January 18, 2012 CCS-REMI SUBNATIONAL CLIMATE AND ENERGY POLICIES, MARKETS

Transcription

1 January 18, 2012 CCS-REMI SUBNATIONAL CLIMATE AND ENERGY POLICIES, MARKETS

2 Tom Peterson, President and CEO, CCS OVERVIEW 2 1/18/2012

3 Premiere Catalyst for Climate, Energy and Economic Action Nonpartisan, Non Advocacy, 501c3 Partnership Organization HQs in Washington, DC; 30+ team members across US Program and project partners in US, Canada, Mexico, China National leader on policy development, analysis and consensus building since 2004 U.S. projects with 40+ states, 3 regions, 2,000+ stakeholders Policy facilitation, design, analysis, implementation, financing GHG targets, policy actions, instruments, measurements, design Energy, industry, transportation, waste, agriculture, forestry sectors Energy and investment markets Funded by private foundations and donors, government agencies The Center for Climate Strategies (CCS) 3 1/18/2012

4 REMI Analysis State Climate & Energy Plans Florida Pennsylvania Michigan Wisconsin New York Maryland Southern California CCS State Plans Pre-2004 CCS Plans CCS State REMI Analyses China Provinces Mexico Border States 4 1/18/2012

5 CCS REMI Climate and Energy Policy Analysis Applied since 2008 in five states and at the national level; projects underway in US states and regions, China, Mexico CCS is the national leader in innovative approaches to simulate macro impacts and related metrics of economic, energy and climate change actions using the REMI Model CCS REMI modeling innovations have been widely published in peer reviewed journals: Rose, A. and Wei, D Macroeconomic Impacts of the Florida Energy and Climate Change Action Plan, Climate Policy 12(1): Rose, A., Wei, D., and Dormady, N Regional Macroeconomic Assessment of the Pennsylvania Climate Action Plan, Regional Science Policy and Practice 3(4): Rose, A. and Dormady, N A Meta-Analysis of the Economic Impacts of Climate Change Policy in the United States, The Energy Journal 32(2): /18/2012

6 Stakeholder-Driven Decisions Specific Policy Choices Which objectives Which policy options How they are designed How they are implemented How are they financed Specific Analysis Choices Which metrics Which data sources Which key assumptions Which analytical methods How to address uncertainty 6 1/18/2012

7 Context Climate change not a voter priority It is, however, connected to priorities - Integration of economy, energy, environment - Jobs, markets, security, investment resonate Past progress is underappreciated Range of future options not well understood New framing needed 7 1/18/2012

8 AEO Projected CO2e Emissions by Projection Year 8500 Projected Emissions MMtCO projection for 2020 is 69% lower than 2005 projection relative to US 2020 target AEO2005 AEO2006 AEO2007 ER AEO2008 AEO2008 ER AEO2009 AEO2009 AEO2010 AEO emissions 1990 emissions 17% below Year Source: U.S. EIA Annual Energy Outlook for listed years; ER = early release; MMtCO2e = million metric tons carbon dioxide equivalent; AEO= Annual Energy Outlook, US Energy Information Administration Data and analysis from the CCS Security and Investment Project, /18/2012

9 AEO projected CO2 reductions estimated by economy and major policy measure 2007 vs AEO2007 Economy NG fuel switching Projected emissions MMtCO VMT CAFE Building codes & ARRA efficiency measures State EEPS State RPS Non-RPS renewables Additional policy & voluntary actions AEO Year Source: see supplement; MMtCO2e = million metric tons carbon dioxide equivalent; VMT=Vehicle Miles Traveled; NG=Natural Gas; CAFE=Corporate Average Fuel Economy; EEPS=Energy Efficiency Performance Standard; RPS=Renewable Portfolio Standard; AEO= Annual Energy Outlook (US Energy Information Administration). Data and analysis from the CCS Security and Investment Project, /18/2012

