MACC for Japan, PRC, ROK and Mongolia

Abatement Cost Curves for Japan, PRC, ROK and Mongolia Mizuho Information & Research Institute Inc. Yuko Motoki and Kazuya Fujiwara 18 October 2011, Tokyo, Japan 1

Objective and Scope

2

Objectives This project aims to contribute to the study by providing greenhouse gas emissions projections and mitigation marginal abatement cost curves for China, Japan, Mongolia and South Korea.




3

Scope Time Horizon








Base Year: 2008 Target Year: 2020, 2030

Target Gas







CO2, CH4, N2O, HFC, PFC, SF6

Target Sector









4

Energy enduse: Industry, Residential, Commercial, Transportation Energy transformation & supply: Power generation, Heat generation, Oil refinery, etc. Non-energy: Agriculture, Livestock, etc.

Methodology

5

AIM/Enduse[MAC] tool Bottom-up modeling tool







Detail technology selection framework

Static analysis







Mitigation options under a certain carbon price are selected

What can be analyzed in AIM/Enduse[MAC] ?










6

Technological change Energy consumption GHG emissions/mitigation potential Cost of mitigation, etc.

AIM/Enduse[MAC] tool Calculation Flow




Energy Service Demand Future Scenario • Steel production • Cement production • Passenger transportation • Freight transportation • Residential energy service etc.

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Technology

Final Energy Demand

Technology Selection • Energy type • Energy price • Energy constrains • Emission factors etc.

• Technology cost • Energy consumption • Service supply • Lifetime etc.

Energy Database

Technology Database

AIM/Enduse[MAC] tool Activity amounts (= Energy service demands)








Service demand in each sector or sub-sector is estimated by demand models in AIM activity. For this project, activity amounts are collected from various kinds of international and national projection, research papers and documents.





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Industrial sector: Production, GDP, etc. Residential, Commercial sector: Number of household, Population, etc. Transportation sector: Traffic volume, GDP, etc. Others: Cultivated area, Number of livestock, etc.

AIM/Enduse[MAC] tool Mitigation options (= Technology)










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200 or more options, based on realistic and currently existing technologies in the mid-term, and some of future innovative technologies expected in 2020/2030 are taken into account. Effects of mitigation measures such as additional policies promoting modal shift, public-enlightment actions are not considered in the model. These effects are taken into account as changes of activity amounts exogenously.

Simulation Cases





Baseline case: set as a technology frozen case, i.e. when the future share and energy efficiency of standard technologies are fixed at the same level as in the base year. Countermeasure case: set as combination of following conditions.




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Carbon price: 50, 100, 200 USD/tCO2 Payback period: Short case, Long case Others: the lock-in effect is analyzed

Simulation Case


Discount rate setting under two payback period case Sector

Lifetime

Discount rate High DR

Low DR

Payback period Short Payback Long Payback Period Period

Steel, Cement

30

10%

5%

9 yrs.

15 yrs.

Others

30

33%

5%

3 yrs.

12 yrs.

Appliance

10-15

33%

5%

3 yrs.

7-10 yrs.

Building Insulation

30

10%

5%

9 yrs.

15 yrs.

8-12

33%

5%

3 yrs.

6- 9 yrs.

20

10%

5%

9 yrs.

12 yrs.

30

10%

5%

9 yrs.

15yrs.

Industrial

Residential & Commercial

Vehicle Transportation

Power plant 11

Train, Ship, Aircraft

Results

12

Japan Service Demand Setting Base year Sector

Indicator

Unit

2008

Target year 2020

2030

Industry Iron & Steel Production

Million ton

106

120

120

Cement

Production

Million ton

66

67

66

Others

Industrial Production Index

2008 = 100

100

100

101

Residential

No. of Households

Million HHs

52

54

52

Commercial

Floor Space

Million m2

1,817

1,932

1,920

Passenger

Traffic Volume

Billion p-kms

1,292

1,307

1,304

Freight

Change in Traffic Volume

2008 = 100

100

114

114

Livestock

Livestock

1000 heads

4,420

4,280

4,280

Crops

Cultivation Area

1000 ha

4,270

4,950

4,950

Transportation

Agriculture

13

Japan GHG Emission/Mitigation Potential 1,500 1,000 500 0

1,291

Base

1,439 1,245 1,240 1,146 194 198 293

RF HDR HDR HDR 50 100 200

2008

2020 2020 HDR HDR HDR 50 100 200 0 100 200 300 400 500 600

14

1,416 1,132 1,062 284 353

916 499

RF HDR HDR HDR 50 100 200

2030 2030 HDR HDR HDR 50 100 200

Ruduction vs RF Non energy Others Energy Transportation Commercial Residential Industrial

