REMI Macroeconomic Analysis of the Baja Climate Action Plan

Transcription

1 REMI Macroeconomic Analysis of the Baja Climate Action Plan Dan Wei Price School of Public Policy University of Southern California with members of the microeconomic team 1

2 Input Data for REMI Analysis on Climate Action Plan

3 Input Data Requirements Major Categories of Information: 1) detailed cost/savings information from the microeconomic analysis of each policy option; 2) the sectors that will bear the costs, receive the savings, and be stimulated by the investment, and the correspondence to the REMI sectors 3) additional assumptions, such as how the initial investments required for policy implementation will be financed

4 Input Data Requirements Major data sources for the macroeconomic impact analysis are the microeconomic quantification results on the direct costs and savings of the mitigation policy options: Change in upfront capital investment by sector Change in annualized capital cost by sector Change in O&M expenditure by sector Change in fuel expenditures by fuel type by sector Program implementation, administrative costs, and any other relevant costs to the option National or state subsidies/tax credits Any other benefits (increased revenue or savings) 4 12/30/2014

5 Input Data Requirements Additional Assumptions or Data: Where does the capital investment go? Proportion of investment coming from in-state sources vs. out-of-state sources? For in-state investment, the proportion of public funding vs. private investment? For in-state private investment, the proportion of equity vs. debt financing? For private investment, which sector(s) would bear the investment cost? For in-state private investment, how much would it displace ordinary investment in plant and equipment in the absence of the policy option (e.g., replacement or expansion of existing plant and equipment, technological advance)? How are the fuel cost savings and other benefits distributed among sectors? 5 12/30/2014

6 Macro Export Table in the Micro Workbook Light blue table to the right of the microeconomic analysis results in the Net Societal Costs summary section Additional notes on important assumptions REMI Industry/Sector Category : selection of appropriate sector from the REMI-PI+ model that will bear the direct cost or receive the direct savings Direct Cost/Saving Category 6 12/30/2014

7 REMI Industry/Sector Category Agriculture, Hunting, Forestry and Fishing Mining and Quarrying Food, Beverages and Tobacco Textiles and Textile Products Leather, Leather Products and Footwear Wood and Products of Wood and Cork Pulp, Paper, Paper Products, Printing, and Publishing Coke, Refined Petroleum and Nuclear Fuel Chemicals and Chemical Products Rubber and Plastics Other Non-Metallic Mineral Basic Metals and Fabricated Metals Machinery, Nec Electrical and Optical Equipment Transport Equipment Manufacturing, Nec; Recycling Electricity, Gas and Water Supply Construction 7 12/30/2014 Wholesale and retail Hotels and Restaurants Inland Transport Water Transport Air Transport Other Supporting and Auxiliary Transport Activities Post and Telecommunications Financial Intermediation Real Estate Activities Renting of Machinery and Equipment and Other Business Activities Public Admin and Defense; Compulsory Social Security Education Health and Social Work Other Community, Social and Personal Services Residential Commercial Municipal Government State Government National Government

8 Direct Cost/Saving Category Cost Category Initial Capital Cost Net Biomass Costs Annualized Capital Cost Net Other Fuel Costs Operations & Maintenance (non-energy) Materials Costs Net Electricity Costs Services Costs Neat Steam/Heat Costs Landowner Opportunity Costs Net Natural Gas Costs Natural Resource Value Change Net Gasoline Costs Program Administrative Cost Net Diesel Costs National Tax Credit/Subsidy Net Fuel Oil Costs Provincial Tax Credit/Subsidy Net Coal Costs Municipal Tax Credit/Subsidy Net LPG Costs Other Costs/Savings 8 12/30/2014

9 Macro-Economic Analysis Example #1: Residential, Commercial, Institutional & Industrial (RCII) Sector 9 12/30/2014

10 RCI-3. Efficiency Expansion In Existing Buildings Policy Description: This policy is designed to reduce energy intensity in existing buildings through improvements in their design, construction and use Timing: Objective: 15% reduction in energy intensity per square meter of building. Annual incremental EE improvement in electricity and fuel consumption is about 2.1%. Coverage: Commercial and residential buildings 10 12/30/2014

11 RCI-3: Micro Analysis Results REMI Industry/Sector Category Residential Residential Commercial Commercial Residential Residential Commercial Commercial Direct Cost/Saving Category Descriptor Initial Capital Cost First Year Fuel Costs Initial Capital Cost First year Electricity Costs Initial Capital Cost First Year Fuel Costs Initial Capital Cost First year Electricity Costs Annualized Capital Cost Capital Costs for Fuel Efficiency Annualized Capital Cost Capital Costs for Electricity Efficiency Annualized Capital Cost Capital Costs For Fuel Efficiency Annualized Capital Cost Capital Costs For Electricity Efficiency Macroeconomic Export Units MM$ MM$ MM$ MM$ MM$ MM$ MM$ MM$ /30/

