Assessing the effects of the European Emissions Trading Scheme for Portugal using the TIMES_PT model

1
Assessing the effects of the European Emissions
Trading Scheme for Portugal using the TIMES_PT
model
Sofia Simões, João Cleto, Júlia Seixas
Environmental Sciences and Engineering
Department New University of Lisbon Portugal
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Overview

• TIMES_PT model
• Structure and information sources
• Energy Services Demand 2000-2030
• Exogenous Inputs demand and main policy
  assumptions
• Final energy consumption in base year
• Simulating EU ETS
• CO2 emissions in EU ETS
• National CO2 marginal abatement curve
• Simulation of EU ETS
• Allocation and price scenarios
• Results
• Next steps

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Portuguese energy system

• Energy intensity is one the highest in EU
• Small improvements in energy efficiency for
  residential and commercial
• Improvements in industry - however mainly
  low-value energy intensive products
• 85 primary energy imports rest is hydro,
  biomass and wind
• Kyoto/burden sharing target of 27 1990 levels
• Most recent forecasts point to growth of GHG
  emissions of 47 by 2010 and 41-38 by 2020

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TIMES_PT model
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Implementation of TIMES_PT
NEEDS
E2POL
NEEDS
National research project Quantifying
interactions between energy and environment
policy instruments http//air.dcea.fct.unl.pt/proj
ects/e2pol/
EU research project Evaluation of total costs and
benefits of energy policies and future energy
systems http//www.needs-project.org/nf2.asp
TIMES_PT
Implementation of TIMES for Portugal 2000-2030
(2050)
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Model structure
Policy constraints restrictions, taxes,
subsidies,
Demand projections end-use energy services
materials
Materials and Energy flows
Transport road passengers (car short / long
distance, bus urban / intercity, moto), road
freight, rail (passengers / freight), aviation,
navigation
Oil, coal, gas import prices
Final energy prices
Primary energy supply Refinery, imports and
renewable energy
Industry Iron Steel Non-Ferrous metals
ChlorineAmmonia Other Chemic. Cement Lime
Glass Hollow/Flat Ceramics Pulp Paper Other
Optimal combination of energy supply and demand
technologies
Minimise total system costs
Residential Existing New - Rural/ Urban /Multi
appartment
Electricity generation
National primary energy potential Hydro, wind,
solar, biomass
Emissions
Commercial Large and Small
Costs
Agriculture
Installed capacity
Base year New energy technologies capacity,
availability, efficiency, life, costs, emission
factors
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Model Structure Exogenous inputs
GEM-E3 General Equilibrium Model for
Energy-Economy-Environment
TIMES_PT
Inputs
Inputs

• Elasticities of final demands to macroeconomic
  drivers, income (ELASI) and price (ELASP)
• Autonomous efficiency improvement in industry
  (AEEI)
• Base year data (DEM2000)
• Residential Data

• Energy prices
• Primary Energy potential and costs
• New and Existing Technologies
• Policy assumption (e.g. CO2 eq emissions
  restrictions)

• Population growth
• World energy prices
• Technical progress, energy intensity and labour
  productivity evolution
• EU-22 GDP growth target (2 to 2.5)

Residential Demand Generation
Optimization function
GEM-E3

• Energy Scenarios
• Technology profile
• System costs
• Emissions

• Annual Demand (DEM)
• Cement (Mt)
• Paper (Mt)
• Iron Steel (Mt)
• Glass (Mt)
• Pkm (Million Pkm)
• Tkm
• Other Industries (PJ)
• Agriculture (PJ)
• Resid. Space Heating (PJ)
• Resid. Space Cooling (PJ)
• Water Heating (PJ)
• Etc.

• National Macroeconomic Drivers (DRGR)
• GDP growth
• Private consumption as a proxy for disposable
  income
• Sectoral production growth industry, services,
  transports and agriculture.
• PRGR Price Evolution (PRGR)

DEMt Industry, Commercial, Transports and
Agriculture demand generation
Outputs
Outputs
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Clinker, Pulp, Glass, Iron Steel Demand
Clinker
Pulp
1,5
1,0
2,0
1,6
Iron Steel
Glass
0,3
1,0
1,9
2,5
Source Industrials Association of container
glass, Saint-Gobain (flat glass) and 2000 data
from Statistic National Institute (INE)
2000 values from NIR
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Simulating EU ETS
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EU ETS in TIMES

• Identify emission restriction for each sector
• Estimate emissions from EU ETS sectors in a BASE
  scenario and in a Kyoto scenario
• Assume share of these emissions in EU ETS (glass,
  ceramics, combustion, lime, paper)
• Estimate restriction and allowance stock by
  comparing with Kyoto scenario
• 2) Create possibility to buy allowances