Non energy Others Energy Transportation Commercial Residential Industrial

Japan Primary Energy Consumption 1,200 1,000 800 600 400 200 0

1,007

Base

2008

15

1,053

RF

1,076

1,076

1,015

HDR HDR HDR 50 100 200 2020

1,034

RF

1,049

1,049

1,098

HDR HDR HDR 50 100 200 2030

Others Hydro Biomass Nuclear Gas Oil Coal

Abatement Cost (US$/tCO2)

Japan Abatement Cost Curve 100

Short Payback Period (high discount rate)

80

Energy Agriculture Industrial Residential/Commercial Trasnport Others

60 40 20

Reduction (MtCO2)

-20 -40 16

0

40

80

120

160

200

Abatement Cost (US$/tCO2)

Japan Abatement Cost Curve 100 80 60 40 20

0 -20 -40 17

Short Payback Period (high discount rate)

80

160

240

320

400

Reduction (MtCO2) Long Payback Period (Low discount rate)

Korea Service Demand Setting Base year Sector

Indicator

Unit

2008

Target year 2020

2030

Industry Iron & Steel Production

Million tons

56

74

87

Cement

Production

Million tons

53

70

83

Others

Change in GDP

2008 = 100

100

131

155

Residential

Population

2008 = 100

48

50

50

Commercial

Change in GDP

2008 = 100

100

131

155

Passenger

Change in Traffic Volume

2008 = 100

100

119

134

Freight

Change in Traffic Volume

2008 = 100

100

249

373

Livestock

Number of Livestock

1000 heads

614,992

593,444

595,238

Crops

Cultivation Area

1000 ha

1,210

1,248

1,267

Transportation

Agriculture

18

Korea GHG Emission/Mitigation Potential 1,000 800 600 400 200 0

908 743 546

Base

617 126

607 136

581 162

RF HDR HDR HDR 50 100 200

2008

2020 2020 HDR HDR HDR 50 100 200 0 50 100 150 200 250 300

19

681

670

651

227

238

257

RF HDR HDR HDR 50 100 200 2030 2030 HDR HDR HDR 50 100 200

Ruduction vs RF Non energy Others Energy Transportation Commercial Residential Industrial

Non energy Others Energy Transportation Commercial Residential Industrial

Korea Primary Energy Consumption 800 600 400 200 0

547

555

555

628

608

633

633

430

Base

2008

20

545

RF

HDR HDR HDR 50 100 200 2020

RF

HDR HDR HDR 50 100 200 2030

Others Hydro Biomass Nuclear Gas Oil Coal

Abatement Cost (US$/tCO2)

Korea Abatement Cost Curve 100

Short Payback Period (high discount rate)

80

Energy Agriculture Industrial Residential/Commercial Trasnport Others

60 40 20

Reduction (MtCO2)

-20 -40 21

0

30

60

90

120

150

Abatement Cost (US$/tCO2)

Korea Abatement Cost Curve 100 80 60 40 20

0 -20 -40 22

Short Payback Period (high discount rate)

40

80

120

160

200

Reduction (MtCO2) Long Payback Period (Low discount rate)

