When starting with the most expensive option makes sense : use and misuse of marginal abatement cost curves

This article investigates the use of expert-based Marginal Abatement Cost Curves (MACC) to design abatement strategies. It shows that introducing inertia, in the form of the"cost in time"of available options, changes significantly the message from MACCs. With an abatement objective in cumulative emissions (e.g., emitting less than 200 GtCO2 in the 2000-2050 period), it makes sense to implement some of the more expensive options before the potential of the cheapest ones has been exhausted. With abatement targets expressed in terms of emissions at one point in time (e.g., reducing emissions by 20 percent in 2020), it can even be preferable to start with the implementation of the most expensive options if their potential is high and their inertia significant. Also, the best strategy to reach a short-term target is different depending on whether this target is the ultimate objective or there is a longer-term target. The best way to achieve Europe's goal of 20 percent reduction in emissions by 2020 is different if this objective is the ultimate objective or if it is only a milestone in a trajectory toward a 75 percent reduction in 2050. The cheapest options may be sufficient to reach the 2020 target but could create a carbon-intensive lock-in and preclude deeper emission reductions by 2050. These results show that in a world without perfect foresight and perfect credibility of the long-term carbon-price signal, a unique carbon price in all sectors is not the most efficient approach. Sectoral objectives, such as Europe's 20 percent renewable energy target in Europe, fuel-economy standards in the auto industry, or changes in urban planning, building norms and infrastructure design are a critical part of an efficient mitigation policy.Climate Change Mitigation and Green House Gases,Climate Change Economics,Environment and Energy Efficiency,Energy and Environment,Transport and Environment

Optimal Transition from Coal to Gas and Renewable Power under Capacity Constraints and Adjustment Costs

This paper studies the optimal transition from existing coal power plants to gas and renewable power under a carbon budget. It solves a model of polluting, exhaustible resources with capacity constraints and adjustment costs (to build coal, gas, and renewable power plants). It finds that optimal investment in renewable energy may start before coal power has been phased out and even before investment in gas has started, because doing so allows for smoothing investment over time and reduces adjustment costs. Gas plants may be used to reduce short-term investment in renewable power and associated costs, but must eventually be phased out to allow room for carbon-free power. One risk for myopic agents comparing gas and renewable investment is thus to overestimate the lifetime of gas plants - e.g., when computing the levelized cost of electricity - and be biased against renewable power. These analytical results are quantified with numerical simulations of the European Commission's 2050 energy roadmap

Building world narratives for climate change impact, adaptation and vulnerability analyses

The impacts of climate change on human systems depend not only on the level of emissions but also on how inherently vulnerable these systems are to the changing climate. The large uncertainties over future development and structure of societies and economies mean that the assessment of climate change efects is complex. One way to deal with this complexity is by using scenario analysis that takes account of these socio-economic diferences. The challenge is to identify the dimensions along which societies and economies evolve over time in such a way as to cover sufciently diferent vulnerability patterns. This conceptual efort is critical for the development of informative scenarios. Here, we identify three dimensions that take into account the most relevant factors that defne the vulnerability of human systems to climate change and their ability to adapt to it.impacts; vulnerability; adaptation; climate change; scenario; prospective; narratives

Assessing and ordering investments in polluting fossil-fueled and zero-carbon capital

