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

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

Use Energy Models to Project Costs of Mitigating Carbon Emissions

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

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. B aseline 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

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

Four Kinds of Mitigation Policy Flexibilities Where Flexibility When Flexibility How Flexibility What Flexibility

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

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

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

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.

Benefits of International Emissions Trading

Four Kinds of Mitigation Policy Flexibilities Where Flexibility When Flexibility How Flexibility What Flexibility

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

Industrial Emissions (GtC/yr) IS92a WRE-550 WG1-550 Alternative Emission Paths for Stabilizing Atmospheric Concentrations of CO 2 at 550 ppmv (Parts Per Million by Volume)

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

Four Kinds of Mitigation Policy Flexibilities Where Flexibility When Flexibility How Flexibility What Flexibility

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

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.

Solar Energy Photolysis Center H+H+ O2O2 e-e- H2OH2O e-e- Hydrogenase H2H2 Reduced Ferredoxin Oxidized Ferredoxin Biological Hydrogen Production: Complete Pathway in Each Cell

Controlled Combustion The Concept: Unstable Combustion Controlled Combustion Concept High-T Flame Conventional Flame Air Temperature.>800C Conventional Flame Combustion Dilution by combustion products, N 2 or CO 2 Air Temperature < 600C

Geologic Storage of CO 2 Use CO 2 to recover methane in coal beds. Dissolve CO 2 in deep aquifers that contain salt water. Inject CO 2 to recover oil and gas. Volumes are very large: 1 GtCO 2 /yr = 25 million B/D.

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)

Four Kinds of Mitigation Policy Flexibilities Where Flexibility When Flexibility How Flexibility What Flexibility