GHG MACC Brief A provisional collation of some GHG MACC curves in circulation. April, 2009

Transcription

1 GHG MACC Brief A provisional collation of some GHG MACC curves in circulation April, 2009

2 Acknowledgements This piece has been compiled by AP EnvEcon as part of the IMP Ireland project. The IMP Ireland project is funded by the Environmental Protection Agency with co-funding from AP EnvEcon. The Environmental Protection Agency funding is provided as part of the Science, Technology, Research and Innovation for the Environment (STRIVE) Programme The programme is financed by the Irish Government under the National Development Plan It is administered on behalf of the Department of the Environment, Heritage and Local Government by the Environmental Protection Agency which has the statutory function of co-ordinating and promoting environmental research. The authors are extremely grateful to the Environmental Protection Agency and the Department of Environment, Heritage and Local Government for their support, without which this work would not be possible. Views expressed are those of the authors alone.

3 Marginal Abatement Cost Curve Brief INTRODUCTION McKinsey & Company have been hired by Sustainable Energy Ireland (SEI) to develop a greenhouse gas emissions Marginal Abatement Cost Curve (MACC) for Ireland. McKinsey have developed a global MACC as well as individual MACCs for countries such as the UK, Germany, the US and Australia. This short brief aims to collate some information on the McKinsey global and other national curves and present the outcomes from these exercises with the aggregated European MACC developed by IIASA 1 with input from various national modelling teams and stakeholders. The purpose is to set out some of the GHG abatement curve menus that are currently in circulation and under discussion. By way of introduction to the collated information, the following is a very brief overview of both the McKinsey and GAINS MACC approach. It should be noted that it is not practical to directly compare these MACCs as both have been developed using different methodologies, on different geographic scales and with different time horizons in mind. The GAINS curve presented looks out to 2020 while the available global McKinsey MACC is for MCKINSEY GLOBAL MACC ANALYSIS McKinsey (2007) 3 developed a global abatement cost curve with the aim of modelling abatement potential/measures to meet any politically determined emissions target in 2010, 2020 and The MACC development process focused on the , 450 and 400 ppm emissions targets as identified by the UNFCCC. The low end of the McKinsey curve is comprised of measures that improve energy efficiency and as a result appear at negative costs. 4 Higher up the curve McKinsey place measures for adopting more greenhouse gas 1 IIASA s European curve has been used recently as part of the GAINS model in relation to the non CO2 gas assessment of the effort sharing agreement. 2 Information on the McKinsey curve was obtained from McKinsey, A cost curve for greenhouse gas reduction. The McKinsey Quarterly. While this report documents a 2020 global MACC the report itself does not present any graphics of a 2020 global MACC that would enable a comparative analysis with the GAINS curve. 3 McKinsey, A cost curve for greenhouse gas reduction. The McKinsey Quarterly. 4 Table 1 provides details of the abatement measures presented in the McKinsey 2030 global MACC. Measures are presented in order of increasing cost of abatement. It is important to note the marginal abatement costs associated with each abatement measure are cost estimates. Costs were not directly

4 efficient technologies (such as CCS and wind power) in power generation and manufacturing industry and for shifting to cleaner industrial processes (McKinsey, 2007). The curve also highlights abatement options focused on various aspects of forestation and adoption of more greenhouse gas efficient agricultural practices. In the process of developing the MACC, McKinsey (2007) estimated that if abatement measures are implemented in order of increasing marginal cost then the 2030 emissions targets of 550ppm and 450ppm can be achieved at a marginal cost per ton of CO 2eq no greater than 25 and 40 respectively. IIASA GAINS MACC ANALYSIS IIASA have developed a MACC for the EU27 and use this in conjunction with the GAINS model to identify cost-effective mitigation measures using an optimisation approach. 5 This method compares mitigation measures at consecutive marginal cost values. The GAINS MACC analyses abatement options over a wide marginal cost (euro/tco 2eq) range. Mitigation costs in the MACC range from tco 2eq to 250 tco 2eq. Table 2 presents the abatement measures identified in the GAINS MACC. MCKINSEY GAINS MACC COMPARISON It is not practical to directly compare the abatement costs identified for each abatement technology in the GAINS MACC with those presented in the McKinsey MACC since the curves examine different time horizons and incorporate varied assumptions and methodologies that are not discussed in this brief. However, this brief provides an insight into some of the abatement measures that are being tabled in these current MACC analyses and provides readers with an introduction to some of the issues that need to be taken into consideration when using data from various MACC studies. Comparison of tables 1 and 2 reveal that a number of the same abatement measures are identified in both MACCs (e.g. building efficiency improvements, vehicle stock improvements, introduction of CCS). What are of particular note are the marginal costs identified in both MACCs for the implementation of a number of measures. As an example, both MACCs indentify building efficiency/building insulation abatement measures as being at the bottom end of the cost curves. The GAINS curve attaches a marginal cost of to building measures while McKinsey identify a marginal cost of relatively close. available for each measure type and were obtained from a simple analysis of the McKinsey MACC. See McKinsey (2007) for actual MACC. 5 GAINS, GAINS Data Sheet on GHG Mitigation Potentials. IIASA.