12 RCI-3: Micro Analysis Results (cont d) REMI Industry/Sector Category Direct Cost/Saving Category Descriptor Residential Residential Commercial Commercial Residential Residential Commercial Commercial Other Costs/Savings Avoided Fuel Expenditures Other Costs/Savings Avoided Electricity Expenditures Other Costs/Savings Avoided Fuel Expenditures Other Costs/Savings Avoided Electricity Expenditures Program Administrative Cost Fuel Program Cost Program Administrative Cost Electricity Program Cost Program Administrative Cost Fuel Program Cost Program Administrative Cost Electricity Program Cost Macroeconomic Export Units MM$ MM$ MM$ MM$ MM$ MM$ MM$ MM$ /30/

13 RCI-3: Additional Assumptions Assume that 30% of capital expenditure is used for building retrofits and 70% is used for purchases of energy-efficient appliances 100% of the capital and administrative costs are borne by residential and commercial sectors Percentage of capital expenditure to be financed: Retrofits: 50% Appliances: 0% 13 12/30/2014

14 RCI-3: Micro-Macro Mapping Table Linkage Microeconomic Quantification Results Upfront Mitigation Capital Investment on Building Retrofit and Purchases of Energy Efficient Equipment/Appliances Businesses (Commercial Annual Levelized Sectors) Capital Cost Households (Residential Sector) Increased Demand of Program Administrative Service Businesses (Commercial Sectors) Increased Administrative Cost 14 12/30/2014 Households (Residential Sector) Policy Variable Selection in REMI Output and Demand Block Exogenous Final Demand (amount) for Construction, Machinery Manufacturing and Electrical and Optical Equipment sectors Increase Compensation, Prices, and Costs Block Capital Cost (amount) of Individual Commercial Sectors Increase Output and Demand Block Consumption Reallocation (amount) All Consumption Sectors Decrease Custom Industry Sale for Electric Power Generation, Transmission, and Distribution sector Increase Compensation, Prices, and Costs Block Production Cost (amount) of Individual Commercial Sectors Increase Output and Demand Block Consumption Reallocation (amount) All Consumption Sectors Decrease Positive or Stimuli Positive Positive

15 RCI-3: Micro-Macro Mapping Table (cont d) Linkage Microeconomic Quantification Results Interest Payment of Financing Capital Investment Electricity and Fuel Savings Businesses (Commercial Sectors) Households (Residential Sector) Energy Demand Decrease from the Energy Supply Sectors Policy Variable Selection in REMI Output and Demand Block Exogenous Final Demand (amount) for Financial Intermediation sector Increase Compensation, Prices, and Costs Block Production Cost of Individual Commercial Sectors Decrease Output and Demand Block Consumption Reallocation (amount) All Consumption Sectors Increase Custom Industry Sale for Electric Power Generation, Transmission, and Distribution sector Decrease Output and Demand Block Exogenous Final Demand (amount) for Coke, Refined Petroleum and Nuclear Fuel sector Decrease Positive or Stimuli Positive Positive 15 12/30/2014

16 RCI-3: Macroeconomic Analysis Results Differences from Baseline Level Variable Units NPV Total Employment Jobs N/A Gross Domestic Product Millions of Fixed (2013) Pesos Output Millions of Fixed (2013) Pesos ,836 Disposable Personal Income Millions of Fixed (2013) Pesos ,147 PCE-Price Index 2009=100 (Nation) N/A Population Number of People N/A Baseline Plus Addition of the Policy Variable Units Total Employment Jobs 1,382,214 1,503,242 1,622,324 1,764,379 Gross Domestic Product Millions of Fixed (2013) Pesos 765, ,165 1,077,949 1,287,048 Output Millions of Fixed (2013) Pesos 1,557,097 1,863,897 2,248,039 2,717,273 Disposable Personal Income Millions of Fixed (2013) Pesos 432, , , ,825 PCE-Price Index 2009=100 (Nation) Population Number of People 3,550,461 3,870,077 4,189,040 4,494,710 Percent Change from Baseline Level Variable Units Total Employment % % % % % Gross Domestic Product % % % % % Output % % % % % Disposable Personal Income % % % % % PCE-Price Index % % % % % Population % % % % % 16 12/30/2014

17 RCI-3: Decomposition Analysis Results 17 12/30/2014

18 RCI-3: Decomposition Analysis Results 18 12/30/2014

19 RCI-3: Decomposition Analysis Results Total Employment (jobs) Increase Demand of Building Retrofit Increased Demand for Energy-Efficient Appliances/Devices Increased Demand of Program Administrative Service Electricity Savings Fuel Savings Increase Demand of Financial Sector Increased Capital Cost Increased Administrative Cost Reduced Demand of Electricity Reduced Demand of LPG Total NPV GSP (million 2013 Pesos) Increase Demand of Building Retrofit Increased Demand for Energy-Efficient Appliances/Devices Increased Demand of Program Administrative Service Electricity Savings ,985.6 Fuel Savings ,460.3 Increase Demand of Financial Sector Increased Capital Cost ,007.8 Increased Administrative Cost Reduced Demand of Electricity ,826.2 Reduced Demand of LPG /30/2014 Total