10 Priorities? Environment Energy Economy 10 1/18/2012

11 Dr. Adam Rose and Dr. Dan Wei, CCS and USC CCS MACROECONOMIC ANALYSIS 11 1/18/2012

12 Objectives and Issues Evaluate the total (direct & indirect) impacts of energy and environmental policies Micro analyses of costs and benefits only pertain to direct impacts at the site of mitigation option application Increases and decreases in direct economic activity generate ripple effects throughout the economy Macroeconomic impact is a multiple of the original direct onsite impact Price decreases and increases can also stimulate or mute the macro effects 12 1/18/2012

13 Micro/Macro Analysis Linkages Technical Work Group Analysis Microeconomic Analysis Results Macroeconomic Modeling Macroeconomic Analysis Results Energy Supply Aggregate Impacts: Climate Action Council Residential, Commercial, & Industrial Transportation & Land Use For Individual Options: GHG Reductions Costs Savings Cost-Effectiveness (intra-sectoral & inter-sectoral overlaps eliminated) Mapping of Micro Analysis Results to REMI Inputs REMI PI + Model GSP Employment Personal Income Sectoral Impacts: Output Employment Price Market Share Distributional Impacts: Agriculture, Forestry & Waste Management Income Impacts across Different Income Groups 13 1/18/2012

14 Macro Analysis Steps Test & reconcile macroeconomic model to independent forecast Obtain data on mitigation options from microeconomic analysis Make comprehensive linkage from micro analysis output to macro analysis input Simulate impacts of each individual policy option Simulate impacts of all policy options simultaneously Analyze economy-wide aggregate results Evaluate sectoral & distributional impacts 14 1/18/2012

15 Dr. Adam Rose and Dr. Dan Wei, CCS and USC MICHIGAN EXAMPLE 15 1/18/2012

16 Michigan GHG Mitigation Policy Options GHG Reductions (MMtCO 2 e) 2025 Cumulative Emissions Reductions (MMtCO2e, ) NPV ($million) Cost Effectiveness ($/tco 2 e) Energy Supply (ES) $5, $29.16 ES Option #1: Renewable Portfolio Standard $4, $41.14 ES Option #2: Nuclear $1, $21.63 ES Option #3: Coal Plant Efficiency Improvements and Repowering $95.00 $2.67 ES Option #4: Combined Heat and Power $35.40 $4.44 Residential, Commercial, and Industrial (RCI) $14, $27.90 RCI Option #1: Demand Side Management Programs $6, $27.39 RCI Option #2: High Performance Buildings (private and public sector) $5, $27.39 RCI Option #3: Building Codes $2, $33.76 Transportation and Land Use (TLU) $ $5.64 TLU Option #1: Anti-Idling Technologies and Practices $ $47.92 TLU Option #2: Vehicle Purchase Incentives, including rebates $ $1, TLU Option #3: Mode Shift from Truck to Rail $ $93.12 TLU Option #4: Renewable Fuel Standard (biofuels goals) $ $4.15 TLU Option #5: Transit $ $ TLU Option #6: Smart Growth/Land Us $ $92.84 Agriculture, Forestry and Waste Management (AFW) $8, $28.77 AFW Option #1: Soil Carbon Management $ $13.47 AFW Option #2: Nutrient Management $ $21.91 AFW Option #3: Livestock Manure - Anaerobic Digestion and Methane Utilization $2.52 $1.72 AFW Option #4: MSW Landfill Gas Management $ $2.22 AFW Option #5: Enhanced Recycling of Municipal Solid Waste $3, $16.49 AFW Option #6: Reforestation / Afforestation $ $45.44 AFW Option #7: Urban Forestry $4, $ TOTAL , $ $ /18/2012

17 Michigan Cost Curve $200 Economy-wide Stepwise Marginal Cost Curve of Michigan, 2025 (Center for Climate Strategies, 2010) Marginal Cost ($/tco2e) $150 $100 $50 $0 -$50 -$100 -$150 RCI-3 TLU-1 TLU-6 AFW-4 ES-3 AFW-3 AFW-5 ES-4 TLU-4 AFW-1 RCI-1 RCI-2 AFW-2 All Sector TLU ES AFW RCI ES-2 Percentage Reduction of 2025 BAU GHG Emissions ES-1 TLU-5 TLU-3 AFW-6 AFW /18/2012