5 However, a significant difference exists between the two curves in terms of the marginal cost associated with the deployment of wind energy. For GAINS the marginal cost of wind energy is while the cost is significantly higher in the McKinsey curve at 20. Obviously considerations are such that perhaps the variation is based on regional differences (global versus European scale), time horizon variation (2020 versus 2030), technical assumptions (type of wind power) or simply methodological variations and a different mix of assumptions. Nonetheless, such curves have the potential to influence policy and where considerable variation remains when examining national specific curves, results should be carefully examined. MCKINSEY COUNTRY MACC ANALYSIS Prior to this work in Ireland McKinsey have developed country level MACCs for countries such as Germany, Australia, the United Kingdom and the United States. Table 3 presents the list of abatement measures and associated abatement costs identified in these country level MACCs. With the exception of Germany all cost curves have been developed using 2030 as the reference time point. 6 Table 3 reveals that across these 4 countries there are variations in abatement measure options and the costs of these mitigation options. However, analysis of the individual country reports indicates that the variation in abatement measures presented in the four respective MACC s may be partially explained by differences in the depth of analysis undertaken by McKinsey. For example, the McKinsey German MACC report includes individual MACCs for the energy, buildings, industrial and transport sectors whereas other reports are of a somewhat narrower focus. 6 The German MACC was developed using 2020 as the reference year.

6 Table 1 McKinsey Global Marginal Abatement Cost Curve 7 Marginal Abatement Cost ( /t CO2e) McKinsey Global MACC Curve (2030) Building insulation Fuel efficiency in commercial vehicles Efficient Lighting systems Air Conditioning Water heating Fuel efficiency in vehicles Sugarcane biofuel Standby losses Industrial non-co2 0 5 Nuclear 5 10 Livestock management Low cost forestation Low cost forestation CCS, enhanced oil recovery, new coal Industrial feedstock substitution Wind energy; low penetration 7 For full analysis of the McKinsey global MACC see McKinsey, A cost curve for greenhouse gas reduction. The McKinsey Quarterly. 8 Measures highlighted in blue text indicate that emissions reductions arising from the implementation of these approaches will be achieved at zero or negative cost, i.e. emissions reductions can be realised at no net cost to the economy.

7 25 30 Co-firing biomass Medium-cost forestation CCS; new coal Avoided deforestation Industrial motor systems CCs; coal retrofit Coal-to-gas shift Waste Biodiesel Industrial CCS

8 Table 2 GAINS EU27l Marginal Abatement Cost Curve 9 Marginal Abatement ( /t CO2e) Cost Wind energy GAINS EU27 MACC Curve (2020) 10 Building efficiency measures; commercial/residential heat and cooling (existing/new buildings, houses & apartments) Domestic appliance efficiency improvements Efficient lighting systems (commercial & residential) Industry efficiency improvements; energy conversion industry Light duty hybrid gasoline trucks Food industry wastewater; anaerobic treatment with gas recovery Organic chemical industry wastewater; anaerobic treatment with gas recovery Efficiency improvements; non ferrous metal industry Residential thermal water heating Transport refrigeration alternative refrigerant 5 10 Ban on open burning of agricultural or residential waste Coal mine gas recovery with flaring 9 For in-depth analysis of the GAINS MACC see GAINS, GAINS Data Sheet on GHG Mitigation Potentials. IIASA. 10 Measures highlighted in blue text indicate that emissions reductions arising from the implementation of these approaches will be achieved at zero or negative cost, i.e. emissions reductions can be realised at no net cost to the economy.

9 Improving agricultural nitrogen use CHP plant use in industry Improved efficiency heavy duty diesel trucks Geothermal electricity Improved efficiency diesel buses Hydroelectric power plants Oil refinery flaring Adjusting fertiliser addition to the periods of ag demand CCS from power plants Light duty trucks with advanced internal combustion engine Manure management; community scale anaerobic digester Efficiency improvements; iron & steel industry Abandon agricultural use of organic oils

10 Marginal Abatement Cost ( /t CO2e) Table 3 McKinsey Country Marginal Abatement Cost Curve Analysis 11 Germany (2020 MACC) 13 UK (2030 MACC) Australia (2030 MACC) US (2030 Mid-range MACC) 1W standby for consumer electronics, IT, & communications Innovative detergents 1W standby for office equipment Refrigeration for retail Ventilation drive systems Control systems for voltage stabilisation Efficient drives Substitution of street lighting Energy savings variable speed drives in motor system applications Building structure measures; improved energy management systems & heating/cooling technologies 11 Details of the German, UK, Australian and US McKinsey MACC analysis were obtained from the following sources; Germany - McKinsey, Costs and Potentials of Greenhouse Gas Abatement in Germany, a report by McKinsey & Co. On behalf of BDI initiative Business for Climate UK CBI Climate Change Task Force, Climate change: Everyone s business options for greenhouse gas reduction in the UK. United Kingdom. Australia McKinsey, An Australian Cost Curve for Greenhouse Gas Reduction, McKinsey & Company. US McKinsey, Reducing U.S. greenhouse gas emissions: How much at what cost?, McKinsey & Company 12All marginal abatement cost are presented in /tonne of CO 2e. The McKinsey developed MACC for Australia and the US detail all abatement measures in Australian and US dollars respectively. For the purpose of comparative analysis all abatement measure costs were converted to Euros at the appropriate exchange rates. 13 The German MAC analysis is the most detailed of the 4 countries analysed with separate MACC presented for the energy, buildings, industrial and transport sector. As result, column 1 presents 4 different font styles to indicate the abatement measures associated with different sectors (energy, buildings, industrial, transport)

