Meeting Saudi Arabia s Carbon Mitigation Goals: Some Preliminary Findings David Wogan

Transcription

1 Meeting Saudi Arabia s Carbon Mitigation Goals: Some Preliminary Findings David Wogan

2 The Strategic Policy Challenge Paris Accord took a decentralised approach to drive global collective action But the sum of nationally determined contributions to date is insufficient to meet currently agreed global goals A more practical policy approach is needed to help close the gap 2

3 Practical Climate Change Policies Research Project KAPSARC and IEEJ are undertaking a joint research project to examine more practical approaches to climate change policy Key elements of the project include: Developing efficient global pathways that incorporate mitigation and adaptation Examining nationally optimal approaches that reflect local starting points and how they might be influenced by stakeholder interests 3

4 Project Methodology Step 1 Step 2 Step 3 Step 4 Calculate efficient global pathways for meeting agreed global emission outcomes/targets Establish emissions envelopes at the country (or regional) level Identify and evaluate potential country-specific policies and assess impacts Explore how stakeholder interests may influence the choice of polices and their implementation at a country-level 4

5 KAPSARC s Saudi Arabian Carbon Mitigation Research Project Objective To identify economically optimal policies and pathways to meet Saudi Arabia s NDC and assess their impacts; and Explore how internal stakeholder interests may influence the choice of policies and their implementation Study methodology Quantitatively assess least cost pathways for Saudi Arabia to achieve its NDC under the Paris Accord Policy options Carbon pricing Capital subsidies Industrial input fuel price deregulation 5

6 Analytical Framework Analysis uses the KAPSARC Energy Model of Saudi Arabia (KEM) Partial-equilibrium model for six integrated industrial sectors KEM seeks to minimizes costs associated with meeting demand from these sectors Analysis focuses on the power and water sectors (including interaction of other sectors) KEM sectors Power Water Upstream Petrochemicals Refining Cement GHG Emissions 6

7 Saudi Arabian Energy Sector Overview Primary energy supply: Mtoe Oil production: Mtoe Petroleum exports: Mtoe Final energy consumption: Mtoe Electricity: TWh Electricity sector operation and development is greatly influenced by the water sector (desalination) Population: ~ 31 million (215) Carbon emissions: MT CO2e Source: IEA 216 7

8 Saudi Arabia Drives Regional Energy & Carbon Emissions Growth Sources: IEA and Enerdata 8

9 Saudi Arabia s Carbon Mitigation Goals Nationally Determined Contribution target of 13 million metric tons of CO 2 equivalent by 23 1% 9% Carbon Emissions by Sector (215) Waste Agriculture Other Greenhouse gas reductions viewed as co-benefits of economic diversification activities Mitigation measures include: energy efficiency renewable energy carbon capture & utilization/storage increased use of natural gas methane recovery 8% 7% 6% 5% 4% 3% 2% 1% % Transport Manufacturing Industry Power & Water 9

10 Carbon Pricing: Carbon Emissions CO 2 emissions (million tons per annum) Reference NDC $5/ton $25/ton $35/ton $5/ton 1

11 Carbon Pricing: Electricity Production Electricity production (TWh) Steam turbine Gas turbine CCGT PV CSP Onshore wind Desalination 11

12 Carbon Pricing: Capital Investment 25 Cumulative investment (billion USD) Reference $5/ton $25/ton $35/ton $5/ton Steam turbine Gas turbine CCGT Gas turbine retrofit PV CSP Onshore wind 12

13 Carbon Pricing: Fuel Mix Fuel consumption (quad BTU) HFO Diesel Methane Crude oil 13

14 Capital Subsidies: Carbon Emissions CO 2 emissions (million tons per annum) Reference NDC 5% 15% 25% 14

15 Capital Subsidies: Electricity Production Electricity production (TWh) Reference Reference 5% 15% 25% Reference 5% 15% 25% Steam Gas turbine CCGT PV CSP Onshore wind Cogeneration 15

16 Capital Subsidies: Capital Investment 4 Cumulative investment (billion USD) Reference 5% 15% 25% Steam turbine Gas turbine CCGT Gas turbine retrofit PV CSP Onshore wind 16

17 Capital Subsidies: Fuel Mix Fuel consumption (trillion BTU) Reference Reference 5% 15% 25% Reference 5% 15% 25% HFO Diesel Methane Crude oil 17

18 Industrial Input Fuel Price Reform: Carbon Emissions CO 2 emissions (million tons per annum) Reference NDC Immediate 5 year 8 year 18

19 Industrial Input Fuel Price Reform: Electricity Production Electricity production (TWh) Reference Reference Immediate 5 year 8 year Reference Immediate 5 year 8 year Steam turbine Gas turbine CCGT PV CSP Wind Desalination 19

20 Industrial Input Fuel Price Reform: Capital Investment 4 Cumulative investment (billion USD) Reference Immediate 5 year 8 year Steam turbine Gas turbine CCGT Gas turbine retrofit PV CSP Onshore wind 2

