Deriving optimal carbon policies for biomass utilization 9.12.2014 - PowerPoint PPT Presentation

Forests, land use and climate change: Deriving optimal carbon policies for biomass utilization 9.12.2014 IEA Task 38 Workshop on Forests Aapo Rautiainen Jussi Lintunen Jussi Uusivuori

In this presentation… We present a model which includes: – The allocation of land to competing uses – The allocation of biomass to competing uses – Carbon storage in biomass, soils and products We use it to derive an efficient (tax) policy for regulating of biomass emissions

What its based on Lintunen, J. and Uusivuori, J. 2014. On the economics of Forest Carbon: Renewable and Carbon Neutral But Not Emission Free. Fondazione Eni Enrico Mattei Working Paper Series. 13.2014. Rautiainen, A. Lintunen, J. and Uusivuori, J. (Work in Progress)

Earlier Research (e.g.) Stand-level analysis: – van Kooten ym. 1995, Hoen & Solberg 1994 National-level analysis: – Tahvonen 1995 Substitution vs. Carbon storage: – Marland ja Schlamadinger 1997 Bioenergy emissions: – Fargione ym. 2008, Searchinger ym. 2009 ja Repo ym. 2011 5.11.2014

I Model properties

The carbon cycle Oceanic Emissions from fossil Decay carbon pool fuel use in energy production Uncollected Growth Emissions from residues production of non- Annual carbon renewable materials cycling in Consumption and fertilizer agriculture of crops and residues Atmospheric carbon pool Decay Growth Energy use, short-lived wood Energy Living forest products, waste from Landfill Litter Legend: use biomass producing long-lived products Carbon fluxes Long-lived wood Uncollected Harvested Wood Waste products Products residues Carbon pools Soil carbon

EOM for atmospheric C 𝐵𝑈𝑁 = 1 − 𝜀 𝐵𝑈𝑁 𝑇 𝑢 𝐵𝑈𝑁 𝑇 𝑢+1 𝑂 𝑢 + 𝜁 𝑨 𝑨 𝑢 + 𝜁 𝑤 +𝜁 𝑔 𝑔 𝑤 𝑗𝑢 𝑦 𝑗1𝑢 𝑗=1 𝑋 + 𝜁 𝑥 𝑥 𝑢 𝑄 + 1 − 𝛽 𝑥 𝑢 𝑀 + 𝑥 𝑢 𝐹 + 𝑥 𝑢 𝑆𝐹𝑇 + 𝑥 𝑢 −𝜁 𝑥 𝐻 𝑢 𝐼𝑋𝑄 𝑂 𝑂 𝐷 + 𝜁 𝑗 𝑆 + 𝐺 + 𝜁 𝑗 𝐹 + 𝜁 𝑗 𝑑 𝐻 𝑗𝑢 𝑠 𝐻 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑠 𝑏 𝑗𝑢 𝑆𝐹𝑇 − 𝜁 𝑗 𝜁 𝑗 𝑗=1 𝑗=1 𝑂+1 𝐵 𝑗 𝐾 𝑗 𝑇 𝑇 𝑗𝑏𝑘𝑢 𝑇 + 𝜀 𝑀𝐺 𝑇 𝑢 𝑀𝐺 + 𝜀 𝑗𝑘 𝑗=1 𝑏=1 𝑘=1

EOM for atmospheric C 𝐵𝑈𝑁 = 1 − 𝜀 𝐵𝑈𝑁 𝑇 𝑢 𝐵𝑈𝑁 𝑇 𝑢+1 Atmospheric C in period t+1 𝑂 Atmospheric C in period t 𝑢 + 𝜁 𝑨 𝑨 𝑢 + 𝜁 𝑤 +𝜁 𝑔 𝑔 𝑤 𝑗𝑢 𝑦 𝑗1𝑢 minus decay into oceans 𝑗=1 𝑋 + 𝜁 𝑥 𝑥 𝑢 𝑄 + 1 − 𝛽 𝑥 𝑢 𝑀 + 𝑥 𝑢 𝐹 + 𝑥 𝑢 𝑆𝐹𝑇 + 𝑥 𝑢 −𝜁 𝑥 𝐻 𝑢 𝐼𝑋𝑄 𝑂 𝑂 𝐷 + 𝜁 𝑗 𝑆 + 𝐺 + 𝜁 𝑗 𝐹 + 𝜁 𝑗 𝑑 𝐻 𝑗𝑢 𝑠 𝐻 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑠 𝑏 𝑗𝑢 𝑆𝐹𝑇 − 𝜁 𝑗 𝜁 𝑗 𝑗=1 𝑗=1 𝑂+1 𝐵 𝑗 𝐾 𝑗 𝑇 𝑇 𝑗𝑏𝑘𝑢 𝑇 + 𝜀 𝑀𝐺 𝑇 𝑢 𝑀𝐺 + 𝜀 𝑗𝑘 𝑗=1 𝑏=1 𝑘=1

