Modelling Long-Term Scenarios for Low Carbon Societies (Climate Policy)

long-term

3

i

Neil Strachan, Tim Foxon and Junichi Fujino

climate polic EDITOR-IN-CHIEF Professor Michael Grubb Imperial College London UK

The leading international, peer-reviewed journal on responses to climate change EXECUTIVE EDITOR

BOOK REVIEWS EDITOR

Richard Lorch lmperlal College London Centre tor tnvironmentdl Policy South Kensington Campus London SW7 2AZ. LTK clirnatepolicv~~'i1mperia1 dc.uk

Dr Axel Michaelowa University of Zurich Switzerland

FRENCHTRANSLATOR Charlotte Jourdain

ASSOCIATE EDITORS Preety Bhandari The Energy and Resources Institute (TERI) India

Switzerland

Dr Frank J. Convery University College Dublin Ireland

Dr Jonathan Pershing World Resource? l n ~ t ~ t u t e USA

Dr 'Tom Downing Stockholm Environment lnstitute UK

Professor Roberto Xhaeffer Federal University of Rio de Janeiro Brazil

Dr Axel Michaelowa University of Zur~ch

Dr Bernhard Schlamadinger Climate Strategies UK Dr laishi Sugiyama Central Research Institute of Electric Power Industry (CRIEPI) Japan

EDITORIAL ADVISORY BOARD Dr Omar Masera Cerutti Universidad Nacional Autonoma de Mexico (UNAM) Mexico Vicki Arroyo-Cochran Pew Centre on Global Climate Change USA Dr Ken Chomitz The World Bank USA Professor Ogunlade Davidson The University of Cdpe Town South Africa Professor Hadi Dowlatabadi The University of British Columbia Canada Dr Joanna Depledge IJniversity of Cambridge UK

Professor Tim Jackson Univers~tyof Surrey UK

Dr Rajendra Pachauri The Energy dnd Resources Institute (TERI) lndia

Prof Dr lng Eherhard Jochem Fraunhofer lnstitute Germany

Dr Jiahua Pan Chinese Academy of Soclal Sciences Research Centre for Sustainable Development China

Mark Kenber The Climate Group UK Dr Richard Kinley [JNFCCC Secretanat Germany Professor Zbigniew Kundzewicz Pollsh Academy o f Science Poland Professor Emilio La Rovere University of Rio de Janeiro Braril

Dr Jae Edmonds The University of Maryland USA

Dr Dan Lashof Ndtural Resources Defense Councll Climdtc Cmter USA

Dr Sujata Gupta Asian Development Bank The Philippine?

Dr Hoerung Lee Council of Energy dnd Envlronmrnt Korea Korea

Dr Erik Haites Margaree Consultant? Inc Canada

Professor Nebojsa Nakicenovic IIASA Austria

Mr David Hone Shell Internationdl UK

Dr Elena Nikitina Kusrldn Acddernv of Sclcncer Rursid

Professor Jean-Charles Hourcade ClRED/CNRS France

Professor Shozo Nishioka Nationdl lnstitute for Environmental Studw Japan

Professor Mike Hulme Tyndall Centre UK

Professor Ian Noble 'I he World Bdnk USA

Dr Saleemul Huq llED UK

Dr Jin-Gyu Oh Inrtltute ot Energv EsrPx"nm~Lnili&(W9darr*1m=*~~w~m

Effects of carbon tax on greenhouse gas mitigation in Thailand S149

TABLE 6 CO, emission reduction in carbon tax scenarios Sectors

Base case cumulat~ve

Cumulat~veemission reduction from the base case

CO, emission, MtCO,

emission level under carbon tax scenarios, MtCO,

C10+

C75

ClOO

Agriculture

549

0

0

0

Commercial

71 2

0

0

0

9,189

157

467

579

405

0

(8)

(6)

Transport

9,532

354

433

445

Power

7,743

1,179

2,810

3,607

28,130

1,691

3,711

4,632

Industrial Residential

Total

Note: The f~gureIn parentheses denotes an Increase In CO, emissions from the base case