20 RCI-5. Solar Heaters Policy Description: This policy is designed to increase the installation of solar water heaters in individual households. Timing: Objective: 45% reduction of residential LPG consumption 20 12/30/2014

21 RCI-5: Micro Analysis Results REMI Industry/Sector Category Direct Cost/Saving Category Residential Residential Residential Residential Residential Operations & Annualized Capital Maintenance (nonenergy) Program Other Initial Capital Cost Cos t Administrative Cost Costs/Savings Descriptor 21 12/30/2014 Solarr Water Heaters Solarr Water Heaters Solarr Water Heaters Solarr Water Heaters Avoided Fuel Expenditures Macroeconomic Export Units MM$ MM$ MM$ MM$ MM$ 2014 $234 $22.59 $4.69 $ $366 $57.82 $7.31 $ $506 $ $10.13 $ $656 $ $13.12 $ $816 $ $16.31 $ $984 $ $19.68 $ $1,162 $ $23.24 $ $0 $ $23.24 $ $0 $ $23.24 $ $0 $ $23.24 $ $0 $ $23.24 $ $0 $ $23.24 $ $0 $ $23.24 $ $0 $ $23.24 $ $0 $ $23.24 $ $0 $ $23.24 $ $0 $ $23.24 $

22 RCI-5: Additional Assumptions 100% of the capital and administrative costs are borne by residential and commercial sectors Zero of capital expenditure will be financed 22 12/30/2014

23 RCI-5: Micro-Macro Mapping Table Linkage /30/2014 Microeconomic Quantification Results Increased Demand of Solar Water Heaters 2 Annual Levelized Capital Cost Increased Demand of Solar Water Heater Maintenance and Repair Services Increased O&M Cost to the Residential Sector Increased Demand of Program Administrative Services 6 Increased Administrative Cost 7 Fuel Savings 8 Energy Demand Decrease from the Energy Supply Sectors Policy Variable Selection in REMI Output and Demand Block Exogenous Final Demand (amount) for Machinery Manufacturing sector Increase Output and Demand Block Consumption Reallocation (amount) All Consumption Sectors Decrease Output and Demand Block Exogenous Final Demand (amount) for Renting of Machinery & Equipment and Other Business Activities sector Increase Output and Demand Block Consumption Reallocation (amount) All Consumption Sectors Decrease Output and Demand Block Exogenous Final Demand (amount) for Public Admin and Defense; Compulsory Social Security sector Increase Output and Demand Block Consumption Reallocation (amount) All Consumption Sectors Decrease Output and Demand Block Consumption Reallocation (amount) All Consumption Sectors Increase Output and Demand Block Exogenous Final Demand (amount) for Coke, Refined Petroleum and Nuclear Fuel sector Decrease Positive or Stimuli Positive Positive Positive Positive

24 Macro-Economic Analysis Example #2: Energy Supply (ES) Sector 24 12/30/2014

25 ES-1. Small Hydroelectric Generation Policy Description: This policy establishes the generation of electrical energy in Baja California via the construction and operation of small hydroelectric plants, taking advantage of water flow, primarily from existent canals in the State, or other form of running water that provides the necessary water pressure Timing: Program starts in 2014 with full implementation by 2020 Objective: Generate 35 MW of new generation by specified date 25 12/30/2014

26 ES-1: Micro Analysis Results REMI Industry/Sector Category Electricity, Gas and Water Supply Electricity, Gas and Water Supply Electricity, Gas and Water Supply Electricity, Gas and Water Supply Direct Cost/Saving Category Initial Capital Cost Annualized Capital Cost Operations & Maintenance (non-energy) Net Natural Gas Costs Descriptor micro hidro Capital Micro Hidro O&M Cost Fuel Cost Saving Macroeconomic Export Units MM$ MM$ MM$ MM$ 26 12/30/ $0 $0 $0 -$ $117 $8 $1 -$ $117 $15 $1 -$ $117 $23 $1 -$ $117 $30 $1 -$ $117 $38 $1 -$ $117 $46 $1 -$ $0 $46 $0 -$ $0 $46 $0 -$ $0 $46 $0 -$ $0 $46 $0 -$ $0 $46 $0 -$ $0 $46 $0 -$ $0 $46 $0 -$ $0 $46 $0 -$ $0 $46 $0 -$ $0 $46 $0 -$71

27 ES-1: Additional Assumptions Assume that 100% of capital investment will be covered through debt financing Capital investment expenditures for small hydro power generation are split 80:20 between sector that produce generating equipment and the construction sector 27 12/30/2014

28 ES-1: Micro-Macro Mapping Table Linkage Microeconomic Quantification Results Policy Variable Selection in REMI Positive or Stimuli 1 Increased Investment in Renewable Electricity Generation Output and Demand Block Exogenous Final Demand (amount) for Construction and Machinery Manufacturing sectors Increase Positive 2 Avoided fuel cost in the Power Sector Compensation, Prices, and Costs Block Production Cost (amount) of Electricity, Gas and Water Supply Sectors Decrease Positive 3 Interest Payment of Financing Capital Investment Output and Demand Block Exogenous Final Demand (amount) for Financial Intermediation sector Increase Positive 28 12/30/2014

