Download Understanding the Energy/Environment Nexus Using the MARKAL

Assessing the Latvia Energy Sector in
the Context of Climate Change
Economics
World Bank Prototype Carbon Fund Workshop
Riga, Latvia
January 24-27, 2000
Gary A. Goldstein, Lorna A. Greening
International Resources Group, Ltd.
Janis Rekis
Latvian Development Agency, Department of Energy
LAA/DoE
Presentation Topics
 Relevance of Latvia MARKAL
 Implications of Economic Growth on the
Energy System and Carbon Emissions
 Evaluating the Value of Latvia Carbon
Permits
 MARKAL Methodology Overview
 Conclusions
LDA
Relevance of Latvia MARKAL
 IFE-Norway Collaboration
 Preliminary Results Presented at IEA-ETSAP
 MEPRD Report on SO2
 Policies and Measures to Mitigate GHG
Emissions and Increase Sinks
 Second National Communication to the
UNFCCC
 Energy Trading and CO2 Mitigation in the
Nordic and Baltic Countries
LDA
Latvia MARKAL Baseline
Assumptions
 GDP = Optimistic National Energy Program Scenario
(1997)
 Energy Prices for Imports from International Energy
Agency (Other than Electricity)
 Individual Power Plants Represented
 Technology Progress with Regard to Efficiency
Improvements
 No Limits on Fuel Imports
 No Nuclear Power
 Forestry and Non-CO2 GHG are Not Accounted For
LDA
Latvia GDP Forecasts
Forecast for MARKAL (1996)
Ministry of Economy (Slow Development, 1999)
Latvia National Energy Program (Base, 1997)
GDP at average prices
Ministry of Economy (Optimistic Development, 1999)
Latvia Natioinal Energy Program (Optimistic, 1997)
12000
2526
2439
2246
2173
2191
2557
4000
2177
6000
3925
8000
4381
mill.US$
10000
2000
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
05
20
10
20
15
20
20
20
25
20
30
20
35
0
LDA
All data given in average prices of 1 9 9 3 at exchange rate 0 .6 7 4 LS/ US$
What are the Implications of Economic
Growth for Carbon Emissions?
 Expanded Trade with the EU will Result in GDP
Growth Rates Similar to the EU by 2005
 Industrial Structure will Shift to Light
Manufacturing and Commercial Services
 Carbon Emissions will Increase, but Economy
will be Less Carbon Intensive Over Time
LDA
Energy Services According to GDP Growth
World Bank PCF Latvia Workshop
250
200
PJ
150
100
50
0
1994
1999
2004
2009
2014
2019
Years
Base Case
LDA
Mid Growth
Low Growth
2024
Total CO2 Emissions
World Bank PCF Latvia Workshop
30000
25000
Th. Tons CO2
20000
15000
10000
5000
0
1994
1999
2004
2009
2014
2019
2024
Years
LDA
Base Case
Base Case -5%CO2
Mid Growth
Mid Growth -5%CO2
Low Growth
Low Growth -5%CO2
92% level of 1990
MoE-Higher Growth
Potential CO2 Permit Revenue
• Cumulative CO2 Emissions Below Kyoto Level
(92% of 1990) for 2008-2012
• 24.9 – 66.35 Mtons CO2
• Permit Price Range
• $1.11 - $7.74/TonCO2 ($4.07 - $28.38/TonC)
• Permit Revenue Range
• $27.6 - $513.6 Million
LDA
Liepajas Project Avoided Emissions
(Base Scenario)
• Displaces Some Natural Gas and Dual-fired Power
Generation
• Avoided Emissions 2001- 2012 (TonsC)
– Methane displaced
– Power Sector Fuel Switching
119.298
16.965
– TOTAL
136.263
LDA
1994
LDA
1999
2004
2009
2014
2019
Base Case 5%CO2
Base Case
Base Case 5%CO2
Base Case
Base Case 5%CO2
Base Case
Base Case 5%CO2
Base Case
Base Case 5%CO2
Base Case
Base Case 5%CO2
Base Case
Base Case 5%CO2
Base Case
Th. Tons CO2
CO2 Emissions by Fuel
World Bank PCF Latvia Workshop
25000
20000
15000
10000
Peat
Natural Gas
LPG
Heavy Oil
Gasoline
Disel
Coal
5000
0
2024
Contribution to 10% CO2 Reduction - Base Case
World Bank PCF Latvia Workshop
22000
Th Tons CO2
20000
18000
EFF IMPROVEMENT
MOVE TO RENEW
16000
MOVE TO NUCLEAR
LESS CO2/FOSSIL
14000
REMAINING
12000
10000
1994
1999
2004
2009
Years
LDA
2014
2019
2024
CO2 Intensity (CO2 vs GDP)
World Bank PCF Latvia Workshop
Th. Tons CO2/ 1995 Mil. US$
5.0
4.5
Base Case
4.0
Base Case -5%CO2
Mid Growth
3.5
Mid Growth -5%CO2
Low Growth
3.0
Low Growth -5%CO2
2.5
2.0
1994
1999
2004
2009
Year
LDA
2014
2019
2024
Total Energy System Cost vs Cumulative CO2
BASE - High Growth
World Bank PCF Latvia Workshop
570
Million Tons CO2
560
550
540
530
520
510
31.74
31.74
31.74
31.75
31.75
31.75
Billion 1995 US$
LDA
31.75
31.75
31.76
31.76
CO2 Permit Price Range
World Bank PCF Latvia Workshop
1995$/Ton CO2
10
8
6
4
2
0
1994
1999
2004
2009
Year
LDA
2014
2019
2024
Annual Revenue from Permit Sales - Base Case
World Bank PCF Latvia Workshop
Annual Revenue from Permit Sales - Base Case
World Bank PCF Latvia Workshop
40
35
40
35
25 30
20 25
1994M$
1995M$
30
Lowest Permit Price
15 20
Lowest
HighPermit