(16.5%) followed by C75 (13.2%) and C10+ (6.0%) (see Table 6). With carbon tax, the total system cost is found to increase by 6%, 16% and 20% in the C10+, C75 and ClOO cases, respectively, during 2000-2050 as compared with that in the base case. As a result of the carbon tax, the highest CO, emission reduction would take place in the power sector, followed by the transport and industrial sectors (see Table 6). The power sector accounts for 70% of total CO, emission reduction in the C10+ scenario, 76% in the C75 scenario and 78% in the ClOO scenario. It should be noted here that, with the introduction of a carbon tax, reduction in CO, emission is mainly achieved through the use of coal-based carbon capture and storage (CCS) and natural-gas-based advanced combined cycle power generation. In C10+, the share of the transport sector in CO, emission reduction is higher (21%) than that of the industrial sector (9%), while the opposite is the case in the C75 and ClOO scenarios. The effect of carbon tax on CO, emission reduction in other sectors is not found to be significant. In the agriculture sector, efficient electric motors and efficient diesel tractors were the only two types of efficient energy technology options considered in our model. Both these technologies would be selected in the base case to their maximum limit allowed. Thus, their usage would not be affected by carbon tax and, as a result, there is no reduction in CO, emission in this sector. In the commercial sector, efficient air conditioners and compact fluorescent lamps (CFLs) were the efficient options considered for cooling and lighting service demands along with their conventional counterparts. It was found that CFLs would be selected to their maximum extent in the base case; thus carbon tax would not affect them. As for the efficient air conditioning devices, they would become cost-effective with carbon tax and would substitute for conventional air conditioning devices in the carbon tax cases. Although this reduces electricity consumption from the sector due to carbon tax, CO, emission reduction associated with the reduced electricity consumption is accounted for (included) under the power sector. Thus, there appears to be no reduction in CO, emission with the introduction of a carbon tax in the commercial sector. In the residential sector, efficient lamps (fluorescent tubes and CFLs) would be selected to the maximum level in the base case; thus there is no change in their shares with the introduction of a carbon tax. In the case of space cooling service demands, as in the commercial sector, conventional air conditioners are substituted by efficient air conditioners under carbon tax cases; but the

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CLIMATE POLICY

S150 Shrestha et at. w

CO, reduction associated with reduced electricity use by the efficient air conditioners is accounted for in the power sector CO, emission. In residential cooking, electric stoves are partially replaced by efficient LPG stoves with the introduction of a carbon tax. With the increased use of LPG in the carbon tax cases, some increase in CO, emission would appear in the residential sector under the C75 and Cl00 scenarios (see Table 6). This is mainly because CO, emissions associated with electric stoves are reflected in the power sector emission rather than in the residential sector emission (see Table 6). 5.3.1. Role of renewable energy technologies in CO, emission reduction In the base case, the share of renewable energy (including hydropower and biomass) in TPES is expected to decrease from 18% in year 2000 to 9% in year 2050. This is because biomass, hydropower and geothermal energy resources would be utilized to their maximum exploitable limit considered in the study after 2030 in the base case. In the power sector, the share of renewable energy in TPES would be 19% (including imported electricity and biomass) i n the base case. The share would slightly increase to about 21% under carbon tax scenarios. The use of solar photovoltaic (PV) technology in electricity generation has not been an attractive option in the base case, where the cost of solar PV is assumed to be fixed at US$4,240/kW (constant 1995 price) throughout the study period. However, the cost of solar technology is expected to fall over time due to the learning-by-doing effect (EPIA, 2006). IEA (2004) has used a learning rate of 18% for solar PV technology while analysing the competitiveness of CCS technology. Therefore, in this study we examined the effect of an 18% learning rate (LR) along with carbon tax. The results show that the learning-by-doing effect on solar technology would have significant effects on its adoption and CO, emission reduction in the power sector (Table 7). 5.3.2. Role of emerging energy technologies in CO, emission reduction As discussed in Section 5.3, the carbon tax would have the largest effect on the power sector in terms of CO, emission reduction. One of the reasons for this is the adoption of a significant level of CCS-based power generation technologies under the carbon tax scenarios unlike in the base case, in which only a low level of CCS technology was cost-effective. The study shows that in the carbon tax scenarios, the share of electricity production based on CCS power generation technologies would increase to 7%, 14% and 23% in the C10+, C75 and ClOO scenarios, respectively. Similarly the total power generation from natural gas power plants based on advanced combined cycle technology would increase from 14% in the base case to 19%, 35% and 31% in the C10+, C75 and ClOO scenarios, respectively. Power generation from coal-fired IGCC and PFBC plants

TABLE 7 Effects of learning by doing on solar PV technology adoption and CO, emission reduction Base case

Carbon tax scenario (with 18% learning rate) CT10+

CT75

C T l 00

Cumulative solar power generation, Mtoe

0

19

20

20

Power sector cumulative emission, MtCO,

7,743

6,426

4,857

4,025

Emission reduction, MtCO,

-

1,317

2,886

3,718

Year of penetration

-

2025

201 3

201 3

CLIMATE POLICY

Effects of carbon tax on greenhouse gas mitigation in Thailand S151

TABLE 8 Effects of increments in the CCS-based power plant costs on power generation and CO, emission from the power sector Base case

Total power generat~on

C1 O +

Cl 00

C75

At reference prlce

At 25% higher price

At

At 25%

At

At 25%

reference price

higher price

reference price

higher price

of CCS

of CCS

of CCS

of CCS

of CCS

of CCS

0

92

58

189

113

31 4

276

199

266

275

483

532

434

472

7,742

6,563

6,737

4,932

5,247

4,135

4,248

based on CCS technology, Mtoe Total power generation based on comb~nedcycle technology, Mtoe Total CO, emission in the power sector, MtCO,

would decrease from 26% in the base case to 19%, 1% and