29 ES-1: Micro-Macro Mapping Table (cont d) Linkage Microeconomic Quantification Results Policy Variable Selection in REMI Positive or Stimuli 4 Increased Capital Cost of the Power Sector Compensation, Prices, and Costs Block Capital Cost (amount) of Electricity, Gas and Water Supply Sectors Increase 5 Increased O&M cost in the Power Sector 6 Reduced Demand of NG 7 Cost Pass-through Effect Compensation, Prices, and Costs Block Production Cost (amount) of Electricity, Gas and Water Supply Sectors Increase Custom Industry Sale for Gas Supply sector Decrease Compensation, Prices, and Costs Block Production Cost (amount) of Individual Industrial and Commercial Sectors Increase or Decrease / Positive 29 12/30/2014

30 Steps of Simulating Cost Pass-through Effect Assume changes in electricity generation cost stemming from the switch from fossil-fuel electricity generation to renewable electricity generation would pass through onto ratepayers via changes in electricity rates Step 1. In the first run, simulate all policy variables relating to Capital Cost change and Production Cost change of the Electricity, Gas and Water Supply sector Step 2. Obtain from REMI results the percentage changes in Consumer Price of Electricity, Gas and Other Fuels (%P E ) Step 3. For each sector: 30 12/30/2014 % Production Cost = %P E TTTTT FFFF IIIIII OOOOOO

31 ES-1: Macroeconomic Analysis Results Differences from Baseline Level Variable Units NPV Total Employment Jobs N/A Gross Domestic Product Millions of Fixed (2013) Pesos Output Millions of Fixed (2013) Pesos Disposable Personal Income Millions of Fixed (2013) Pesos PCE-Price Index 2009=100 (Nation) N/A Population Number of People N/A Baseline Plus Addition of the Policy Variable Units Total Employment Jobs 1,381,970 1,502,904 1,622,263 1,764,426 Gross Domestic Product Millions of Fixed (2013) Pesos 765, ,159 1,078,100 1,287,320 Output Millions of Fixed (2013) Pesos 1,556,995 1,863,983 2,248,426 2,717,864 Disposable Personal Income Millions of Fixed (2013) Pesos 432, , , ,796 PCE-Price Index 2009=100 (Nation) Population Number of People 3,550,450 3,870,031 4,188,974 4,494,710 Percent Change from Baseline Level Variable Units Total Employment % % % % % Gross Domestic Product % % % % % Output % % % % % Disposable Personal Income % % % % % PCE-Price Index % % % % % Population % % % % % 31 12/30/2014

32 ES-1: Decomposition Analysis Results 32 12/30/2014

33 ES-1: Decomposition Analysis Results 33 12/30/2014

34 ES-1: Decomposition Analysis Results Total Employment (jobs) 34 12/30/ Investment in Constructing New Micro Hidro Plant Investment in Power Generation Equipment Avoided fuel cost in the power sector Increase Demand of Financial Sector Increased Capical Cost of the Power Sector Increased O&M Cost in the Power Sector Reduced Demand of NG Cost Pass-through to Ind and Comm Sectors Total GSP (million 2013 Pesos) NPV Investment in Constructing New Micro Hidro Plant Investment in Power Generation Equipment Avoided fuel cost in the power sector Increase Demand of Financial Sector Increased Capical Cost of the Power Sector Increased O&M Cost in the Power Sector Reduced Demand of NG Cost Pass-through to Ind and Comm Sectors Total

35 ES-3 Distributed Energy Supply for Building Policy Description: This policy addresses the use of distributed renewable energy supply system in public buildings in Baja California. The essence of this policy is to make an inventory of buildings owned by the State Government that could be equipped with panels to capture solar energy. The purpose of this policy is not only to reduce energy costs, with the consequent reduction of emissions, but to lead by example and position the State Government as a model to promote the use of renewable sources existing in the State Timing: Objective: 15 MW of new distributed generation from renewable sources by /30/2014

36 ES-3: Micro Analysis Results REMI Industry/Sector Category State Government State Government State Government State Government Direct Cost/Saving Category Initial Capital Cost Annualized Capital Cost Annualized Capital Cost Net Electricity Costs 36 12/30/2014 Fuel Cost Descriptor Solar PV Capital Solar PVapital O&M Cost Saving Macroeconomic Export Units MM$ MM$ MM$ MM$ 2014 $167 $13 $3 -$ $167 $27 $3 -$ $167 $40 $3 -$ $167 $54 $3 -$ $167 $67 $3 -$ $167 $80 $3 -$ $167 $94 $3 -$ $0 $94 $0 -$ $0 $94 $0 -$ $0 $94 $0 -$ $0 $94 $0 -$ $0 $94 $0 -$ $0 $94 $0 -$ $0 $94 $0 -$ $0 $94 $0 -$ $0 $94 $0 -$ $0 $94 $0 -$227