EOM for atmospheric C 𝐵𝑈𝑁 = 1 − 𝜀 𝐵𝑈𝑁 𝑇 𝑢 𝐵𝑈𝑁 𝑇 𝑢+1 Fossil fuel emissions 𝑂 Material emissions (from non-renewables) 𝑢 + 𝜁 𝑨 𝑨 𝑢 + 𝜁 𝑤 +𝜁 𝑔 𝑔 𝑤 𝑗𝑢 𝑦 𝑗1𝑢 Fertilizer emissions (from agriculture) 𝑗=1 𝑋 + 𝜁 𝑥 𝑥 𝑢 𝑄 + 1 − 𝛽 𝑥 𝑢 𝑀 + 𝑥 𝑢 𝐹 + 𝑥 𝑢 𝑆𝐹𝑇 + 𝑥 𝑢 −𝜁 𝑥 𝐻 𝑢 𝐼𝑋𝑄 𝑂 𝑂 𝐷 + 𝜁 𝑗 𝑆 + 𝐺 + 𝜁 𝑗 𝐹 + 𝜁 𝑗 𝑑 𝐻 𝑗𝑢 𝑠 𝐻 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑠 𝑏 𝑗𝑢 𝑆𝐹𝑇 − 𝜁 𝑗 𝜁 𝑗 𝑗=1 𝑗=1 𝑂+1 𝐵 𝑗 𝐾 𝑗 𝑇 𝑇 𝑗𝑏𝑘𝑢 𝑇 + 𝜀 𝑀𝐺 𝑇 𝑢 𝑀𝐺 + 𝜀 𝑗𝑘 𝑗=1 𝑏=1 𝑘=1

EOM for atmospheric C 𝐵𝑈𝑁 = 1 − 𝜀 𝐵𝑈𝑁 𝑇 𝑢 𝐵𝑈𝑁 𝑇 𝑢+1 Forest growth 𝑂 Emissions from wood use 𝑢 + 𝜁 𝑨 𝑨 𝑢 + 𝜁 𝑤 +𝜁 𝑔 𝑔 𝑤 𝑗𝑢 𝑦 𝑗1𝑢 𝑗=1 𝑋 + 𝜁 𝑥 𝑥 𝑢 𝑄 + 1 − 𝛽 𝑥 𝑢 𝑀 + 𝑥 𝑢 𝐹 + 𝑥 𝑢 𝑆𝐹𝑇 + 𝑥 𝑢 −𝜁 𝑥 𝐻 𝑢 𝐼𝑋𝑄 PULP, LOGS, ENERGY WOOD, RESIDUES, HWP 𝑂 𝑂 𝐷 + 𝜁 𝑗 𝑆 + 𝐺 + 𝜁 𝑗 𝐹 + 𝜁 𝑗 𝑑 𝐻 𝑗𝑢 𝑠 𝐻 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑠 𝑏 𝑗𝑢 𝑆𝐹𝑇 − 𝜁 𝑗 𝜁 𝑗 𝑗=1 𝑗=1 𝑂+1 𝐵 𝑗 𝐾 𝑗 𝑇 𝑇 𝑗𝑏𝑘𝑢 𝑇 + 𝜀 𝑀𝐺 𝑇 𝑢 𝑀𝐺 + 𝜀 𝑗𝑘 𝑗=1 𝑏=1 𝑘=1