11 Gasoline cars; engine friction Heavy trucks; aerodynamics Diesel cars; auxiliaries Adaptive lighting systems Efficiency white goods Compact fluorescent lamps Renovation of multifamily housing Heat recovery improvements in ventilation systems (tertiary sector) Efficiency optimisation of lighting in buildings Tertiary lighting (TFL) Heat recovery in ventilation systems/ air conditioning in buildings Light trucks; technical measures Diesel cars; medium downsizing & tires Gasoline cars; thermal management Aviation; reduction in additional distances Engine & non engine efficiency improvements; commercial vehicles Engine & non engine efficiency improvements; cars Energy efficient lighting Heating for non-insulated residential buildings Energy monitoring & control systems (e.g. energy performance contracting) Optimisation of heating systems in buildings Motor systems Commercial air handling Commercial & residential electronics Residential buildings; lighting; efficiency improvements

12 Car fuel economy Renovation; 3-6 person family homes Renovation; 1-2 person family homes Gasoline cars; tires, gear shift/fuel consumption indicator Diesel cars; tire pressure monitoring system Rooftop PV (approx. 50 kwp) Improved power plant technology; hard coal (retrofit) Office building insulation Use of LEDS (tertiary & household sector) Heating for insulated residential buildings Improved power plant technology; lignite (retrofit) Open space PV (> 1MWp) Improved power plant technology; gas (retrofit) Improved power plant technology; gas (new) Mechanical optimisation of drive systems Chemical sector; Improved efficiency of catalytic converters Steel sector; production shift from BF/BOF to EAF Rail traffic; technical optimisation, capacity utilisation Cavity wall insulation Condensing boilers Nuclear Residential water heating efficiency Commercial lighting efficiency Residential stand-by savings Biofuels Residential lighting efficiency Refrigeration efficiency Residential heating/ventilation efficiency Conservation tillage Agriculture; livestock Agriculture; soils Commercial buildings; LED lighting Cars; fuel economy package Commercial buildings; CFL lighting Residential buildings; new shell improvements Commercial buildings; new shell improvements Commercial buildings; CHP Cellulosic biofuels Industrial process improvements Industry; CHP Existing power plant conversion efficiency improvements Residential water heaters Conservation tillage Coal mining; methane management Commercial buildings; control systems Manufacturing; HFCs management Residential buildings; shell retrofits Nuclear; new build Onshore wind; low penetration

13 of local & long distance transport Aviation technology & fuel consumption optimisation Biomass (solid) Improved power plant technology; lignite (new) CHP hard coal Passive houses Cement sector; clinker substitution Hard coal to gas shift Biogas CCS lignite (new) Onshore wind Biomass (co-firing) Offshore wind Improved power plant technology; hard coal (new) CHP gas Lignite-to-gas shift CCS hard coal (new) Paper sector; efficiency improvements Cement sector; CCS Steel sector; CCS Fuel substitution Biofuels Zero-carbon homes Wind on shore CCS (coal) Solid wall insulation Floor insulation CCS (early retired gas) Industrial motor systems Afforestation; pasture Forest management On-shore wind Coal CCS new Reforestation Energy efficiency, basic materials production Coal-to-gas shift; new builds Industrial CCS Solar PV Coal CCS retrofit Geothermal Avoided deforestation Soil CO2 Afforestation, cropland Biomass Natural gas & petroleum systems management Active forest management Afforestation of pastureland Reforestation Winter cover crops Onshore wind; medium penetration Distributed solar PV Coal power plants; CCS new builds with EOR Biomass power; co-firing Coal power plants; CCS rebuilds with EOR Onshore wind; high penetration Afforestation of cropland Commercial buildings; HVAC equipment efficiency Coal power plants; CCS new builds Solar CSP Industry; CCS new builds on carbon intensive processes Residential buildings; HVAC equipment efficiency Coal power plants; CCS rebuilds Coal-to-gas shift in dispatch of existing power plants

14 Geothermal Optimised air condition systems Non ferrous metal sector; electrolysis improvement Biofuels; 1 st & 2 nd generation bioethanol Cement sector; fuel substitution Steel sector; thin slabbing/direct casting Biodiesel Biofuels; hydrogenated vegetable oil Ventilation systems for residential buildings

15 The IMP Ireland project is funded by the Environmental Protection Agency of Ireland under the STRIVE programme Co funding is provided by AP EnvEcon. The project is led by AP EnvEcon.