37 ES-3: Micro-Macro Mapping Table Linkage Microeconomic Quantification Results Increased Demand of Solar PV Panels Increased Government Spending on Solar PV (Offsetting other General Government Spending) Increased Demand of Inspection, Maintenance, and Repair of Solar PV and Devices Increased Government Spending on Solar PV O&M (Offsetting other General Government Spending) 5 Fuel Cost Savings 6 Reduced Demand of Electricity Policy Variable Selection in REMI Output and Demand Block Exogenous Final Demand (amount) for Electric and Optical Equipment sector Increase Output and Demand Block Government Spending (amount) Total Decrease Output and Demand Block Exogenous Final Demand (amount) for Renting of Machinery & Equipment and Other Business Activities sector Increase Output and Demand Block Government Spending (amount) Total Decrease Output and Demand Block Government Spending (amount) Total Increase Custom Industry Sale for Electric Power Generation, Transmission, and Distribution sector Increase Positive or Stimuli Positive Positive Positive 37 12/30/2014

38 Macro-Economic Analysis Example #3: Agriculture, Forestry and Other Land Use and Waste Management Sector (AFOLU & WM) 38 12/30/2014

39 AFOLU-1. Manure Management: Non-Dairy Livestock Policy Design: This policy seeks to optimize the management and use of livestock manure from swine of Production Unit (PU) of medium to large scale. To optimize manure management, anaerobic digestion (AD) will be promoted to obtain biogas (medium PU), electricity (large farms PU) and bio fertilizer (both farms). Goal: Take advantage of 50% of the manure from swine to obtain biogas, electricity and biofertilizer from Anaerobic Digestion process. 45% Medium Scale. Biogas 55% Large Scale. Electricity Timing: Begin implementation in 2015; achieve full goal by 2020; 39 12/30/2014 assume linear ramp-up toward the goal.

40 AFOLU-1: Micro Analysis Results REMI Industry/Sector Category Direct Cost/Saving Category Agriculture, Hunting, Forestry and Fishing Initial Capital Cost Agriculture, Hunting, Forestry and Fishing Annualized Capital Cost Agriculture, Hunting, Forestry and Fishing Operations & Maintenance (nonenergy) Agriculture, Hunting, Forestry and Fishing Net Electricity Costs Agriculture, Hunting, Forestry and Fishing Annualized Capital Cost Agriculture, Hunting, Forestry and Fishing Net LPG Costs Descriptor Initial Investments Annualized Capital O&M Costs Revenue: Value of Power Sold to Grid Revenue: Carbon Credit Value Avoided LPG Value Macroeconomic Export Units MM$ MM$ MM$ MM$ MM$ MM$ (0.023) (0.0018) (0.041) (0.046) (0.0036) (0.082) (0.069) (0.0054) (0.12) (0.092) (0.0071) (0.16) (0.11) (0.0089) (0.21) (0.14) (0.011) (0.25) (0.14) (0.011) (0.25) (0.14) (0.011) (0.25) (0.14) (0.011) (0.25) (0.14) (0.011) (0.25) (0.14) (0.011) (0.25) (0.14) (0.011) (0.25) (0.14) (0.011) (0.25) 40 12/30/ (0.14) (0.011) (0.25) (0.14) (0.011) (0.25) (0.14) (0.011) (0.25)

41 AFOLU-1: Additional Assumptions Policy implementation assumes all costs borne by the livestock production sector; no government cost share Carbon credit revenues are presumed to come from sources outside of the State Assume that the capital cost is 100% covered by debt financing 41 12/30/2014

42 AFOLU-1: Micro-Macro Mapping Table Linkage Microeconomic Quantification Results Upfront Mitigation Capital Investment on New Equipment for Anaerobic Digestion or Composting, and Electricity Generation from Methane Increased Capital Cost of the Livestock Production Sector Interest Payment of Financing Capital Investment Increased O&M Cost of the Livestock Production Sector Policy Variable Selection in REMI Output and Demand Block Exogenous Final Demand (amount) for Machinery Manufacturing sector Increase Compensation, Prices, and Costs Block Capital Cost (amount) of Agriculture, Hunting, Forestry and Fishing sector Increase Output and Demand Block Exogenous Final Demand (amount) for Financial Intermediation sector Increase Compensation, Prices, and Costs Block Production Cost (amount) of Agriculture, Hunting, Forestry and Fishing sector Increase Positive or Impact Positive Positive 42 12/30/2014

43 AFOLU-1: Micro-Macro Mapping Table (cont d) Linkage Microeconomic Quantification Results Reduced Electricity Cost of the Livestock Production Sector Reduced Demand from Electric Power Generation Sector Reduced LPG Cost of the Livestock Production Sector Reduced Demand from LPG Producing Sector Carbon Credit Value for the Livestock Production Sector Policy Variable Selection in REMI Compensation, Prices, and Costs Block Production Cost (amount) of Agriculture, Hunting, Forestry and Fishing sector Decrease Custom Industry Sale for Electric Power Generation, Transmission, and Distribution sector Decrease Compensation, Prices, and Costs Block Production Cost (amount) of Agriculture, Hunting, Forestry and Fishing sector Decrease Output and Demand Block Exogenous Final Demand (amount) for Coke, Refined Petroleum and Nuclear Fuel sector Decrease Compensation, Prices, and Costs Block Capital Cost (amount) of Agriculture, Hunting, Forestry and Fishing sector Decrease Positive or impact Positive Positive Positive 43 12/30/2014