18 Macroeconomic Impacts in Michigan 15 out of 20 policy options have positive macro impacts Aggregate impacts: $8.35B GSP gains in 2025 (or 2.3% increase) $25.26B NPV of GSP gains between thousand new jobs by 2025 (or 2.7% increase) Most influential options: Demand-side Mgt accounts for $5.1B NPV of GSP gains Urban Forestry results in -$2.53B NPV of GSP decrease 18 1/18/2012

19 Sectoral Impacts in Michigan NPV of Sectoral GSP Impacts (in billion 2000$) Top 5 Positively Affected Sectors Top 5 Negatively Affected Sectors Real estate $4.71 Utilities -$11.08 Monetary authorities $4.37 Petroleum, coal product manufacturing -$0.25 Health care services $3.47 Pipeline transportation -$0.14 Retail trade $2.81 Construction -$0.14 Professional & technical services $1.87 Rail transportation -$ /18/2012

20 Macroeconomic Impacts in Michigan (GSP Impacts, billions 2000$) Scenario NPV AFW1 Soil Carbon Management AFW2 Nutrient Management AFW3 Livestock Manure - Anaerobic Digestion and Methane Utilization AFW4 MSW Landfill Gas Management AFW5 Enhanced Recycling of Municipal Solid Waste AFW6 Reforestation / Afforestation AFW7 Urban Forestry Subtotal: AFW TLU1 Anti-Idling Technologies and Practices TLU2 Vehicle Purchase Incentives, including rebates TLU3 Mode Shift from Truck to Rail TLU4 Renewable Fuel Standard (biofuels goals) TLU5 Transit TLU6 Smart Growth/Land Use Subtotal: TLU RCI1 Demand Side Management Programs RCI2 High Performance Buildings RCI3 Building Codes Subtotal: RCI ES1 Renewable Portfolio Standard ES2 Nuclear ES3 Coal Plant Efficiency Improvements and Repowering ES4 Combined heat and power Subtotal: ES Summation Total Simultaneous Total /18/2012

21 Macroeconomic Impacts in Michigan (Employment Impacts, thousands) Scenario AFW1 Soil Carbon Management AFW2 Nutrient Management AFW3 Livestock Manure - Anaerobic Digestion and Methane Utilization AFW4 MSW Landfill Gas Management AFW5 Enhanced Recycling of Municipal Solid Waste AFW6 Reforestation / Afforestation AFW7 Urban Forestry Subtotal: AFW TLU1 Anti-Idling Technologies and Practices TLU2 Vehicle Purchase Incentives, including rebates TLU3 Mode Shift from Truck to Rail TLU4 Renewable Fuel Standard (biofuels goals) TLU5 Transit TLU6 Smart Growth/Land Use Subtotal: TLU RCI1 Demand Side Management Programs RCI2 High Performance Buildings RCI3 Building Codes Subtotal: RCI ES1 Renewable Portfolio Standard ES2 Nuclear ES3 Coal Plant Efficiency Improvements and Repowering ES4 Combined heat and power Subtotal: ES Summation Total Simultaneous Total /18/2012

22 Dr. Adam Rose and Dr. Dan Wei, CCS and USC IMPACTS OF COMPREHENSIVE CLIMATE AND ENERGY POLICY OPTIONS ON U.S. ECONOMY 22 1/18/2012

23 Objective of the Study Examine the likely impacts of 23 major sector-based mitigation policies and measures at the national level scaled up from climate action plans developed in 16 states 23 1/18/2012

24 Methodology Microeconomic Impact Analysis ES, RCI & AFW Options: modeled extrapolation from results in 16 state action plans using 37 sector-specific characteristics TLU Policy Options: VISION Model and Sector-Specific Spreadsheet Model Macroeconomic Impact Analysis REMI PI+ Model 24 1/18/2012