Allocation/restriction scenarios Maintain 2000
emissions 70 of National target of 0 from
1990 70 of National target of -20 from 1990
Allowances prices scenarios 10 /t 21 /t 40
/t
Trade itself not simulated, only buying
allowances Assumed constant proportion of
emissions in EU ETS over time
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TIMES_PT Scenarios - main policy assumption
Base Scenario Kyoto Scenario
Nuclear politically unacceptable ? ?
Min. electricity generated from gas combined cycle (existing new) corresponding to at least 1100 MW in 2010-2030 ? ?
No new Coal Power Plants before 2015 no increase in coal in final sectors new coal has CCS ? ?
Min. use of Municipal Waste Wood Waste for electricity ? ?
Min. 1.1 MW wind onshore in 2005 (feed-in-tariffs) ? ?
Biofuel targets for 2010 (5.75 of diesel and gasoline) ? ?
Min. 39 of the electricity consumed in 2010 is from renewable sources
ISP (energy carriers tax) and VAT over energy carriers ? ?
No carbon sinks ? ?
CO2 emissions restrictions ? (27 above 1990 levels in 2010-2030)
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National CO2 marginal abatement cost curve
113 to 100 from 1990 in 2020
refers to 1990 emissions
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CO2 emissions in EU_ETS
Excluded emissions from solvent use, agriculture,
waste, fugitive from fuels and f-gases - 20 in
2010
5 to -3
0 to -5
-2 to -6
12
10
11
15
12
11
15
4
7
6
5
5
6
6
30
24
23
23
21
16
16
43
48
49
48
50
50
49
(46)
(90)
(69)
(80)
(40-54)
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EU ETS in TIMES_PT buy allowances
ELCCO2N

• TRDSTOR
• Stock no. permits
• Cost of permits

TSTORAGE_ELCT
ELCTCO2N
IISCO2N
IISTCO2N
TSTORAGE_IIST
IISCO2P
IISTCO2P
TRDCO2N
SUPCO2N
SUPTCO2N
TSTORAGE_SUPT
SUPCO2P
SUPTCO2P
(...)
CHPCO2N
TSTORAGE_CHPT
CHPTCO2N
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Results
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Bought quantities (Gg CO2)
increase price
2010 10eur/t 21eur/t 40eur/t
CO2 as 2000 3327 2721 2166
CO2 as Nat 0 / 1990 10149 9057 4986
CO2 as Nat -20 / 1990 14997 13803 8466

2020 10eur/t 21eur/t 40eur/t
CO2 as 2000 5000 4149 4163
CO2 as Nat 0 / 1990 12000 5710 4163
CO2 as Nat -20 / 1990 17054 7673 5879

2030 10eur/t 21eur/t 40eur/t
CO2 as 2000 4589 4536 3807
CO2 as Nat 0 / 1990 6608 6093 4314
CO2 as Nat -20 / 1990 9045 8159 6535
2010 2010
nat. ETS
2000 5000 8 15
Nat 0 12000 18 35
-20 19000 29 56
Allowances stocks
increase restriction
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Buyers 2010
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Buyers 2020
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System cost variations
change compared to Kyoto scenario
increase price
2010 10eur/t 21eur/t 40eur/t
CO2 as 2000 0.48 0.61 0.68
CO2 as Nat 0 / 1990 0.65 0.81 0.53
CO2 as Nat -20 / 1990 0.84 1.18 1.25

2020 10eur/t 21eur/t 40eur/t
CO2 as 2000 0.40 0.52 0.73
CO2 as Nat 0 / 1990 0.58 0.69 0.87
CO2 as Nat -20 / 1990 0.81 0.70 1.15

2030 10eur/t 21eur/t 40eur/t
CO2 as 2000 1.83 1.97 2.21
CO2 as Nat 0 / 1990 1.83 2.04 2.31
CO2 as Nat -20 / 1990 1.91 2.15 2.56
increase restriction
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Next steps

• Test other allocation criteria
• Verify results with sector marginal abatement
  curves
• Model with national emission ceiling
• Possibility to model selling allowances?
• Feed-in-tariffs for renewables
• Acidifying emissions constraints

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sgcs_at_fct.unl.ptjfcn_at_fct.unl.ptmjs_at_fct.unl.pt
http//air.dcea.fct.unl.pt/projects/e2pol/
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Departamento de Ciências e Engenharia do Ambiente
Research work funded by the FCT/MCES and POCI
2010, supported by FEDER
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Primary Energy Potentials in TIMES_PT
2000 2030 Reference Non Energy Extr. costs (/GJ) (VIEWLS project)
Wood Products (PJ) 71.7 100 (28) Assumed a maximum growth 30 of 2000 capacity 4.89
Biogas (PJ) 0.1 29 (100) GPPAA Extrapolation of PNAC Waste Scenarios 32.85
Crops for Biofuel (PJ) 0.0 15 (100) Extrapolation of Renewable Energy Portugal Forum 1.30
Biofuel production (PJ) 0.0 50 (100) Best guess based on 2008 expected installed capacity 28.50
Municipal Waste (PJ) 7.3 10 (27) Extrapolation of PNAC Waste scenarios 5.81
Industrial Waste Sludge (PJ) 0.0 2 (100) Best guess 5.81
Hydro (PJ) 40.2 95 (58) Ministery of Economy 0.00
Wind onshore (GW) 0.7 5 (98) Conservative assumption based on REN 0.00
Wind offshore (GW) 0.0 2 (100) Best guess 0.00
Solar- heating (PJ) 0.8 38 (98) Extrapolation of Renewable Energy in Portugal Forum 0.00
Solar-electricity generation (GW) 0.0 2 (100) Best guess 0.00
Geothermal (PJ) 0.6 8 (93) Extrapolation of Renewable Energy Portugal Forum 0.00
Waves (GW) 0.0 5 (100) Cruz, J., Sarmento, A. (2004). Energia das Ondas 0.00