Study on Long-term Energy Strategy in Northeast Asia for CO2 Mitigation with an Econometric Model

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International Energy Workshop (IEW) Kyoto,
Japan July 5 - 7, 2005
Study on Long-term Energy Strategy in Northeast
Asia for CO2 Mitigation with an Econometric Model
Ryoichi KOMIYAMA, Li ZHIDONG, Kokichi ITO
The Institute of Energy Economics, Japan (IEEJ),
Tokyo, JAPAN Nagaoka University of Technology,
Nagaoka Niigata, JAPAN
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Contents

• Projection Outline
• Research Objective, Methodology
• Projection Results China and Japan
• Primary Demand, Oil Demand
• CO2 emissions trajectory
• Reference and Alternative Scenario
  
  
• (enhanced
  environmental measures)
• Conclusions

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Projection Outline

• Research Objective
• Consistent energy demand-supply projection in
  Northeast Asia, focusing on China, developed by
  an integrated econometric model, and analyzes
  regional CO2 mitigation potential, through energy
  conservation and fuel switching in a consistent
  way.
• Projection Period 2000 2030
• Methodology Macro-Economic Model, Energy Demand
  and Supply Model, both developed on the basis of
  econometrics
• Scenarios
• - Reference
• Highly probable energy evolution for the
  future
• - Alternative
• Enhanced environmental measures are
  implemented

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Basic Framework
MACRO Economic Model
(Basic assumption)
GDP components
GDP, Crude oil price, Exchange rate, Population,
Power generation outlook, World trade etc.
Price/Labor etc.
Industrial activities
Development of country-specific macro economic
model particularly in China, Korea and ASEAN
countries (Indonesia, Malaysia, Philippines,
Thailand)
Transport activities
Energy Demand-Supply Model
Sketching future structure of energy demand and
supply in a fully consistent way on the basis of
IEA-compiled Energy Balance Table
Energy Demand
Conversion Sector
Econometric type of model allows to envisage
realistic and concrete energy future.
Energy Supply
CO2 emissions
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Geographical Coverage

• The whole world is geographically disaggregated
  into 31 regions, and Asia, into 14 regions.
• Geopolitically detailed analysis into Asian
  countries.

OECD Europe
Non-OECD Europe
The United Kingdom Germany France Italia Othe
r E.OECD
Former Soviet Union Non-OECD Europe
North America
America Canada
Asia(14 regions)
China Japan Hong Kong Taiwan Korea
Singapore Brunei Indonesia Malaysia
Philippines Thailand Vietnam India Other
Asia
Middle East
Middle East
Central/South America
Africa
Mexico Chile Other L.America
Africa
Oceania
Other Countries
Australia New Zealand
Other Countries
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World Primary Energy Demand by Fuel
Mtoe
AAGR AAGR
71-00 00-30
Total 2.1 2.0
Coal 1.7 2.0
Oil 1.4 1.9
Gas 3.0 2.5
Oil
Coal
Natural Gas
Nuclear
Hydro
Renewables

• Oil will remain the single-largest energy source
  in primary energy mix by 2030.
• Gas is expected to grow due to the prospects for
  its future extensive use in various sectors,
  thereby making itself catching up with coal after
  2020.

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Primary Energy Demand in China
TPES FY2000 930 Mtoe ? FY2030 2,600 Mtoe
(2.8-fold inc.)
Oil FY2000 4.4 mb/d ? FY2030 19 mb/d
(4.3-fold inc.)

• Around 40 of incremental increase will derive
  from coal, and about 30, from oil.
• Although the dependence on coal will slightly
  decline, it still remains dominant fuel in China
  in 2030.
• Oil increase will stem from transportation, and
  gas increase, from both res/com and power sector.

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Incremental Increase in World Primary Energy
Demand by Fuel and Region - China, the Center of
Demand Growth
Non- OECD
OECD
China
Share of China in incremental increase TPES
25, Coal 43, Gas 23. ? Chinas presence in the
global energy market should become even larger.
Almost 50 of increment in oil and gas will
derive from Non-OECD nations.
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Automobile holdings in China
Million cars
Vehicle stock (million cars) Ownership rate
Actual(FY2000) 16 1.3
Reference (FY2030) 240 16
High GDP (FY2030) 370 25
Low GDP (FY2030) 130 8.8
High GDP Growth
Reference
(FY 2000) Vehicle Stock Ownership rate Japan
73 mil. cars 57 S.Korea 12
mil. cars 26 USA 220 mil.
cars 79
Low GDP Growth
GDP Growth 2000-2030 Reference6.3
High7.3 Low4.8
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World Oil Demand
World Oil Demand FY2000 70 mb/d ? FY2030 123
mb/d (1.8-fold inc.)
Annual average increase 2000 to 2030 World 1.8
mb/d, China 0.5 mb/d, Other Asia 0.5 mb/d
China is primary driver in oil demand increase
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Oil Demand and Supply in China

• The shortfall of oil supply is projected to
  amount to 15 mb/d in 2030
• Rate of import dependence will mark 81 in 2030,
  from 26 in 2000

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Net Oil Import

• Japans net oil import becomes No.2 in North
  East Asia by 2030
• China outstrip Japan during next decade (at
  FY2015)
• Alternative scenario in China reduce 1.3 mb/d
  crude oil import

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Assumptions Demographic factor in Japan

• Population After peaking at FY2006, gradually
  declining

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Primary Energy Demand in Japan
Oil the single most important fuel in 2030,
accounting for 43 of total Natural Gas upswing
trend, both in power generation and municipal gas
use driven by distributed power generator, such
as fuel cell Nuclear inched up reflecting
electricity demand increase New Energy increase
slowly supported by government policy (RPS law)
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CO2 Emissions by Region in Asia
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Alternative Scenario in China
Enhanced environmental measures are implemented

• Thermal efficiency in 2030

Coal-fired Oil-fired
Gas-fired Reference 43
47 49 Alternative 45
49 51

• Vehicle Fuel efficiency 20 improvement

• New Energies Supply in 2030

Hydro Nuclear
Renewables Reference 250 GW 50
GW 118 GW Alternative 300 GW 90 GW
231 GW
(Alternative Scenario in Japan basically reflects
current government energy-conservation and
renewable policy)
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CO2 Emissions in China and Japan
China FY2000 900 Mt-C ? FY2030 2,244 Mt-C
(2.5-fold inc.) 1,772 Mt-C
Japan FY2000 320 Mt-C ? FY2030 324 Mt-C (No
Change) 279 Mt-C
Alternative Scenario
Environmental measures mitigate 472 Mt-C in
China, 45 Mt-C in Japan, at 2030
Mitigation potential in Japan is much lower than
China
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Conclusions

• Energy and CO2 are soaring in China, just edging
  up in Japan

• Japans domestic emission measures have minor
  impact in Northeast Asia.

• CO2 emissions issue should be addressed as one
  where all Northeast Asian countries have a common
  stake

• For Japan, transfer of technology to China
  through region-wide energy and environmental
  cooperation is important in order to achieve a
  greater overall environmental benefit