On the Economics of Climate Change

Transcription

1 On the Economics of Climate Change Science & Pretzels Potsdam, 22 February 2012 Prof. Dr. Ottmar Edenhofer

2 The Preindustrial Earth System A Sketch Atmosphere Fossil Resources (Coal, Oil, Gas) Land Ocean According to Lenton (2011) 2

3 From a Solar to a Fossil Stock Economy The Earth System of the Anthropocene Atmosphere Fossil Resources Society Resources extraction Interaction Governance Land Ocean According to Lenton (2011) and Ostrom (2011) 3

4 Fossil Resources Stock A Lottery Prize! Per Capita GDP (1990$) Emissions Population Per Capita GDP Year Edenhofer et al Emissions (GtC/yr) Population (Billions)

5 What are the Impacts on Climate? 5

6 Tipping Points in the Earth System Tipping processes of the climate system show a strong reaction already to small climate changes Schellnhuber, 1996; Lenton et al., 2008

7 Burning Embers Diagram Prognosis for 2100 (IPCC 2007) 2 C above preindustrial level T. M. Lenton & H. J. Schellnhuber (Nature Reports Climate Change, 2007)

8 Climate protection as an insurance In this case, the cost-benefit calculation is collapsing since risk aversion would result in practically spending the whole income to eliminate the possibility of disastrous damages Climate politics as an insurance against disastrous climate change! Stern 2008

9 World Map of wealth Source: Füssel (2007)

10 World Map of Carbon Debt Source: Füssel (2007)

11 Carbon Debt and Wealth 10 4 P: Fossil CO 2 emissions (kg C per person and year) Ethiopia India Bangladesh China Egypt South Africa Brazil Russia Mexico United States Germany France Fitting line: ln P=0.987 ln K+c Japan K: Capital stock (US$2000 per person) Source: Füssel (2007) 11

12 The BAU Scenarios Could Exceed the Level of Greenhouse Gas Concentration of 600ppm (~4 C Temperature Increase) SRREN, Edenhofer et al. (2011)

13 We are not on track Renaissance of Coal! SRREN, Edenhofer et al. (2011)

14 The Atmosphere as a Global Common Atmosphere: Limited Sink ~ 230 GtC Resource Extraction > GtC 14

15 Allocation of Emission Rights USA Japan Europe Russia Middle East Latin America Asia (Others) China India Sub-Sahara Africa Rest of the World World Per capita Per GDP C&C: Contraction & Convergence C&C with histor. Responsibility CDC: Common but Differentiated Convergence Consumption losses [%] gains losses Knopf et al

16 Climate policy as prisoners dilemma Player 2 Avoid Emit Avoid The socially optimal result would be for everybody to avoid Player 1 Emit

17 Climate policy as prisoners dilemma Player 2 Avoid Emit Avoid Player but every individual prefers to profit as free rider Saving of abatement costs Carbon Leakage benefit -1 0 Emit 3 0 Cooperation is not accomplished

18 IPCC and the UN System Nobel peace prize 1961, posthumous Dag Hammarsjköld ( ) Second Secretary General of UN Nobel peace prize 2007 IPCC Bert Bolin ( ), First IPCC chair Nobel prize in economics 2009 Elinor Ostrom (1933) 18

19 Climate Policy as an Insurance GHG emissions resulting from the provision of energy services contribute significantly to the increase in atmospheric GHG concentrations. SRREN, Edenhofer et al. (2011)

20 The Great Transformation Luderer et al. (2011)

21 The current global energy system is dominated by fossil fuels. Shares of energy sources in total global primary energy supply in 2008 SRREN, Edenhofer et al. (2011)

22 RE growth has been increasing rapidly in recent years 150 GW of new RE power plant capacity was built in This equals 50% of all power plants built during that period.