21 Industrial Input Fuel Price Reform: Fuel Mix Fuel consumption (quad BTU) Reference Reference Immediate 5 year 8 year Reference Immediate 5 year 8 year HFO Diesel Methane Crude oil 21

22 Some Preliminary Comparative Results CO 2 emissions (million tons per annum) Reference NDC $35/ton 8-year Reform 5% Subsidy 22

23 Some Preliminary Comparative Results 4 Cumulative investment (billion USD) Reference $35/ton 8-year Reform 5% Subsidy Steam turbine Gas turbine CCGT Gas turbine retrofit PV CSP Onshore wind 23

24 Summary of Preliminary Analysis A country-specific approach accounts for the characteristics of Saudi Arabia s industrial sectors and its role as a major energy producer and consumer Direct and indirect CO 2 mitigation policies can drive significant emissions reductions The effectiveness of each policy can be measured by many metrics CO 2 emissions Transition periods Investment costs Broader economic goals Unintended consequences 24

25 Anticipated 217 Milestones Research: Incorporate bargaining & macroeconomic analysis Expand study framework to examine China, India and the Gulf Cooperation Council states Publications: Potential practical carbon policy options & pathways for Saudi Arabia Potential practical carbon policy options & pathways for Japan Optimal global emission pathways including mitigation & adaptation 25

26 Meeting Saudi Arabia s Carbon Mitigation Goals: Some Preliminary Findings David Wogan

27 Supporting Material David Wogan

28 Carbon price ($35/ton): relative cost of fuel 6 5 Relative value (USD/mmBTU) $1.86/mmBTU $2.61/mmBTU Methane (USD/mmBTU) Methane + $35/ton Crude (USD/mmBTU) Crude + $35/ton 28

29 Carbon price ($35/ton): fuel consumption 3 Fuel consumption (Trillion BTU) HFO diesel methane Arablight 29

30 Carbon price ($35/ton): electricity supply 4 35 Electricity productoin (TWh) Steam Gas turbine Combined cycle turbine PV CSP Wind Cogeneration 3

31 Carbon price ($35/ton): capacity 9 8 CSP available 7 First PV installed 6 Capacity (GW) Planned builds: Steam & CCGT Steam GT CCGT PV CSP 31

32 Carbon price ($5/ton): relative cost of fuel 6 5 Relative value (USD/mmBTU) $2.65/mmBTU $3.72/mmBTU Methane (USD/mmBTU) Methane + $5/ton Crude (USD/mmBTU) Crude + $5/ton 32

33 Carbon price ($5/ton): fuel consumption Fuel consumption (trillion BTU) HFO methane Arablight 33

34 Carbon price ($5/ton): electricity supply 25 Electricity production (TWh) Steam turbine Gas turbine CCGT PV CSP Desal 34

35 Carbon price ($5/ton): capacity Cumulative capacity (GW) First PV installed Planned builds: Steam & CCGT CSP available ST GT CCGT PV CSP Cogen 35

36 Capital subsidies (5%): relative cost of fuel 8 7 Marginal value (USD/mmBTU) Methane Crude 36

37 Capital subsidies (5%): fuel consumption Fuel consumption (trillion BTU) HFO Methane Arablight 37

38 Capital subsidies (5%): electricity supply 25 Electricity production (TWh) Steam turbine Gas turbine CCGT PV CSP Wind Desal 38

39 Capital subsidies (5%): capacity 9 Cumulative capacity (GW) First PV installed Planned builds: Steam & CCGT CSP available Steam GT CCGT PV CSP 39

40 Capital subsidies (25%): relative cost of fuel 8 7 Marginal value (USD/mmBTU) Methane Crude 4

41 Capital subsidies (25%): fuel consumption Fuel consumption (trillion BTU) HFO Methane Arablight 41

42 Capital subsidies (25%): electricity supply 3 25 Cumulative capacity (GW) Steam turbine Gas turbine CCGT PV CSP Desal 42

43 Capital subsidies (25%): capacity 9 Cumulative capacity (GW) First PV installed Planned builds: Steam & CCGT CSP available Steam GT CCGT PV CSP 43

44 Immediate reform: relative cost of fuel Marginal value (USD/mmBTU) International price of crude oil Marginal value of methane Methane Crude 44

45 Immediate reform: fuel consumption Fuel consumption (trillion BTU) HFO diesel methane Arablight 45

46 Immediate reform: electricity supply 25 Electricity production (TWh) Steam turbine Gas turbine CCGT PV CSP Desal 46

47 Immediate reform: capacity Cumulative capacity (GW) ST GT CCGT PV CSP Cogen 47

48 8-year reform: relative cost of fuel 12 Relative cost of fuels (USD/mmBTU) International price of crude oil Marginal value of methane Methane Crude 48

49 8-year reform: fuel consumption Fuel consumption (trillion BTU) HFO Methane Crude oil 49

50 8-year reform: electricity supply 25 Electricity production (TWh) Steam turbine Gas turbine CCGT PV CSP Wind Desal 5

51 8-year reform: capacity Cumulative capacity (GW) ST GT CCGT PV CSP Cogen Contact: report@tky.ieej.or.jp 51