EOM for atmospheric C 𝐵𝑈𝑁 = 1 − 𝜀 𝐵𝑈𝑁 𝑇 𝑢 𝐵𝑈𝑁 𝑇 𝑢+1 Growth in agriculture 𝑂 Emissions crop and residue use 𝑢 + 𝜁 𝑨 𝑨 𝑢 + 𝜁 𝑤 +𝜁 𝑔 𝑔 𝑤 𝑗𝑢 𝑦 𝑗1𝑢 𝑗=1 𝑋 + 𝜁 𝑥 𝑥 𝑢 𝑄 + 1 − 𝛽 𝑥 𝑢 𝑀 + 𝑥 𝑢 𝐹 + 𝑥 𝑢 𝑆𝐹𝑇 + 𝑥 𝑢 −𝜁 𝑥 𝐻 𝑢 𝐼𝑋𝑄 𝑂 𝑂 𝐷 + 𝜁 𝑗 𝑆 + 𝐺 + 𝜁 𝑗 𝐹 + 𝜁 𝑗 𝑑 𝐻 𝑗𝑢 𝑠 𝐻 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑠 𝑏 𝑗𝑢 𝑆𝐹𝑇 − 𝜁 𝑗 𝜁 𝑗 𝑗=1 𝑗=1 𝑂+1 𝐵 𝑗 𝐾 𝑗 FOOD AND ENERGY CROPS, RESIDUES 𝑇 𝑇 𝑗𝑏𝑘𝑢 𝑇 + 𝜀 𝑀𝐺 𝑇 𝑢 𝑀𝐺 + 𝜀 𝑗𝑘 𝑗=1 𝑏=1 𝑘=1

EOM for atmospheric C Soil carbon emissions by 𝐵𝑈𝑁 = 1 − 𝜀 𝐵𝑈𝑁 𝑇 𝑢 𝐵𝑈𝑁 𝑇 𝑢+1 - Land use class - Age class 𝑂 𝑢 + 𝜁 𝑨 𝑨 𝑢 + 𝜁 𝑤 - Decay class +𝜁 𝑔 𝑔 𝑤 𝑗𝑢 𝑦 𝑗1𝑢 Landfill emissions (discarded HWP) 𝑗=1 𝑋 + 𝜁 𝑥 𝑥 𝑢 𝑄 + 1 − 𝛽 𝑥 𝑢 𝑀 + 𝑥 𝑢 𝐹 + 𝑥 𝑢 𝑆𝐹𝑇 + 𝑥 𝑢 −𝜁 𝑥 𝐻 𝑢 𝐼𝑋𝑄 𝑂 𝑂 𝐷 + 𝜁 𝑗 𝑆 + 𝐺 + 𝜁 𝑗 𝐹 + 𝜁 𝑗 𝑑 𝐻 𝑗𝑢 𝑠 𝐻 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑑 𝑏 𝑗𝑢 𝑠 𝑏 𝑗𝑢 𝑆𝐹𝑇 − 𝜁 𝑗 𝜁 𝑗 𝑗=1 𝑗=1 𝑂+1 𝐵 𝑗 𝐾 𝑗 𝑇 𝑇 𝑗𝑏𝑘𝑢 𝑇 + 𝜀 𝑀𝐺 𝑇 𝑢 𝑀𝐺 + 𝜀 𝑗𝑘 𝑗=1 𝑏=1 𝑘=1

The Economy Final consumption Food Good Aggregation of Aggregation of Energy consumption good food composite Discarded wood Non-renewable products material Crops Energy production Wood Fossil Residues Legend: Residues fuel Inputs and outputs Fertilizer Production Forestry Agriculture and consumption processes Land