23 The Technical Potential of Renewable Energies SRREN, Edenhofer et al. (2011)

24 The Costs of Renewables Are Often Still Higher Than Those of Non-Renewables But SRREN, Edenhofer et al. (2011)

25 ...Some RE Technologies Are Already Competitive Small scale CHP (steam turbine) Binary cycle plant Domestic pellet heating system Palm oil biodiesel SRREN, Edenhofer et al. (2011)

26 Renewable Energies Have a Potential to Lower Costs SRREN, Edenhofer et. al. 2011

27 Global RE Primary Energy Supply from 164 Long-Term Scenarios versus Fossil and Industrial CO 2 Emissions SRREN, Edenhofer et al. (2011)

28 RE can contribute to sustainable development RE can accelerate access to energy, particularly for the 1.4 billion people without access to electricity and the additional 1.3 billion people using traditional biomass RE deployment can reduce vulnerability to supply disruptions and market volatility Low risk of severe accidents Environmental and health benefits

29 Global RE Primary Energy Supply from 164 Long-Term Scenarios versus Fossil and Industrial CO 2 Emissions 2007 SRREN, Edenhofer et al. (2011)

30 Global RE Primary Energy Supply from 164 Long-Term Scenarios versus Fossil and Industrial CO 2 Emissions 2007 SRREN SPM, Figure SPM.9 SRREN, Edenhofer et al. (2011)

31 Potential Role of Renewables SRREN, Edenhofer et al. (2011)

32 Macroeconomic Costs Limited availability of technologies SRREN, Edenhofer et al. (2011)

33 Numerical Limitations of Integrated Assessment Models Time resolution: Time steps of several years Fluctuations of renewables neglected Geographical resolution: Aggregate world regions Infrastructure neglected (e.g. grids) Technological challenge with large shares of fluctuating renewables: The electricity grid requires an exact match of supply and demand at any time and at any place. 33

34 Integration Options for Renewables Improved weather forecast Better planning of renewable electricity feed-in Demand side management Adjust demand to renewable electricity feed-in Flexible power plants Provide residual load Important Supply Side Options Grid extension Large area pooling of uncorrelated fluctuations (>300km): Import / Export between countries Energy storage Remove electricity from the grid in times of high renewable generation and feed-in electricity in times of low generation 34

35 Impact of Considering Fluctuations in an Energy System Model of Germany Most models do not take into account fluctuations explicitly: Same scenario with consideration of fluctuations: Electricity Production (TWh) Nuclear Coal Lignite Mitigation Costs rise by Nuclear 20% when PV Geo Wind-offshore Wind-onshore Bio & Hydro Electricity Production (TWh) considering the fluctuations of renewables! PV Geo Wind-offshore Coal Wind-onshore Bio & Hydro Lignite Gas Turbine 100% Renewables 80% Renewables Scenario: 80% domestic CO 2 emission reduction in 2050 vs (Ueckerdt et al., 2011) 35

36 Integration Options for Renewables Improved weather forecast Better planning of renewable electricity feed-in Demand side management Adjust demand to renewable electricity feed-in Flexible power plants Provide residual load Grid extension Large area pooling of uncorrelated fluctuations (>300km): Import / Export between countries Energy storage Remove electricity from the grid in times of high renewable generation and feed-in electricity in times of low generation 36

37 Aggregate Transmission in 2050 in an Electricity Sector model of Europe Baseline, no climate policy: 90% CO 2 reduction in electricity sector: (Haller et al., 2011, submitted) 37

38 Germany 2050: Electricity production with network expansion (European Interconnectors) Time slices (characteristic days): About 50% of demand covered by imports Demand GW Storage outflow Import Production Export Storage inflow Large capacities of natural gas power plants required, especially in winter hours Scenario: 90% CO 2 emission reduction in electricity sector (Haller et al., 2011, submitted) 38

39 Integration Options for Renewables Improved weather forecast Better planning of renewable electricity feed-in Demand side management Adjust demand to renewable electricity feed-in Flexible power plants Provide residual load Grid extension Large area pooling of uncorrelated fluctuations (>300km): Import / Export between countries Energy storage Remove electricity from the grid in times of high renewable generation and feed-in electricity in times of low generation 39