44 AFOLU-1: Macroeconomic Analysis Results Differences from Baseline Level Variable Units NPV Total Employment Jobs N/A Gross Domestic Product Millions of Fixed (2013) Pesos Output Millions of Fixed (2013) Pesos Disposable Personal Income Millions of Fixed (2013) Pesos PCE-Price Index 2009=100 (Nation) N/A Population Number of People N/A Baseline Plus Addition of the Policy Variable Units Total Employment Jobs 1,381,870 1,502,933 1,622,364 1,764,479 Gross Domestic Product Millions of Fixed (2013) Pesos 765, ,161 1,078,152 1,287,351 Output Millions of Fixed (2013) Pesos 1,556,870 1,863,968 2,248,505 2,717,900 Disposable Personal Income Millions of Fixed (2013) Pesos 432, , , ,793 PCE-Price Index 2009=100 (Nation) Population Number of People 3,550,448 3,870,023 4,188,976 4,494,710 Percent Change from Baseline Level Variable Units Total Employment % % % % % Gross Domestic Product % % % % % Output % % % % % Disposable Personal Income % % % % % PCE-Price Index % % % % % Population % % % % % 44 12/30/2014

45 AFOLU-1: Decomposition Analysis Results 45 12/30/2014

46 AFOLU-1: Decomposition Analysis Results 46 12/30/2014

47 AFOLU-1: Decomposition Analysis Results Total Employment (jobs) Increased Demand of New Equipment Reduced Electricity Costs Positive_Reduced LPG Costs Carbon Credit Increased Demand of Financial Sector Increased Capital Cost of the Ag Sector Increased O&M Cost Reduced Demand Electricity Reduced Demand of LPG Total NPV GSP (million 2013 Pesos) Increased Demand of New Equipment Reduced Electricity Costs Positive_Reduced LPG Costs Carbon Credit Increased Demand of Financial Sector Increased Capital Cost of the Ag Sector Increased O&M Cost Reduced Demand Electricity Reduced Demand of LPG /30/2014 Total

48 AFOLU-2 Manure Management: Dairies Policy Design: This policy proposes to use dairy manure generated in the dairy farms (Production Units >500 heads) in Baja California to produce electricity and biofertilizer. To optimize manure management it is recommended to install anaerobic digesters and motors-generator, which will be used to process the manure through anaerobic digestion and to produce electricity, respectively. Goals: Take advantage of 50% of the manure from dairy cattle to obtain electricity and biofertilizer from Anaerobic Digestion process. Timing: Begin implementation in Achieve the full goal by Assume linear ramp-up between 2015 and /30/2014

49 AFOLU-2: Micro Analysis Results REMI Industry/Sector Category Direct Cost/Saving Category Descriptor State Government Initial Capital Cost State Government Grant Agriculture, Hunting, Forestry and Fishing Initial Capital Cost Dairy Capital Costs Share Agriculture, Hunting, Forestry and Fishing Annualized Capital Cost Annualized Capital Cost Agriculture, Hunting, Forestry and Fishing Operations & Maintenance (nonenergy) O&M Costs Agriculture, Hunting, Forestry and Fishing Net Electricity Costs Avoided Retail Electricity Costs Agriculture, Hunting, Forestry and Fishing Other Costs/Savings Revenue: Carbon Credit Value Macroeconomic Export Units MM$ MM$ MM$ MM$ MM$ MM$ 2014 $0.0 $0.0 $0.0 $0.0 $0.0 $ $6.0 $6.0 $0.6 $0.5 ($2.3) ($0.4) 2016 $12 $12.1 $1.7 $0.9 ($4.6) ($0.7) 2017 $18 $18.1 $3.5 $1.4 ($6.9) ($1.1) 2018 $24 $24.2 $5.8 $1.8 ($9.2) ($1.5) 2019 $30 $30.2 $8.7 $2.3 ($12) ($1.8) 2020 $36 $36.3 $12.2 $2.7 ($14) ($2.2) 2021 $0.0 $0.0 $12.2 $2.7 ($14) ($2.2) 2022 $0.0 $0.0 $12.2 $2.7 ($14) ($2.2) 2023 $0.0 $0.0 $12.2 $2.7 ($14) ($2.2) 2024 $0.0 $0.0 $12.2 $2.7 ($14) ($2.2) 2025 $0.0 $0.0 $12.2 $2.7 ($14) ($2.2) 2026 $0.0 $0.0 $12.2 $2.7 ($14) ($2.2) 2027 $0.0 $0.0 $12.2 $2.7 ($14) ($2.2) 2028 $0.0 $0.0 $12.2 $2.7 ($14) ($2.2) 49 12/30/ $0.0 $0.0 $12.2 $2.7 ($14) ($2.2) 2030 $0.0 $0.0 $11.7 $2.7 ($14) ($2.2)

