low carbon policies in the us: effectiveness, costs and...
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Low Carbon Policies in the US: Effectiveness, Costs and GHG Implications
Madhu khanna Department of Agricultural and Consumer Economics
University of illinois
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Trends in Renewable Energy Use ! Globally: 45% of net additions to world capacity in the power sector
! US: Rapid growth- 57% since 2000
! Solar energy increased 8 times; wind energy 30 times
Renewable Energy Consumption (Quadrillion Btu) Major Sources in the US, 1949–2015
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Fossil Fuels Still Dominate the Energy Market
Renewable energy sources: 10% of total U.S. energy consumption Heavy reliance on biomass among renewables Heavy dependence on fossil energy
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Renewable Energy Policies in the US
Renewable Fuel Standard
Sector-specific: Transportation and Electricity sectors Regional/State Specific Technology-based standards for renewable energy Supply-side focus
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State Renewable Portfolio Standards
www.dsireusa.org / March 2015WA: 15% x 2020*
OR: 25%x 2025* (large utilities)
CA: 33% x 2020
MT: 15% x 2015
NV: 25% x2025* UT: 20% x
2025*†
AZ: 15% x 2025*
ND: 10% x 2015
NM: 20%x 2020 (IOUs)
HI: 40% x 2030
CO: 30% by 2020 (IOUs) *†
OK: 15% x 2015
MN:26.5% x 2025 (IOUs)
31.5% x 2020 (Xcel)MI: 10% x
2015*†WI: 10% 2015
MO:15% x 2021
IA: 105 MW IN:10% x 2025†
IL: 25% x 2026
OH: 12.5% x 2026
NC: 12.5% x 2021 (IOUs)
VA: 15% x 2025†KS: 20% x 2020
ME: 40% x 2017
29 States + Washington DC + 2 territories have a Renewable Portfolio Standard (8 states and 2 territories have renewable portfolio goals)
Renewable portfolio standard
Renewable portfolio goal Includes non-renewable alternative resources* Extra credit for solar or customer-sited renewables†
U.S. Territories
DC
TX: 5,880 MW x 2015*
SD: 10% x 2015
SC: 2% 2021
NMI: 20% x 2016
PR: 20% x 2035
Guam: 25% x 2035
USVI: 30% x 2025
NH: 24.8 x 2025VT: 20% x 2017MA: 15% x 2020(new resources) 6.03% x 2016 (existing resources)
RI: 14.5% x 2019CT: 27% x 2020
NY: 29% x 2015
PA: 18% x 2021†
NJ: 20.38% RE x 2020 + 4.1% solar by 2027
DE: 25% x 2026*MD: 20% x 2022DC: 20% x 2020
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Clean Power Plan ! State-specific targets to reduce CO2 emissions rate by 2030 ranging from 11% to 54%
! Targets could be on the rate of emissions
! Or on the quantity of emissions; possibility of trading emissions across states
! Targeted to reduce CO2 emissions by 32% relative to 2005
Percent Reduction Goals for CO2 per MWH by 2030
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How far could these policies go in promoting renewable energy?
0
5
10
15
20
25
30
RPS CPP Rate-Based
CPP Mass-Based
National CPP Mass-Based
RPS & CPP-Rate Based
RPS & CPP Mass-Based
RFS
Electricity Sector Transportation Sector
Percentage Share of Renewable in Total Energy Consumed
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Can Energy Policy Be Good Climate Policy?
0%
5%
10%
15%
20%
25%
30%
RPS CPP Rate-Based
CPP Mass-Based
National CPP Mass-
Based
RPS & CPP-Rate Based
RPS & CPP Mass-Based
RFS
Electricity Sector Transportation Sector
Percentage Reduction in GHG Emissions in 2030 Relative to No Policy
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GHG Savings with Alternative Cellulosic Biofuels Relative to Gasoline
(Dwivedi et al., 2015)
Miscanthus produces
140% - 170% Savings of GHG for
each Unit of Production
Corn Stover results in a 50%- 90% Savings of GHG for
each Unit of Production
Switchgrass results in
100% - 130% GHG, but the Unit Cost of
Production is More
Variable.