25 Microeconomic Impact Results The 23 options in aggregate can: Reduce 3.24 billion tons of GHG emissions in 2020 Achieve over $5 billion net direct economic savings in 2020 Yield an average net savings of $1.57 per ton of GHG emissions avoided 25 1/18/2012

26 GHG Mitigation Cost Curve 2020 Marginal Cost Curve of U.S., Stakeholder Implementation (Center for Climate Strategies, 2010) $60 AFW-5 AFW-7 ES-4 $40 $20 ES-1 ES-3 TLU-2 AFW-3 AFW-4 AFW-2 TLU-4 $0 Marginal Cost ($/tco2e) ES-2 AFW-8 TLU-3 AFW-6 RCI-5 AFW-1 -$20 -$40 -$60 RCI-4 -$80 RCI-2 RCI-1 RCI-3 TLU-5 TLU-1 -$100 -$120 All Sector TLU-6 TLU ES AFW RCI -$140 -$ Percentage Reduction of 2020 BAU GHG Emissions 26 1/18/

27 Macroeconomic Impact Results GDP Impacts in 2020 (billion 2007$) Scenario NPV ES-1 Renewable Portfolio Standard $0.25 $2.27 $5.32 $5.35 $35.52 ES-2 Nuclear $0.00 $0.07 $0.46 $6.85 $8.14 ES-3 Carbon Capture and Storage or Reuse (CCSR) $0.00 $0.00 $2.80 $4.47 $16.57 ES-4 Coal Plant Efficiency Improvements $0.01 $0.02 $0.04 $0.48 $0.86 Subtotal Energy Supply (ES) $0.24 $2.32 $8.57 $16.19 $59.38 RCI-1 Demand Side Management Programs $4.82 $16.17 $36.19 $90.05 $ RCI-2 High Performance Buildings $0.84 $1.73 $4.72 $12.12 $40.14 RCI-3 Appliance standards $0.02 $0.04 $0.12 $0.05 $0.43 RCI-4 Building Codes $0.89 $2.68 $6.06 $13.65 $49.05 RCI-5 Combined Heat and Power $3.79 $8.57 $14.08 $21.17 $ Subtotal Residential Commercial and Industrial (RCI) $2.79 $11.99 $32.77 $94.68 $ AFW-1 Crop Production Practices $0.08 $1.05 $2.28 $4.55 $17.50 AFW-2 Livestock Manure $0.01 $0.02 $0.07 $0.17 $0.58 AFW-3 Forest Retention $0.06 $0.31 $0.57 $0.48 $3.45 AFW-4 Reforestation/Afforestation $5.92 $7.67 $9.23 $11.07 $73.47 AFW-5 Urban Forestry $1.32 $4.75 $5.95 $5.44 $40.12 AFW-6 Source Reduction $0.04 $0.62 $1.45 $2.53 $10.37 AFW-7 Enhanced Recycling of MSW $0.88 $3.49 $7.94 $10.38 $51.61 AFW-8 MSW Landfill Gas Management $1.02 $1.57 $2.61 $10.44 $26.47 Subtotal Agriculture, Forestry & Waste (AFW) $2.52 $4.09 $11.51 $22.58 $75.46 TLU-1 Vehicle Purchase Incentives $0.02 $0.62 $3.78 $16.51 $39.64 TLU-2 Renewable Fuel Standard $0.02 $0.27 $2.38 $4.78 $17.08 TLU-3 Smart Growth $0.18 $0.89 $2.32 $6.15 $19.54 TLU-4 Transit $0.05 $0.00 $0.23 $1.18 $2.46 TLU-5 Anti-Idling Technologies and Practices $0.08 $0.01 $0.18 $1.92 $2.96 TLU-6 Mode Shift from Truck to Rail $0.44 $2.39 $0.56 $6.69 $2.92 Subtotal Transportation and Land Use (TLU) $0.38 $1.15 $3.56 $27.68 $50.45 Summation Total $0.34 $12.60 $39.28 $ $ Simultaneous Total $0.34 $12.68 $41.34 $ $ /18/2012