China Service Demand Setting Base year Sector

Indicator

Unit

2008

Target year 2020

2030

Industry Iron & Steel Production

Million tons

406

610

570

Cement

Production

Million tons

1,168

1,600

1,600

Others

Change in Secondary Industry 2008 = 100 GDP

100

228

405

1,335

1,396

1,402

Residential

Population

Million ps

Commercial

AIM service growth rate

2008 = 100

Passenger

Change in Traffic volume

2008 = 100

100

194

312

Freight

Change in Traffic volume

2008 = 100

100

192

290

2008 = 100

100

122

138

2008 = 100

100

122

138

Transportation

Agriculture Livestock Crops 23

Change in Primary Industry GDP Change in Primary Industry GDP

China GHG Emission/Mitigation Potential 20,000 15,000 10,000 5,000 0

7,880

Base

13,851 11,331 10,534 10,381 2,520 3,317 3,470

RF HDR HDR HDR 50 100 200

2008

2020 2020 HDR HDR HDR 50 100 200 0 1,000 2,000 3,000 4,000

24

Work in progress RF HDR HDR HDR 50 100 200 2030 2030 HDR HDR HDR 50 100 200

Ruduction vs RF Non energy Others Energy Transportation Commercial Residential Industrial Non energy Others Energy Transportation

Work in progress

Commercial Residential Industrial

China Primary Energy Consumption 8,000 6,000 4,000 2,000 0

6,917

6,947

6,907

Work in progress

3,554

Base

2008

25

6,950

RF

HDR HDR HDR 50 100 200 2020

RF

HDR HDR HDR 50 100 200 2030

Others Hydro Biomass Nuclear Gas Oil Coal

Abatement Cost (US$/tCO2)

China Abatement Cost Curve 100

Short Payback Period (high discount rate)

80

Energy Agriculture Industrial Residential/Commercial Trasnport Others

60 40 20

Reduction (MtCO2)

-20 -40 26

0

700

1,400

2,100

2,800

3,500

Abatement Cost (US$/tCO2)

China Abatement Cost Curve 100 80 60 40 20

0 -20 -40 27

Short Payback Period (high discount rate)

700

1,400

2,100

2,800

3,500

Reduction (MtCO2) Long Payback Period (Low discount rate)

Mongolia Service Demand Setting Base year Sector

Indicator

Unit

2008

Target year 2020

2030

Industry Iron & Steel Production

1000 tons

157

2,100

2,100

Cement

Production

1000 tons

169

1,250

1,250

Others

Change in Secondary Industry 2008 = 100 GDP

100

166

240

Residential

Change in No. of Household 2008 = 100

100

112

125

Commercial

Change in No. of Employee

2008 = 100

100

119

133

Passenger

Traffic Volume

Million p-kms

3,607

6,800

8,700

Freight

Traffic Volume

Million t-kms

9,051

23,010

46,515

Livestock

Number of Livestock

1000 heads

43,774

36,865

36,865

Crops

Cultivation Area

1000 ha

178

181

182

Transportation

Agriculture

28

Mongolia GHG Emission/Mitigation Potential 40 30 20 10 0

32 19

Base

RF

2008

24

22

21

8

10

11

HDR HDR HDR 50 100 200 2020 2020 HDR HDR HDR 50 100 200

0 5 10 15 20 29

37

RF

21

20

20

16

17

18

HDR HDR HDR 50 100 200 2030 2030 HDR HDR HDR 50 100 200

Ruduction vs RF Non energy Others Energy Transportation Commercial Residential Industrial

Non energy Others Energy Transportation Commercial Residential Industrial

Mongolia Primary Energy Consumption 20 15 10 5 0

17 13

11

14

14

11

14

8

Base

2008

30

11

RF

HDR HDR HDR 50 100 200 2020

RF

HDR HDR HDR 50 100 200 2030

Others Hydro Biomass Nuclear Gas Oil Coal

Abatement Cost (US$/tCO2)

Mongolia Abatement Cost Curve 100 80

Short Payback Period (high discount rate) Energy Agriculture Industrial Residential/Commercial Trasnport Others

60 40 20

Reduction (MtCO2)

-20 -40 31

0

2

4

6

8

10

Abatement Cost (US$/tCO2)

Mongolia Primary Energy Consumption 100

Short Payback Period (high discount rate)

80 60 40 20

0 -20 -40 32

2

4

6

8

10

Reduction (MtCO2) Long Payback Period (Low discount rate)

Policy Implication

33

Study Points





(1) Carbon Price (2) Payback Period (3) Energy Consumption Structure (4) Lock-in Effect Analysis

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(1) Carbon Price

Technologies with very HIGH initial cost : Support for R&D, commercialization, etc.