50 AFOLU-2: Additional Assumptions 50% State government grant is applied to initial investment costs. All other costs and savings are assumed to accrue to the dairy sector. Carbon credit revenues are presumed to come from sources outside of the State The capital cost of the dairy sector is assumed to be 100% covered through debt financing 50 12/30/2014

51 AFOLU-2: Micro-Macro Mapping Table Linkage Microeconomic Quantification Results Upfront Mitigation Capital Investment on New Equipment for Anaerobic Digestion and Electricity Generation from Methane Increased Capital Cost of the Dairy Sector Increased State Government Subsidies (Offsetting general government spending) Interest Payment of Financing Capital Investment Policy Variable Selection in REMI Output and Demand Block Exogenous Final Demand (amount) for Machinery Manufacturing sector Increase Compensation, Prices, and Costs Block Capital Cost (amount) of Agriculture, Hunting, Forestry and Fishing sector Increase Output and Demand Block Government Spending (amount) Total Decrease Output and Demand Block Exogenous Final Demand (amount) for Financial Intermediation sector Increase Positive or Stimuli Positive Positive 51 12/30/2014

52 AFOLU-2: Micro-Macro Mapping Table (cont d) Linkage Microeconomic Quantification Results Increased O&M Cost of the Dairy Sector Reduced Electricity Cost of the Dairy Sector Reduced Demand from Electric Power Generation Sector Carbon Credit Value for the Livestock Production Sector Policy Variable Selection in REMI Compensation, Prices, and Costs Block Production Cost (amount) of Agriculture, Hunting, Forestry and Fishing sector Increase Compensation, Prices, and Costs Block Production Cost (amount) of Agriculture, Hunting, Forestry and Fishing sector Decrease Custom Industry Sale for Electric Power Generation, Transmission, and Distribution sector Decrease Compensation, Prices, and Costs Block Capital Cost (amount) of Agriculture, Hunting, Forestry and Fishing sector Decrease Positive or Stimuli Positive Positive 52 12/30/2014

53 Macro-Economic Analysis Example #4: Transportation Sector (T) 53 12/30/2014

54 T-3. Onroad Fleet Efficiency Policy Design: This policy is designed to reduce GHG emissions from low-efficient motor vehicles that are in operation in the State of Baja California. Objective: The objective of the policy is to improve the fuel efficiency of the vehicle fleet by accelerating the retirement of vehicles older than 22 years. Program Period: Coverage: households 54 12/30/2014

55 T-3: Micro Analysis Results 55 12/30/2014 Cash Subsidies of Vehicle Scrappage Net Fuel Costs from Vehicle Scrappage Year MM $ MM$ Sum

56 T-3: Additional Assumptions Subsidy per vehicle is assumed to be the same as in California Case for Clunkers Program, which is $1,000 per vehicle. All funding assumed to come from state government For the cash the government paid to the consumers for their retired old vehicles, we assume that 48% of the cash will be spent on transport purposes, and the rest 52% will be distributed among all consumption goods and services 56 12/30/2014

57 T-3: Micro-Macro Mapping Table Linkage 1 2 Microeconomic Quantification Results Spending of Cash Received from old Vehicle Retirement Offset General Government Spending 3 Fuel Cost Savings 4 Reduced Demand of Gasoline Policy Variable Selection in REMI Output and Demand Block Consumer Spending Transport Increase Output and Demand Block Consumption Reallocation All Consumption Categories Increase Output and Demand Block Government Spending (amount) Total Decrease Output and Demand Block Consumption Reallocation All Consumption Categories Increase Output and Demand Block Exogenous Final Demand (amount) for Coke, Refined Petroleum and Nuclear Fuel sector Decrease Positive or Stimuli Positive Positive 57 12/30/2014

58 T-3: Macroeconomic Analysis Results Differences from Baseline Level Variable Units NPV Total Employment Jobs N/A Gross Domestic Product Millions of Fixed (2013) Pesos Output Millions of Fixed (2013) Pesos Disposable Personal Income Millions of Fixed (2013) Pesos PCE-Price Index 2009=100 (Nation) N/A Population Number of People N/A Baseline Plus Addition of the Policy Variable Units Total Employment Jobs 1,381,819 1,502,896 1,622,337 1,764,453 Gross Domestic Product Millions of Fixed (2013) Pesos 765, ,148 1,078,144 1,287,346 Output Millions of Fixed (2013) Pesos 1,556,839 1,863,952 2,248,501 2,717,899 Disposable Personal Income Millions of Fixed (2013) Pesos 431, , , ,765 PCE-Price Index 2009=100 (Nation) Population Number of People 3,550,448 3,870,021 4,188,970 4,494,711 Percent Change from Baseline Level Variable Units Total Employment % % % % % Gross Domestic Product % % % % % Output % % % % % Disposable Personal Income % % % % % PCE-Price Index % % % % % Population % % % % % 58 12/30/2014