28 Macroeconomic Impact Results - Employment Impacts in 2020 (000 s FTE) Scenario ES-1 Renewable Portfolio Standard ES-2 Nuclear ES-3 Carbon Capture and Storage or Reuse (CCSR) ES-4 Coal Plant Efficiency Improvements Subtotal Energy Supply (ES) RCI-1 Demand Side Management Programs RCI-2 High Performance Buildings RCI-3 Appliance standards RCI-4 Building Codes RCI-5 Combined Heat and Power Subtotal Residential Commercial and Industrial (RCI) ,147.8 AFW-1 Crop Production Practices AFW-2 Livestock Manure AFW-3 Forest Retention AFW-4 Reforestation/Afforestation AFW-5 Urban Forestry AFW-6 Source Reduction AFW-7 Enhanced Recycling of MSW AFW-8 MSW Landfill Gas Management Subtotal Agriculture, Forestry & Waste (AFW) TLU-1 Vehicle Purchase Incentives TLU-2 Renewable Fuel Standard TLU-3 Smart Growth TLU-4 Transit TLU-5 Anti-Idling Technologies and Practices TLU-6 Mode Shift from Truck to Rail Subtotal Transportation and Land Use (TLU) Summation Total , , /18/2012 Simultaneous Total , ,524.0

29 Tom Peterson, President and CEO, CCS Dr. Adam Rose and Dr. Dan Wei, CCS and USC SECURITY AND INVESTMENT PROJECT 29 1/18/2012

30 Security Investment and Jobs in 2020 $250 New Investment B$ New Employment $10,994/job* 3,000,000 New Investment (billion 2007$; ) $200 $150 $100 $50 $2,585/job* $4,215/job* $29,240/job* $7,670/job* 2,500,000 2,000,000 1,500,000 1,000, ,000 New Jobs (2020) $0 Heat and Power Residential, Commercial, Industrial Transportation and Land Use Agriculture, Forestry and Waste All Sector Impact 0 *job = employee-year over the period 30 1/18/2012

31 CCS ISM System Integrated Security Metrics 1. Baseline Development (Economy, Energy, Environment) Standards Consistency Coverage Trends Decomposition 2. Policy Option Selection and Design Catalog Attributes Benchmarks Screening Selection Design 3. Economic, Energy, Environmental Security Analysis Options Systems Metrics Micro Macro Distributional 4. Investment Analysis Uses Outlays Metrics Sources Mechanisms 31 1/18/2012

32 32 1/18/2012

33 Investment Mechanisms Market driven Cost sharing (grants, subsidies, rebates) Rate of return Cost drivers Marketing/Demand Long term strategy Trading PHEV Rebates Regulatory necessity TIFIA Revolving loan funds Subsidized loan capital Penalties Ability to do business Trading Pooled capital Aggregating beneficiaries Financing Authorities Energy banks Purchasing clubs Public benefits funds Utilities Credit enhancements/risk reduction Loan loss reserves Guarantees Improved security Improved collection procedures Tax incentives Tax deductions Tax credits Accelerated depreciation 33 1/18/2012

34 Green Architecture & Construction Services Energy-saving Consumer Products HVAC & Building Control Systems ENERGY EFFICIENCY & CLEAN BUILDINGS Lighting Energy-saving Building Materials 34 1/18/2012

35 Direct Cost (Savings) & Investment Requirements - RCI Sector Change from baseline (million 2007$ ) Direct Investment Direct Savings $150,000 $100,000 $50,000 baseline$0 -$50,000 -$100,000 -$150,000 -$200,000 -$250,000 -$300,000 Industrial Process DSM Programs for Efficiency and DSM COM & RES Measures Electricity & Natural gas Use 35 1/18/2012 Zero Net Energy Buildings Appliance Standards Advanced Building Codes - Commercial & Residential Incentives for Industrial CHP

36 Economic Performance by Sector change from baseline -levelized annual 0.60% 2020 Employment Increase 2020 GDP Increase 20 YR GDP Increase 0.50% 2.46 million $157 billion $1.8 trillion 0.40% Employment 0.30% GDP 0.20% 0.10% baseline 0.00% Heat and Power 36 1/18/2012 Residential Commercial Transportation and and Industrial Land Use Agriculture Forestry and Waste