100 $/tCO2 Technologies with MIDDLE initial cost : extend tech’s competitiveness by carbon pricing

Reduction Technologies with NEGATIVE initial cost : Regulation such as building code, efficiency standard :Visualization of advantage of replacement 35

(1) Carbon Price Japan/Korea High

China/Mongolia

[ENE] Wind Power [ENE] Solar PV

[ENE] Wind Power [ENE] Solar PV [RSD/COM] Insulation [RSD/COM] Eff. Equipments

[ENE] Biomass Power Plants [RSD/COM] Insulation [RSD/COM] Eff. Equipments [TRT] Bio-fuel [IND] Eff. Boiler, Machinery, …

[ENE] Eff. Gas Power Plants

[TRT] Eff. Trucks [TRT] Eff. Passenger Vehicles [RSD/COM] Eff. Lamp (LED/CFL) [IND] Eff. Boiler, Machinery, …

[TRT] Eff. Trucks [TRT] Eff. Passenger Vehicles [RSD/COM] Eff. Lamp (LED/CFL) [IND] Eff. Boiler, Machinery, …

100 $/tCO2

Middle

Low 36

[TRT] Bio-fuel [IND] Eff. Boiler, Machinery, …

Abatement Cost (US$/tCO2)

(2) Payback Period 100 80 60 40 20

0 -20 -40 37

Short Payback Period (high discount rate)

80

160

240

320

400

Reduction (MtCO2) Long Payback Period (Low discount rate)

Abatement Cost (US$/tCO2)

(2) Payback Period 100 80

Energy Agriculture Industrial Residential/Commercial Trasnport Others

60 40 20

0 -20 -40 38

Short Payback Period (high discount rate)

To make reduction larger, “Policy for extending payback period” are needed.

80

160

240

320

400

Reduction (MtCO2) Long Payback Period (Low discount rate)

Abatement Cost (US$/tCO2)

(2) Payback Period 100 80 Long Payback Period (Low discount rate)

60 40 20

0 -20 -40 39

Short Payback Period (high discount rate)

700

1,400

2,100

2,800

3,500

Reduction (MtCO2)

Abatement Cost (US$/tCO2)

(2) Payback Period 100 80

Energy Agriculture Industrial Residential/Commercial Trasnport Others

60 40

Long Payback Period (Low discount rate)

20

0 -20 -40 40

Short Payback Period (high discount rate)

700

1,400

2,100

2,800

3,500

Reduction (MtCO2) “Policy for extending payback period” are not crucial in China.

(3) Energy Consumption Structure 100% 80% 60% 40% 20% 0%

18%

68%

2008

RF

3,685 649

1,987 354 2,503 1,345

Base

2008 41

68%

23% 6%

60%

23%

23%

20%

21%

Others 46%

45%

Gas Oil

Base

5,000 4,000 3,000 2,000 1,000 0

18%

HDR HDR HDR 50 100 200

Coal

2020 3,200

3,185

3,184

722 207

722 631

720 678

1,911

1,472

1,427

Others Gas

RF

HDR HDR HDR 50 100 200 2020

Oil Coal

(4) Lock-in Effect ca. 10 % mitigation loss

322

5,000

417

416

4,000 5,268 4,317

3,000

4,639

4,189

4,605

4,182

4,598

2,807

Emission

2,000 Base

RF

Optimal Lock-in Optimal Lock-in Optimal Lock-in HDR 50

2008

42

Reduction

HDR 100 2020

HDR 200

Conclusion

43

Conclusion


Emission Projection, MAC curve







Emission in 2020/2030 Mitigation Potential in 2020/2030 MAC curve

Policy Implication





44

Summarize mitigation options and policies which are needed in three categories classified according to abatement cost. Policy for extending payback period is crucial for Japan, but not so important for other regions. Countermeasures for global warming can realize stable energy consumption structure for China. Lock-in effect will lead to a decrease in the reduction potential.

Thank you for your attention

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