59 T-1: Decomposition Analysis Results 59 12/30/2014

60 T-3: Decomposition Analysis Results 60 12/30/2014

61 T-3: Decomposition Analysis Results Total Employment (jobs) Power Sector Fuel Cost Decrease Reduced Electricity Imports Construction Investment Equipment Investment Total GSP (million 2013 Pesos) NPV Power Sector Fuel Cost Decrease Reduced Electricity Imports Construction Investment Equipment Investment Total /30/2014

62 TLU-6. Energy Efficient Government Fleet Policy Design: improve fuel efficiency of state vehicle fleet Objective: require 40% of compact vehicle new purchases to be hybrid-electric vehicles Program Period: Coverage: government vehicle fleet 62 12/30/2014

63 T-6: Micro Analysis Results 63 12/30/2014 Capital Costs Change of Vehicle Other Net O&M Costs - Fuel Cost Year MM$ MM$ Sum

64 T-6: Micro-Macro Mapping Table Linkage 1 2 Microeconomic Quantification Results Increased Demand of Hybrid-Electric Vehicles Increased Government Spending on Hybrid EVs (Offsetting other General Government Spending) 3 Fuel Cost Savings Policy Variable Selection in REMI Output and Demand Block Exogenous Final Demand (amount) for Transport Equipment sector Increase Output and Demand Block Government Spending (amount) Total Decrease Output and Demand Block Government Spending (amount) Total Increase Positive or Stimuli Positive Positive 4 Reduced Demand of Gasoline Output and Demand Block Exogenous Final Demand (amount) for Coke, Refined Petroleum and Nuclear Fuel sector Increase 64 12/30/2014

65 Summation Total and Simultaneous 65 12/30/2014 CCS, Inc Total of Macroeconomic Impacts Summation Total Impacts: simple summation of the impacts of all the individual options. Simultaneous Total Impacts: analyze all options in the REMI model in one simulation. Results can be different between the summation total and the simultaneous total. The difference between the two can be explained by the non-linearity in the REMI model and synergies in economic actions it captures.

66 Simultaneous Simulation of All Four Policy Options Differences from Baseline Level Variable Units NPV Total Employment Jobs N/A Gross Domestic Product Millions of Fixed (2013) Pesos Output Millions of Fixed (2013) Pesos ,064 Disposable Personal Income Millions of Fixed (2013) Pesos PCE-Price Index 2009=100 (Nation) N/A Population Number of People N/A Baseline Plus Addition of the Policy Variable Units Total Employment Jobs 1,382,264 1,503,175 1,622,193 1,764,300 Gross Domestic Product Millions of Fixed (2013) Pesos 765, ,149 1,077,891 1,287,012 Output Millions of Fixed (2013) Pesos 1,557,191 1,863,898 2,247,955 2,717,236 Disposable Personal Income Millions of Fixed (2013) Pesos 432, , , ,802 PCE-Price Index 2009=100 (Nation) Population Number of People 3,550,463 3,870,081 4,189,034 4,494,711 Percent Change from Baseline Level Variable Units Total Employment % % % % % Gross Domestic Product % % % % % Output % % % % % Disposable Personal Income % % % % % 66 12/30/2014 PCE-Price Index % % % % % Population % % % % %

67 Summary Macro Impacts Gross Domestic Product (Millions of 2013 Pesos) Scenario NPV ES-1 $62 -$2 -$52 -$32 -$134 ES-2 ES-3 Subtotal - ES $62 -$2 -$52 -$32 -$134 RCI1 RCI2 RCI3 $125 $3 -$202 -$304 -$624 Subtotal - RCI $125 $3 -$202 -$304 -$624 AFOLU-1 $0 $0 -$1 -$1 -$3 AFOLU-2 AFOLU-3 Subtotal - AFOLU $0 $0 -$1 -$1 -$3 WM-1 WM-2 WM-3 Subtotal - WM $0 $0 $0 $0 $0 T-1 T-2 T-3 -$22 -$13 -$8 -$6 -$129 Subtotal - T -$22 -$13 -$8 -$6 -$129 Summation Total $164 -$13 -$263 -$342 -$ /30/2014 Simultaneous Total $165 -$12 -$261 -$340 -$885

68 Summary Macro Impacts Employment (number of jobs) Scenario ES ES-2 ES-3 Subtotal - ES RCI1 RCI2 RCI Subtotal - RCI AFOLU AFOLU-2 AFOLU-3 Subtotal - AFOLU WM-1 WM-2 WM-3 Subtotal - WM T-1 T-2 T Subtotal - T /30/2014 Summation Total Simultaneous Total

69 Discussion on Next Steps & Responsibilities for CCS and PE to Conduct Policy Option Macroeconomic Impact Analyses 69 12/30/2014

70 Proposed Schedule for Macro Analysis June 6 Complete and finalize micro quantification June 16 Review micro direct cost/saving results, and determine additional assumptions to be used in macro analysis for each option June 30 Establish micro-macro mapping table for each option and complete input preparation for REMI simulation July 11 Complete macroeconomic impact analysis of individual policy options and all options in the Climate Action Plan as a whole in the REMI Model August 8 Preparation of draft report for review and comment August 31 Complete final report 70 12/30/2014