Economic and technology uncertainty and implications for policy - PowerPoint PPT Presentation

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Economic and technology uncertainty and implications for policy advise Fr´ ed´ eric Babonneau and Alain Haurie ORDECSYS, 4 place de l’Etrier, 1224, Chˆ ene-Bougeries, Switzerland Bruxelles, 8 June 2010 Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Outline Methods and models 1 Uncertainty and role of CCS in abatement strategies 2 Uncertainty on other drivers 3 4 New methods to tackle uncertainty analysis for energy/climate policy Publications 5 Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Outline 1 Methods and models 2 Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers 3 New methods to tackle uncertainty analysis for energy/climate policy 4 Publications 5 Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications A Gamut of Models and Methods We used 6 Economy-Energy-Environmental models ... 3 bottom-up models : TIAM, TIAMEC and TIMES PanEU. 3 top-down models : WITCH, DEMETER and GEMINI-E3. ... and implemented the most advanced stochastic methods ... Stochastic and Dynamic programming Robust Optimization Monte-Carlo and Parametric programming ... to address the questions : How important can be CCS in abatement strategies ? What could be the CCS impacts in a long-term horizon ? What are the main sources of uncertainty impacting the success of climate policies ? How to robustify energy policies under uncertainty ? Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Outline 1 Methods and models 2 Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers 3 New methods to tackle uncertainty analysis for energy/climate policy 4 Publications 5 Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Uncertainties concerning CCS Uncertainties into consideration Mid-term CCS uncertainty : cost, date of availability, storage capacities. Long-term CCS uncertainty : leakage. Uncertainty of policy scenarios : level of carbon tax in the future. Used models in the analysis 3 bottom-up models : TIAM, TIAMEC and TIMES PanEU 2 mid-term top-down models : WITCH and GEMINI-E3 1 long-term top-down model : DEMETER Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Main insights for CCS deployment Analysis with WITCH stochastic Uncertainty on long term carbon tax (resolved in 2030) ⇒ 1 The implementation of CCS technologies appears to be a good 2 bridging option before the next generation of carbon free technologies become competitive (solar, especially). ⇒ Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Main insights on CCS leakage Analysis with DEMETER When assuming a 1%/yr leakage rate the effectiveness and 1 attractiveness of CCS is : ⇒ not reduced with a high value for the discount rate (about 3%) and moderate long-term climate change damages reduced very substantially with a prescriptive low value for the discount rate (about 1%) The uncertainties regarding the leakage rate and the extent of 2 climate-induced damages to the global economy should not prevent us from using CCS on a large scale. ⇒ Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Main insights from TIAM stochastic The method of stochastic programming is implemented on TIAM ⇒ The possible concentration profiles ⇒ The possible emission profiles ⇒ The contribution of CCS and forestry for sequestration ⇒ Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Conclusion of the study with TIMES PanEU Using parametric analysis The results show a high influence of climate policy on the market share of CCS power plants. Under an ambitious climate policy regime (-83% in 2050 compared to Kyoto base) the electricity demand increases up to 6500 TWh in 2050 in the EU-27 plus Norway, Switzerland and Iceland (EU-27+3), driven by the change of the end use sectors towards electric applications. This increase is accompanied by a strong emission reduction in the public heat and electricity sector, which contributes importantly to the achievement of the overall GHG reduction target. Thereby CCS technologies play an important role, achieving a maximum market share in the EU-27+3 in 2050 of almost 40% (2500 TWh) of total electricity generation under a -83% climate target. However under less tight climate targets (here -74% in 2050 compared to Kyoto base) the market share amounts to a maximum of 30% (1700 TWh) in 2050. Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Outline 1 Methods and models 2 Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers 3 New methods to tackle uncertainty analysis for energy/climate policy 4 Publications 5 Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications SP/MC analysis with TIAM and GEMINI-E3 Uncertainties into consideration Climate sensitivity Price of oil Economic growth Methods and models We used SP with the bottom-up model TIAM and MCA with the global top-down model GEMINI-E3. Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Main conclusion The price of oil and behind it the behaviour of OPEC affects the possibility of 1 reaching a target climate. The climate negotiation must therefore incorporate the specificities of these countries. The impact of uncertainty of the climate sensitivity parameter Cs is major, 2 requiring the implementation of early actions (before 2040) in order to reach the temperature target. The “wait and see” approach is not recommended. ⇒ Economic growth: 3 For GEMINI-E3, the economic development of Asia is a decisive factor in the cost and the success of a climate policy. China and India have to be integrated as soon as possible in the climate agreement. For TIAM, the uncertainty of the GDP growth rates has very little impact on pre-2040 decisions compared to the climate sensitivity uncertainty. Need for a basket of carbon technologies : There is not a single silver-bullet technology to combat carbon emissions and CCS alone cannot provide the solution to climate change. ⇒ Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Outline 1 Methods and models 2 Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers 3 New methods to tackle uncertainty analysis for energy/climate policy 4 Publications 5 Alain Haurie Stochastic analysis

Methods and models Uncertainty and role of CCS in abatement strategies Uncertainty on other drivers New methods to tackle uncertainty analysis for energy/climate policy Publications Robust Optimization to Analyse Security of EU energy supply Uncertainties of energy supply routes to EU Technical problems on pipelines and tankers. Commercial and political stakes between suppliers and EU. etc ... Used model We used the global bottom-up model TIAM. Main conclusions derived from robust analysis The results advise a higher diversification and a significant reduction of the 1 concentration of supply sources, a feature that is desirable in itself. ⇒ The supply of energy is guaranteed with a known and high probability. 2 Such reliability is achieved at what may be considered moderate an extra cost, 3 not exceeding 0.7% of the total EU energy cost. Alain Haurie Stochastic analysis