Climate change mitigation requires to replace preexisting carbon-intensive capital with different types of cleaner capital. Coal power and inefficient thermal engines may be phased out by gas power and efficient thermal engines or by renewable power and electric vehicles. We derive the optimal timing and costs of investment in a low- and a zero-carbon technology, under an exogenous ceiling constraint on atmospheric pollution. Producing output from the low-carbon technology requires to extract an exhaustible resource. A general finding is that investment in the expensive zero-carbon technology should always be higher than, and can optimally start before, investment in the cheaper low-carbon technology. We then provide illustrative simulations calibrated with data from the European electricity sector. The optimal investment schedule involves building some gas capacity that will be left unused before it naturally depreciates, a process known as mothballing or early scrapping. Finally, the levelized cost of electricity (LCOE) is a misleading metric to assess investment in new capacities. Optimal LCOEs vary dramatically across technologies. Ranking technologies according to their LCOE would bring too little investment in renewable power, and too much in the intermediate gas power.La transition vers une économie bas carbone nécessite de remplacer le capital existant, très émetteur de gaz à effet de serre (GES), par du capital partiellement ou totalement décarboné : les centrales à charbon peuvent être remplacées par du gaz de dernière génération ou des renouvelables, les véhicules thermiques inefficaces peuvent être remplacés par des véhicules thermiques efficaces ou des voitures électriques. Nous étudions le profil optimal d'investissements dans des technologies bas carbone et zéro carbone pour remplacer un stock existant de capital polluant, sous contrainte d'un plafond sur les émissions cumulées, et lorsque produire grâce à la technologie bas carbone requiert l'extraction de ressources fossiles. Nous trouvons que la technologie zéro carbone doit toujours être construite à un coût plus élevé que la technologie bas carbone, et que les investissements zéro carbone peuvent commencer avant les investissements bas carbone. Nous réalisons ensuite une simulation numérique calibrée sur le secteur électrique européen. Nous trouvons que la transition optimale vers un secteur électrique bas carbone impose d'investir dans des centrales à gaz qui seront par la suite sous-utilisées ("mise sous cocon"). Finalement, le coût actualisé de l'électricité (CAE) n'est pas un bon indicateur pour comparer les technologies. Classer les technologies par leur CAE induiraient trop d'investissements dans les centrales à gaz, et pas assez dans les renouvelables

Marginal abatement cost curves and the optimal timing of mitigation measures

International audienceDecision makers facing abatement targets need to decide which abatement measures to implement, and in which order. Measure-explicit marginal abatement cost curves depict the cost and abating potential of available mitigation options. Using a simple intertemporal optimization model, we demonstrate why this information is not sufficient to design emission reduction strategies. Because the measures required to achieve ambitious emission reductions cannot be implemented overnight, the optimal strategy to reach a short-term target depends on longer-term targets. For instance, the best strategy to achieve European's -20% by 2020 target may be to implement some expensive, high-potential, and long-to-implement options required to meet the -75% by 2050 target. Using just the cheapest abatement options to reach the 2020 target can create a carbon-intensive lock-in and make the 2050 target too expensive to reach. Designing mitigation policies requires information on the speed at which various measures to curb greenhouse gas emissions can be implemented, in addition to the information on the costs and potential of such measures provided by marginal abatement cost curves

Éléments sur la transition vers du capital bas carbone

This thesis shows that while greenhouse gases are a stock pollution that imposes a shadow carbon cost that increases over time, it may be socially desirable to invest now in the deployment of expensive emission-reduction measures. This results solely from taking into account inertia inherent to the accumulation of low-carbon capital, in the absence of any other market imperfection. This thesis also covers the choice of policy instruments that imperfect governments can use to ensure the market implement these investments. It suggests that if governments cannot commit credibly to a carbon price path, or cannot fully compensate the losers from the introduction of a carbon price, then sector-scale policy instruments that incentivize investment in clean capital may be more effective and more acceptable than the carbon priceCette thèse montre que bien que les gaz à effet de serre (GES) représentent une pollution de stock qui impose un cout virtuel du carbone croissant dans le temps, il peut être socialement désirable d'investir des maintenant dans le déploiement de mesures couteuses de réductions d'émissions de GES. Ce résultat découle uniquement de la prise en compte de l'inertie inhérente à l'accumulation de capital bas carbone, en l'absence de toute autre imperfection de marché. De plus, cette thèse montre que des gouvernements imparfaits (c'est-à-dire qui ne peuvent pas s'engager sur une trajectoire parfaitement crédible de prix du carbone, ou ne peuvent pas compenser parfaitement les perdants de la mise en place de ce prix) peuvent avoir intérêt à utiliser des instruments de politiques sectoriels qui influencent directement les décisions d'investissements. Ces instruments peuvent être plus effectifs et plus acceptables que le prix du carbon