40 Germany 2050: Electricity production without network expansion (Autarkic Germany) Time slices (characteristic days): Large storage capacities required Demand GW Storage outflow Import Production Export Storage inflow Large capacities of natural gas power plants required, especially in winter hours Scenario: 90% CO 2 emission reduction in electricity sector (Haller et al., 2011, submitted) 40

41 Interim Synthesis Large back-up capacities of flexible gas power plants are required to provide residual load in extended times of low renewable electricity generation (European winter) even with a European integrated electricity grid even with large day/night or medium-term storage capacities (e.g. pumped hydro) What are the implications for the electricity market, CO 2 emissions of the electricity sector, and what is the potential role of methanisation?

42 The Future Market System? Merit Order Pricing with high Renewable Shares and Flexible Gas Plants Only Marginal Cost Price in times of no RES feed-in Price in times of high RES feed-in Marginal Cost Electricity demand Gas Turbine RE RE RE RE RE Large price fluctuations, depending on weather Situations with high no renewable feed-in Electricity demand Gas Turbine Large reserve capacities Capacity (performance) RE RE RE RE RE Gas Turbine Capacity (performance) RES overproduction 42

43 The Role of Classical Storage (e.g. Pumped Hydro) Marginal Cost Electricity demand without storage Electricity demand with storage Price in times of high RES feed-in Marginal Cost Price in times of low RES feed-in RE RE RE RE RE Electricity demand STORAGE STORAGE RE RE Gas Turbine Gas Turbine Gas Turbine In times of high RES generation & low electricity prices, storage owner buys electricity Gas Turbine Capacity (performance) In times of low RES generation & high electricity prices, storage owner sells electricity Capacity (performance) 43

44 Insufficiency of Pumped Hydro Storage in Europe Price in times of low RES feed-in Electricity demand Gas Turbine RE STORAGE Gas Turbine Capacity (performance) Pumped hydro storage is very limited in Europe Gas turbines need to provide residual load, whenever renewable generation is insufficient to meet demand Natural Gas incurs CO 2 Emissions Natural Gas is a scarce resource and may be subject to severe price increases in the future 44

45 The Potential Role of Methanisation Marginal Cost Price in times of high RES feed-in Electricity demand without methanisation Gas Turbine RE RE RE RE RE Electricity Production CO 2 + Renewable electricity Electricity demand with methanisation Supply flexible gas turbines with CO 2 neutral gas (?) in situations of no (or low) renewable electricity feed-in (i.e. storage outflow) Gas Turbine In times of high RES generation & low electricity Methane can prices, be stored and distributed in existing the methanisation infrastructureplant owner buys electricity, Capacity (performance) CH 4 Heat for Households Heat for Industry Transport Sector and produces methane (i.e. storage inflow) 45

46 The Potential Role of Methanisation Marginal Cost Price in times of low RES feed-in Electricity demand Gas Turbine Due to learning and economies of scale for methanisation, variable costs (i.e. fuel costs) could be more predictable and even reduced in the long term? Capacity (performance) Electricity Production Large capacities of gas turbines need to be installed for providing residual load to fluctuating renewables CH 4 Are there incentives for pursuing these capacity investments in the market? Heat for Households Heat for Industry Transport Sector 46

47 Carbon Capture and 47 storage (CCS) Atmospherical CO 2 Bio+CCS / Air Capture Combustion +CCS C in Fossil Resources Geological C storage Not fully sustainable 47

48 Carbon Capture and 48 use (CCU) Atmospherical CO 2 Combustion +CCS Renewable electricity Gaseous and liquid fuels, e.g.ch 4 C in Fossil Resources Geological Cstorage Transitional 48

49 Carbon Capture and cycling(ccc) Atmospherical CO 2 Bio+CCS / Air Capture Combustion Renewable electricity Gaseous and liquid fuels, e.g.ch 4 Geological or Biological C storage, e.g. charcoal Sustainable 49

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51 Recommendable Literature 51