PermitPrice
Price
10 15
High Permit Price
5 10
0
5
0
1994 1999
1994 1999 2004
2004 2009
Year
Year
LDA
2009 2014
2014
2019 2024
2019
2024
Electricity Production - Deterministic vs Stochastic w/ 5% CO2 Reduction
World Bank PCF Latvia Workshop
40
35
BASE Det
30
Mid Growth Det
PJ
Low Growth Det
BASE Stoch
25
Mid Growth Stoch
Low Growth Stoch
20
15
10
1994
1999
2004
2009
YEAR
LDA
2014
2019
2024
The Forest Sector as a Carbon
Sink
• Timber Harvesting is Increasing Relatively
to 1990
• There is an Increase in Plantation
Production
• Latvian Forests will Remain a Net Carbon
Sink During the Time Period 2000-2020
LDA
MARKAL Building Blocks
RESOURCES
PROCESSES
GENERATION
ENERGY
SERVICES
IMPORT
ELECTRICITY
REFINERIES
END-USE
HEAT
FUEL
PROCESSING
MINING
STOCKS
EMISSIONS
CONTROLS
EXPORT
DEVICES
D
E
M
A
N
D
S
What MARKAL Does
 Identifies least-cost solutions for energy system planning
 Evaluates options within the context of the entire
energy/materials system by:
• balancing all supply/demand requirements
• ensuring proper process/operation
• monitoring capital stock turnover
• adhering to environmental & policy restrictions
 Selects technologies based on life-cycle costs of
competing alternatives
What MARKAL Does (cont.)
 Establishes baselines and the
implications of alternate futures
 Provides estimates of:





energy/material prices
demand activity
technology and fuel mixes
GHG and other emission levels
mitigation and control costs
MARKAL-MACRO Overview
ENERGY SOURCES
TECHNOLOGY CHARACTERISTICS
ENVIRONMENTAL CONSTRAINTS &
POLICIES
LABOR
GDP
CONSUMPTION
USEFUL
ENERGY
SERVICES
MARKAL
MACRO
ENERGY
PAYMENTS
INVESTMENT
CAPITAL
TECHNOLOGY MIX
FUEL MIX
EMISSIONS SOURCES & LEVELS
FUEL & EMISSION MARGINAL COSTS
RANKING OF MITIGATION OPTIONS
Input Form for Resource Supply Option
Te mplate 1a:
Spre adshe e t o f ne ce ssary MARKAL data fo r Ene rg y Carrie r Impo rts (e x cluding Ele ctricity )
ANSWER: Integrating RES, Data & Graphcis
What Questions Can MARKAL Answer?
 How do particular technologies and policies affect
GHG and emissions of other pollutants?
 What are the costs of meeting mitigation targets or the
value of carbon rights?
 How do demand-side actions affect the supply-side
and vice versa?
 How do technology and fuel mix changes resulting
from environmental policies affect energy prices?
 What are the benefits of cooperation mechanisms?
Benefits of using MARKAL for
Promoting Regional Energy
Strategies
 Builds in-country capabilities while promoting
regional dialog and cooperation using a “common
language.”
 Enables evaluation of major projects on a regional
scale.
 Promotes taking advantage of resource diversity.
 Facilitates cost-effective & more rapid mitigation.
 Encourages for more rapid data gathering and
sharing.
 Fosters environmentally responsible and
sustainable development.
Conclusions
• CO2 emissions in Latvia will remain well below Kyoto
commitment levels, subject to economic growth.
• Permit prices are competitive, and should benefit both
Latvia and buyers.
• Substantial gains from permit sales seems likely.
• Opportunities for further cost-effective CO2 reductions
exist via AIJ.
• Development of hedging strategies encourages planning
for high GDP and lower CO2 emissions.
• Integrated analyses can provide important insights into
Climate Change policy and implications.
LDA
Workshop Observations
• The difference between concepts and reality
• Pre-workshop needs
– informal email exchange between experts and HC team
– terminology and key concepts information note for HC
team
– 1st day dialog between experts and HC team
– Check-list for HC (and IC/II) on documentation needs
for determination of the National picture
Workshop Observations (2)
• Controlled wider audience (Baltic
countries)
• More work to do on Baseline definition and
issues
– Additionality vs. Environmental Progress
• Definitive success, with a great deal learned
by all participants
Workshop Observations (3)
• Develop the idea of in-country Sustainable
Development Promotion Centers
 Understanding of the principles of UNFCCC/Protocols (and
IPCC guidelines) as they relate to the country
 Host country knowledge and oversight of their CC assets and
opportunities
 Compilation of a portfolio of potential projects
 Point of contact for interested parties (external and internal)
 Tools and the necessary skills
 Coordinator of a network internal experts
 Guidance through the project development process
 Ensuring the quality of the credits