37 Energy Security Performance by Sector 12% % change - all positive values indicate improvement 10% Imported Oil 8% Fuel Diversity 6% Electric Diversity Grid Stability 4% Energy Intensity Direct Cost/Savings 2% 0% -2% Heat and Power 37 1/18/2012 Residential, Commercial, Industrial Transportation and Land Use Agriculture, Forestry and Waste

38 2010 to 2050 GHG Reductions for All Sectors 2010 to 2030 GHG Reductions for All Sectors Studied Policies Recent Actions in Baseline Recent Actions in Baseline Reductions from baseline (MMtCO2eq) Reductions from baseline (MMt CO2eq) Studied Policies Heat & Power 38 1/18/2012 Residential, Commercial & Industry Transpportation Agricuture, & Land Use Forestry & Waste Heat & Power Residential, Commercial & Industry Transpportation Agricuture, & Land Use Forestry & Waste

39 ISM Macroeconomic Screening Tool Quick and accurate way of estimating the economy-wide impact of GHG mitigation options Key indicators: GDP & employment Key explanatory factors: (cost-effectiveness, avoided fuel prices, investment to in-state producers and with strong in-state supply chain, attraction of out-of-state investment, use of indigenous resources, stimulus to labor-intensive sectors) Key indicators also help in policy design Based on two types of modeling Regional Economic Models, Inc. (REMI) macro econometric forecasting model analysis in 4 states Reduced form model based on regression analysis of REMI results for 92 GHG mitigation options in the 4 states (FL, PA, MI, NY) 39 1/18/2012

40 Soundness and Accuracy Two solid foundations: REMI & reduced form modeling REMI is used in every state in U.S. for policy analysis on many topics; Reduced form version of REMI is innovative: peer-reviewed in latest issue of Regional Science Policy and Practice; Both based on sound macroeconomic principles. Formal soundness & accuracy of regression analysis based on formal measures of goodness of fit ; regression estimating equations pass significance & bias tests; application yields reasonable results. 40 1/18/2012

41 Reduced-form statistical models Based on REMI macroeconomic impact modeling of 92 GHG mitigation options for four states: Florida, Pennsylvania, Michigan, and New York. Using a linear regression model with interaction terms Dependent variable being GSP impact and employment impact Regressors include direct net cost and a set of dummy variables indicating the sectoral category, capital investment, and other option characteristics 41 1/18/2012

42 Regression Analysis Results Results of the Regression Analysis for GDP Impact Estimate Robust Std. Error Pr(> t ) x TLU *** x ES *** x RCI ** x AFW ES RCI Construction Inv * Manufacturing Inv ** Government Subsidy Consumption Reallocation TLU AFW *p<0.1, ** p<0.05, *** p<0.01 N=92; R2 (0.5438); F-statistic (7.946); Overall Model P-value: /18/2012 t value

43 Regression Analysis Results Results of the Regression Analysis for Employment Impact Estimate Robust Std. Error Pr(> t ) x TLU ** x ES *** ** ES RCI AFW Construction Inv ** Manufacturing Inv Government Subsidy Consumption Reallocation x RCI x AFW TLU *p<0.1, ** p<0.05, *** p<0.01 N=92; R 2 (0.3417); F-statistic (3.461); p-value: /18/2012 t value

44 Security and Investment Project Phase 2 Macro Impact Analysis Full macroeconomic impact analysis will be carried out using the REMI Model MARKAL analysis results will serve as REMI modeling inputs Sectoral bridging between the two models Linkages of MARKAL modeling results to REMI policy variable inputs 44 1/18/2012

45 Questions? 45 1/18/2012

46 Thanks! Thomas Peterson, President and CEO Center for Climate Strategies (202) Adam Rose, Ph.D. Economist, CCS Research Professor Sol Price School of Public Policy, USC (213) Dan Wei, Ph.D. Economist, CCS Research Assistant Professor Sol Price School of Public Policy, USC (213) /18/