Enjeux économiques et énergétiques autours des véhicules électrifiées

Comment les transports s'inscrivent-ils dans le contexte énergétique et climatique mondial? Le véhicule électrique permet-il de réduire les émissions de gaz à effet de serre (GES)? La voiture électrique est-elle compatible avec les usages en termes de mobilité? Quel serait l'impact pour la production et distribution d'électricité? Le coût de la tonne de CO2 évitée grâce aux VEx est-il trop élevé? Quel est le rôle de l'incertitude qui pèse sur les prix futurs du pétrole, de l'électricité et du carbone ?Maste

How CO2 Capture and Storage Can Mitigate Carbon Leakage

Most CO2 abatement policies reduce the demand for fossil fuels and therefore their price in international markets. If these policies are not global, this price decrease raises emissions in countries without CO2 abatement policies, generating “carbon leakage”. On the other hand, if the countries which abate CO2 emissions are net fossil fuel importers, they benefit from this price decrease, which reduces the abatement cost. In contrast, CO2 capture and storage (CCS) does not reduce fossil fuel demand, therefore it generates neither this type of leakage nor this negative feedback on abatement costs. We quantify these effects with the global hybrid general equilibrium model Imaclim-R and show that they are quantitatively important. Indeed, for a given unilateral abatement in OECD countries, leakage is more than halved in a scenario with CCS included among the abatement options, compared to a scenario prohibiting CCS. We show that the main reason for this difference in leakage is the above-mentioned international fossil fuel price feedback. This article does not intend to assess the desirability of CCS, which has many other pros and cons. It just identifies a consequence of CCS that should be taken into account, together with many others, when deciding to what extent CCS should be developed.CO2 Capture and Storage, Carbon Leakage

Pathways toward Zero-Carbon Electricity Required for Climate Stabilization

World Bank Policy Research Working Paper 7075This paper covers three policy-relevant aspects of the carbon content of elec-tricity that are well established among integrated assessment models but under-discussed in the policy debate. First, climate stabilization at any level from 2 • C to 3 • C requires electricity to be almost carbon-free by the end of the century. As such, the question for policy makers is not whether to decarbonize electricity but when to do it. Second, decarbonization of electricity is still possible and required if some of the key zero-carbon technologies — such as nuclear power or carbon capture and storage — turn out to be unavailable. Third, progres-sive decarbonization of electricity is part of every country's cost-effective means of contributing to climate stabilization. In addition, this paper provides cost-effective pathways of the carbon content of electricity — computed from the results of AMPERE, a recent integrated assessment model comparison study. These pathways may be used to benchmark existing decarbonization targets, such as those set by the European Energy Roadmap or the Clean Power Plan in the United States, or inform new policies in other countries. These pathways can also be used to assess the desirable uptake rates of electrification technolo-gies, such as electric and plug-in hybrid vehicles, electric stoves and heat pumps, or industrial electric furnaces

How inertia and limited potentials affect the timing of sectoral abatements in optimal climate policy

This paper investigates the optimal timing of greenhouse gas abatement efforts in a multi-sectoral model with economic inertia, each sector having a limited abatement potential. It defines economic inertia as the conjunction of technical inertia --- a social planner chooses investment on persistent abating activities, as opposed to choosing abatement at each time period independently --- and increasing marginal investment costs in abating activities. It shows that in the presence of economic inertia, optimal abatement efforts (in dollars per ton) are bell-shaped and trigger a transition toward a low-carbon economy. The authors prove that optimal marginal abatement costs should differ across sectors: they depend on the global carbon price, but also on sector-specific shadow costs of the sectoral abatement potential. The paper discusses the impact of the convexity of abatement investment costs: more rigid sectors are represented with more convex cost functions and should invest more in early abatement. The conclusion is that overlapping mitigation policies should not be discarded based on the argument that they set different marginal costs (''different carbon prices'') in different sectors