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What Does a Future With 16 Billion Gallons of Cellulosic Biofuel in 2022 Look Like?
! 6% lower GHG emissions with RFS ! 9 million out of 12 million acres of
energy grasses are on marginal land.
! 12% lower GHG emissions with RFS + cellulosic tax credit
! Even with 1.2% to 1.8% increase in Vehicle Miles Traveled
! Without a significant increase in food crop prices
! High carbon price to achieve the same level of biofuels – over $100 per ton of CO2
1.7 1.8 1.9
2 2.1 2.2 2.3
2007 2012 2017 2022
Greenhouse Gas Savings with the RFS (B
MT)
No policy RFS RFS+CBPTC
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0
20
40
60
80
100
120
2016 2018 2020 2022 2024 2026 2028 2030
$ per
MT
Regional rate-based regulationsRegional mass-based regulationsNational mass-based regulation
Implied Carbon Prices under Different CPP Standards
Oliver, 2015
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Societal Costs of Renewable Energy Policies
! Effects on consumers of fuel, electricity
! Effects on consumers of agricultural commodities
! Effects on fossil fuel producers
! Effects on agricultural producers
! US is a major importer of oil and exporter of agricultural products
! Corn ethanol increased price of agricultural exports
! Biofuels can reduce import of oil and reduce oil prices
! Overall improvement in US terms of trade
! Costs of biofuel policies on the rest of the world
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Costs and Benefits of Policies ($ per ton of GHG Emissions Abated)
-30
-20
-10
0
10
20
30
40
50
60
RPS CPP rate CPP mass National CPP mass
RPS & CPP rate
RPS & CPP mass
RFS RFS & RPS
Monetary value of damages from GHG Emissions
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Co-Benefits of the Clean Power Plan by 2020
! Emissions of SO2 from power plants will be 90 percent lower compared to 2005 levels, and emissions of NOx will be 72 percent lower.
! The Clean Power Plan has public health and climate benefits worth an estimated $34 billion to $54 billion per year in 2030, far outweighing the costs of $8.4 billion.
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Perennial energy crops
Werling et al. 2014
Delivering more than energy: Reduce nitrate run-off Improve soil quality Improving biodiversity
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Vanloocke et al. 2016
Reducing Hypoxia in the Gulf of Mexico by Converting a Share of Cropland to Perennial Energy Crops
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Renewable Fuel Standard: Mandate vs Actual
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Challenges to achieving the promise of biofuels
! Demand side constraints: Vehicles to consume high blends of biofuels with gasoline
! Infrastructure to deliver high blend biofuels
! Cost-effective technology to produce advanced biofuels
! Low oil prices
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Political economy challenges
! Winners and losers from renewable energy policies
! Negative effects of biofuel policies on
! agricultural consumers
! Oil industry
! Negative effects of Clean Power Plan on ! Coal industry
! Electricity consumers
! Demand constraints: First vs Second Generation Biofuels ! Legal constraints: Law suit in the Supreme Court against the Clean Power
Plan ! Authority of the EPA to regulate CO2
! Federal authority to impose regulations that impinge on state rights
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Absence of coordinated policies ! Renewable energy policies guided largely by energy security concerns
! Relied on quantity or blend mandates
! Does not necessarily encourage the
! lowest carbon alternatives (Corn stover vs perennial energy crops)
! Least cost alternatives to GHG abatement
! Alternatives that provide other ecosystem services
! Harmonize efforts at abatement across the electricity and transportation sectors
! Coordinated policies would combine a renewable energy mandate with
! Cap and trade policy or with GHG intensity targets (Low Carbon Fuel Standard)
! Nutrient trading programs to reduce nitrate pollution
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Take-aways
! Technological break-throughs critical for advanced biofuels ! But technological pathways are guided by policies ! Current renewable energy policies likely to have modest impacts on GHG emissions by 2030 even
with optimistic assumptions about technology and policy implementation ! Exceptions: Performance standards
! Clean Power Plan for the electricity sector ! Low Carbon Fuel Standard for the transportation fuel sector
! Climate policy by itself would induce a switch to renewable energy only if carbon prices are fairly high
! Political economic considerations will determine policy choices and implementation