Mitigation of Greenhouse Gases: An Overview

1. Mitigation of Greenhouse Gases:An Overview MS&E 290 Public Policy Analysis March 4, 2004

2. Cost/Benefit Modeling Approach:Balancing the Costs of Controlling Carbon Emissions Against the Costs of the Climate impacts They Cause Marginal Cost of Climate Impacts Value/Cost of Emissions Reductions Marginal Cost of Emissions Control Carbon Emissions

3. UseEnergy Models to Project Costs of Mitigating Carbon Emissions

4. Types of Costing Models • Process Engineering • Individual Technologies Represented • Need to Add in Market and Economy Wide Effects • Energy Market Models • Bring in Energy Market Feedbacks • Weaker on Technology • General Equilibrium Models • Bring in Economy-Wide Feedbacks • Weaker on Energy Markets and Technology

5. Five Key Factors Determine Projections of the Cost of Greenhouse Gas Emission Reductions. • Some of these factors concern how the economy will adjust to policies designed to reduce GHG emissions. • Baseline Emissions • The Policy Regime • The Benefits of Emissions Reductions • But others are external to the representation of the economic adjustment process and prescribe the conditions under which the adjustments must occur. • Economic Substitution • Technological Change

6. Important Determinants of the Costs of Controlling Carbon Emissions More Economic Growth Value/Cost of Emissions Reductions More Factor Substitution More Macro Rigidities More Product Substitution More Emissions Trading Carbon Emissions Other Important Factors Technological Change Revenue Recycling Trade Effects Ancillary/Co-Benefits

7. Four Kinds of Mitigation Policy Flexibilities • Where Flexibility • When Flexibility • How Flexibility • What Flexibility

8. Two Country Example of International Emissions Trading Ra, Ra = Emission Reduction Targets for Country A and Country B. MCa, MCb = Marginal Cost of Reducing Emissions for A and B. Ta, Tb = Required Carbon Taxes Before Trading. Ra,t, Rb,t = Emission Reductions With Trading. Ta,t, Tb,t = Carbon Tax With Trading. Emission Reductions

9. Supply/Demand For Emissions Rights Supply of Emissions Rights Price Demand for Emissions Rights Quantity of Emissions Rights Traded

10. Regions That Have Reduction Obligations Motivating Them to Consider International Emissions Trading Under the Kyoto Protocol

12. 4 Assumptions About International Emissions Trading • No emissions trading. • Trading within Annex 1 only. • Double Bubble. • separate EU and rest of Annex 1 trading blocks. • Full global trading.

13. Benefits of International Emissions Trading

14. Four Kinds of Mitigation Policy Flexibilities • Where Flexibility • When Flexibility • How Flexibility • What Flexibility

15. The Emissions Mitigation Challenge Emissions Base Case Emissions Controlled Emissions Target Target Time Time

16. Alternative Emission Paths for Stabilizing Atmospheric Concentrations of CO2 at 550 ppmv (Parts Per Million by Volume) 25 20 15 IS92a Industrial Emissions (GtC/yr) WRE-550 WG1-550 10 5 0 1990 2040 2090 2140 2190 2240 2290 2340

17. Global Consumption Losses through 2100 Discounted to 1990 at 5% -- Kyoto Forever Vs. Three Scenarios for Stabilizing Concentrations at 550ppmv 2500 2000 Result in 550 ppmv Billions of 1990 dollars 1500 Results in 663 ppmv 1000 500 0 Kyoto followed by Kyoto forever Kyoto followed by least-cost least-cost arbitrary reductions

18. Four Kinds of Mitigation Policy Flexibilities • Where Flexibility • When Flexibility • How Flexibility • What Flexibility

21. The VALUE OF DEVELOPING ENERGY TECHNOLOGY(Present Discounted Costs to Stabilize the Atmosphere) Minimum Cost Based on Perfect Where & When Flexibility Assumption. Actual Cost Could be An Order of Magnitude Larger. Battelle Pacific Northwest Laboratories

22. Global Climate and Energy Project (GCEP) • A new project has been established at Stanford, with industry support • (ExxonMobil, Schlumberger, GE, and Toyota), to investigate how to reduce emissions of greenhouse materials. • The approach: look broadly across primary energy sources, transformations, and uses. • Ask where university-based pre-commercial research can reduce barriers to implementing energy systems that have substantially lower greenhouse emissions.

23. Biological Hydrogen Production: Complete Pathway in Each Cell Solar Energy H2 Photolysis Center O2 H+ e- e- Reduced Ferredoxin H2O Hydrogenase Oxidized Ferredoxin

24. Controlled Combustion The Concept: Air Temperature.>800C Controlled Combustion Concept Air Temperature < 600C Controlled Combustion High-T Flame Unstable Combustion Conventional Flame Conventional Flame Combustion Controlled Combustion Dilution by combustion products, N2 or CO2

25. Geologic Storage of CO2 • Use CO2 to recover methane in coal beds. • Dissolve CO2 in deep aquifers that contain salt water. • Inject CO2 to recover oil and gas. • Volumes are very large: 1 GtCO2/yr = 25 million B/D.

26. Four New GCEP Projects • Nanoengineering of Hybrid Carbon Nanotube – Metal Nanocluster Composite Materials for Hydrogen Storage (Cho, Clemens, Dai, and Nilsson) • The Potential Effects of Hydrogen Fuel Cell Use on Climate, Stratospheric Ozone, and Air Pollution (Jacobsen and Golden) • Solid-State NMR Studies of Oxide Ion Conducting Ceramics for Enhanced Fuel Cell Performance (Stebbins) • Nanostructured Photovoltaic Cells for Electrolytic Creation of Hydrogen (McGehee)

27. Four Kinds of Mitigation Policy Flexibilities • Where Flexibility • When Flexibility • How Flexibility • What Flexibility