Objective function ∞ Periodic Social Welfare 𝛾 𝑢 𝑣 𝐺 𝑧 𝑢 𝐺 + 𝑣 𝐷 𝑧 𝑢 𝐷 − 𝐸 𝑇 𝑢 𝐵𝑈𝑁 − 𝐷 𝑢 , max ∞ 𝐞 t 𝑢=0 𝑢=0 Utility from Utility from Disutility from Total food good atmospheric C costs 𝑂 𝐺𝐷 𝑦 𝑗1𝑢 + 𝑑 𝑗 𝑏𝑆𝐹𝑇 + 𝑑 𝐼 𝐼 𝑢 𝑋 + 𝑑 𝑥𝐺𝑆𝐹𝑇 + 𝑑 𝑥𝐷𝑆𝐹𝑇 𝐷 𝑢 = 𝑞 𝑨 𝑨 𝑢 + 𝑞 𝑔 𝑔 𝑞 𝑤 𝑤 𝐺𝑢 + 𝑑 𝑗 𝑢 + Contains substitution Simplified form! Contains: between energy, 𝑗=1 Could be made Cost of fossil fuels, 𝑂 𝑂+1 𝑂+1 non-renewable and more complex. Nonrenewable materials, 𝐷𝑃𝑂 𝑡 renewable materials 𝐷𝑃𝑂 + 𝑑 𝑘𝑙𝑢 𝑦 𝑘1𝑢 + 𝑑 𝑂+1,𝑙,𝑢 𝑡 𝑂+1,𝑙,𝑢 𝑦 𝑂+1,0,𝑢 Agriculture, 𝑘𝑙𝑢 Forestry, 𝑘=1 𝑙=1 𝑙=1 Land use conversions +𝑑 𝐼𝑋𝑄 + 𝑑 𝑀𝐺 𝑋 𝐼𝑋𝑄 − 𝑥 𝑢 𝐼𝑋𝑄 𝑢 HWP collection Capture the substitution between Landfilling food and other consumption 𝐼𝑋𝑄 , 𝛊 t , 𝑦 𝑂+1,0,𝑢 , 𝐲 t+1 , 𝐭 jkt, 𝐒𝐅𝐓 , 𝑥 𝑢 𝐺𝑆𝐹𝑇 , 𝑥 𝑢 𝐷𝑆𝐹𝑇 , 𝑥 𝑢 𝐆 , 𝐛 t 𝐅 , 𝐛 t 𝑀 , 𝑥 𝑢 𝑄 , 𝑥 𝑢 𝐹 , 𝑥 𝑢 𝑨 𝑢 , 𝑔 𝑢 , 𝑤 𝑗𝑢 , 𝐛 t 𝐞 𝑢 = 𝐼𝑋𝑄 , 𝑇 𝑢+1 AR , 𝑇 𝑢 𝐺𝑈 , 𝑇 𝑢 𝐷𝑈 , 𝐓 iaj,t+1 S 𝐵𝑈𝑁 , 𝑇 𝑢+1 𝑀𝐺 𝐓 t , 𝑇 𝑢+1

Objective function ∞ Periodic Social Welfare 𝛾 𝑢 𝑣 𝐺 𝑧 𝑢 𝐺 + 𝑣 𝐷 𝑧 𝑢 𝐷 − 𝐸 𝑇 𝑢 𝐵𝑈𝑁 − 𝐷 𝑢 , max ∞ 𝐞 t 𝑢=0 𝑢=0 Summed over Discounted infinite time horizon 𝑂 𝐺𝐷 𝑦 𝑗1𝑢 + 𝑑 𝑗 𝑏𝑆𝐹𝑇 + 𝑑 𝐼 𝐼 𝑢 𝑋 + 𝑑 𝑥𝐺𝑆𝐹𝑇 + 𝑑 𝑥𝐷𝑆𝐹𝑇 𝐷 𝑢 = 𝑞 𝑨 𝑨 𝑢 + 𝑞 𝑔 𝑔 𝑞 𝑤 𝑤 𝐺𝑢 + 𝑑 𝑗 𝑢 + 𝑗=1 𝑂 𝑂+1 𝑂+1 𝐷𝑃𝑂 𝑡 𝐷𝑃𝑂 + 𝑑 𝑘𝑙𝑢 𝑦 𝑘1𝑢 + 𝑑 𝑂+1,𝑙,𝑢 𝑡 𝑂+1,𝑙,𝑢 𝑦 𝑂+1,0,𝑢 𝑘𝑙𝑢 𝑘=1 𝑙=1 𝑙=1 +𝑑 𝐼𝑋𝑄 + 𝑑 𝑀𝐺 𝑋 𝐼𝑋𝑄 − 𝑥 𝑢 𝐼𝑋𝑄 𝑢 𝐼𝑋𝑄 , 𝛊 t , 𝑦 𝑂+1,0,𝑢 , 𝐲 t+1 , 𝐭 jkt, 𝐒𝐅𝐓 , 𝑥 𝑢 𝐺𝑆𝐹𝑇 , 𝑥 𝑢 𝐷𝑆𝐹𝑇 , 𝑥 𝑢 𝐆 , 𝐛 t 𝐅 , 𝐛 t 𝑀 , 𝑥 𝑢 𝑄 , 𝑥 𝑢 𝐹 , 𝑥 𝑢 𝑨 𝑢 , 𝑔 𝑢 , 𝑤 𝑗𝑢 , 𝐛 t 𝐞 𝑢 = 𝐼𝑋𝑄 , 𝑇 𝑢+1 AR , 𝑇 𝑢 𝐺𝑈 , 𝑇 𝑢 𝐷𝑈 , 𝐓 iaj,t+1 S 𝐵𝑈𝑁 , 𝑇 𝑢+1 𝑀𝐺 𝐓 t , 𝑇 𝑢+1