level 1: Post-2050 leveling off 2060 2060 0%/yr
Level 2: Mid-century peak and decline 2050 2050 1.5%/yr
Level 3: Earlier peak and stronger decline 2040 2040 4.5%/yr
India & Other Countries
EU, US, Other G20, China
Scenarios
India & Other Countries
EU, U
S, O
the
r G
20
, Ch
ina
16 © 2016 Electric Power Research Institute, Inc. All rights reserved.
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US EU Other G20 China India Other Countries
bill
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O2eq
/ y
ear
BaselineNDC onlyNDC +NDC ++Level 1Level 2Level 32 deg C post-2030
Potential Future Regional Emissions Constraints
• Even leveling off after NDCs or peaking are non-trivial
• For a chance at < 2˚C, significant mid-century abatement needed
preliminary
17 © 2016 Electric Power Research Institute, Inc. All rights reserved.
0
20
40
60
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120
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2000 2020 2040 2060 2080 2100
Bill
ion
tonn
es C
O2
equi
vale
nt
0
1
2
3
4
5
6
7
8
9
10
2000 2050 2100 2150 2200
Deg
rees
Cel
sius
abo
ve p
re-i
nd
ust
ria
l
Potential Global Emissions & Temperature Global Emissions Global Temperature
US/EU/OG20/China
Adding India & OC
Baseline
NDC only
NDC +
NDC ++
NDC ++ w/ Level 1
NDC ++ w/ Level 2
NDC ++ w/ Level 3
< 2˚C post-2030 path
Shading reflects some of the uncertainty in the climate response to emissions
(shown for only a few scenarios)
Peaking global emissions requires more than NDCs, and more than developed
countries
Precipitous drop post-2030 for pursuing a medium
likelihood of < 2˚C
2˚C
preliminary