Assessing effects of EU ETS for Portugal – IEW 2007 Assessing the effects of the European...

Assessing effects of EU ETS for Portugal – IEW 2007

Assessing the effects of the European Emissions Trading Scheme for Portugal using the TIMES_PT model

Environmental Sciences and Engineering DepartmentNew University of Lisbon

Portugal

Sofia Simões, João Cleto, Júlia Seixas


Overview

• TIMES_PT model– Structure and information sources

– Energy Services Demand 2000-2030

– Exogenous Inputs: demand and main policy assumptions

– Final energy consumption in base year

• Simulating EU ETS– CO2 emissions in EU ETS

– National CO2 marginal abatement curve

– Simulation of EU ETS

– Allocation and price scenarios

• Results

• Next steps


Portuguese energy system

• Energy intensity is one the highest in EU

• Small improvements in energy efficiency for residential and commercial

• Improvements in industry - however mainly low-value energy intensive products

• 85% primary energy imports – rest is hydro, biomass and wind

• Kyoto/burden sharing target of +27% 1990 levels

• Most recent forecasts point to growth of GHG emissions of 47% by 2010 and 41-38% by 2020

Fossil fuels consumption (PJ)

0

5

10

15

20

25

30

35

40

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Refineries

Pulp

Paper

Iron &Steel

Tiles and bricks

Other ceramics

Cement

Glass


TIMES_PT model


Implementation of TIMES_PT

NEEDS

National research projectQuantifying interactions between energy and

environment policy instrumentshttp://air.dcea.fct.unl.pt/projects/e2pol/

E2POL

EU research projectEvaluation of total costs and benefits of energy policies and future energy systems

http://www.needs-project.org/nf2.asp

TIMES_PT

Implementation of TIMES for Portugal: 2000-2030 (2050)

NEEDS


Model structure

Primary energy supply: Refinery,

imports and renewable energy

Electricity generation

Transport: road passengers (car – short / long distance, bus – urban /

intercity, moto), road freight, rail (passengers / freight), aviation,

navigation

Industry: Iron & Steel; Non-Ferrous metals; Chlorine&Ammonia; Other

Chemic.; Cement; Lime; Glass: Hollow/Flat; Ceramics; Pulp &

Paper; Other

Residential: Existing & New - Rural/ Urban /Multi appartment

Commercial: Large and Small

Agriculture

Oil,

co

al,

ga

s im

po

rt

pric

es

Demand projectionsend-use energy services & materials

Base year & New energy technologiescapacity, availability, efficiency, life, costs, emission factors

Na

tion

al p

rima

ry e

ne

rgy

po

ten

tial

Hyd

ro,

win

d,

sola

r, b

iom

ass

Policy constraintsrestrictions, taxes, subsidies, …

Minimise total system costs

Optimal combination of

energy supply and demand

technologies

Emissions

Costs

Installed capacity

Final energy prices

Materials and Energy flows


– Annual Demand (DEM)• Cement (Mt)• Paper (Mt)• Iron & Steel (Mt)• Glass (Mt)• Pkm (Million Pkm)• Tkm• Other Industries (PJ)• Agriculture (PJ)• Resid. Space Heating (PJ)• Resid. Space Cooling (PJ)• Water Heating (PJ) •Etc.

– Elasticities of final demands to macroeconomic drivers, income (ELASI) and price (ELASP)

– Autonomous efficiency improvement in industry (AEEI)

– Base year data (DEM2000)

– Residential Data

– Population growth

– World energy prices

– Technical progress, energy intensity and labour productivity evolution

– EU-22 GDP growth target (2 to 2.5%)

– Energy prices

– Primary Energy potential and costs

– New and Existing Technologies

– Policy assumption (e.g. CO2 eq emissions restrictions)

Model Structure: Exogenous inputs

GEM-E3Optimization

function

– Energy Scenarios

– Technology profile

– System costs

– Emissions

)1()1(

)1(1

tt

ttt

AEEiELASPPRGR

ELASIDRGRDEMDEM

TIMES_PT

– National Macroeconomic Drivers (DRGR)

• GDP growth

• Private consumption as a proxy for disposable income

• Sectoral production growth: industry, services, transports and agriculture.

– PRGR: Price Evolution (PRGR)

GEM-E3: General Equilibrium Model for Energy-Economy-Environment

Inputs Inputs

Outputs Outputs

Residential Demand

Generation

*

DEMt* = Industry, Commercial, Transports

and Agriculture demand generation


0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2000 2001 2002 2003 2004 2005 2010 2015 2020 2025 2030

Clin

ker

(Mto

n)

INE TIMES_PT

2,0%

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2000 2001 2002 2005 2010 2015 2020 2025 2030

Cru

de s

teel

(M

ton)

Eurostat TIMES_PT

Clinker, Pulp, Glass, Iron & Steel Demand

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2000 2001 2002 2003 2004 2005 2010 2015 2020 2025 2030

Pul

p (M

ton)

Celpa TIMES_PT

0.0

0.5

1.0

1.5

2.0

2000 2001 2005 2010 2015 2020 2025 2030

Gla

ss (

Mto

n)

Industry Data* TIMES_PT

*Source: Industrials Association of container glass, Saint-Gobain (flat glass) and 2000 data from Statistic National Institute (INE)

Clinker

Glass

Pulp

Iron & Steel

2,5%

1,6%

1,0%

1,5%

1,9%

1,0%

0,3%

* 2000 values from NIR


Simulating EU ETS


EU ETS in TIMES

1) Identify emission restriction for each sector • Estimate emissions from EU ETS sectors in a BASE scenario and in a Kyoto

scenario• Assume share of these emissions in EU ETS (glass, ceramics, combustion,

lime, paper)

• Estimate restriction and allowance stock by comparing with Kyoto scenario2) Create possibility to buy allowances

Allocation/restriction scenarios

Maintain 2000 emissions 70% of National target of 0% from 1990

70% of National target of -20% from 1990

Allowances prices scenarios

10 €/t 21 €/t 40 €/t

Trade itself not simulated, only buying allowances

Assumed constant proportion of emissions in EU ETS over time


TIMES_PT Scenarios - main policy assumption

Base Scenario Kyoto Scenario

Nuclear politically unacceptable

Min. electricity generated from gas combined cycle (existing & new) corresponding to at least 1100 MW in 2010-2030

No new Coal Power Plants before 2015 & no increase in coal in final sectors; new coal has CCS

Min. use of Municipal Waste & Wood Waste for electricity

Min. 1.1 MW wind onshore in 2005 (feed-in-tariffs)

Biofuel targets for 2010 (5.75% of diesel and gasoline)

Min. 39% of the electricity consumed in 2010 is from renewable sources

ISP (energy carriers tax) and VAT over energy carriers

No carbon sinks

CO2 emissions restrictions

(27% above 1990 levels in 2010-2030)


National CO2 marginal abatement cost curve

2030

0255075

100125150175200225250275300

0 10000 20000 30000 40000 50000 60000 70000 80000 90000

Abated CO2 (t)

€2000

/tC

O2

Kyoto+20%

+10% 0%

-10%

-20%

-30%

+113% to +100% from 1990 in 2020

0

1000

2000

3000

4000

5000

6000

2010 2020 2030

CO

2 ab

atem

ent (

Gg)

Non ETS Electricity CHP Other CombFe Metals Cement Lime GlassCeramics Pulp Paper

% refers to 1990 emissions


CO2 emissions in EU_ETS

Excluded emissions from solvent use, agriculture, waste, fugitive from fuels and f-gases - 20% in 2010

0

10000

20000

30000

40000

50000

60000

70000

CO

2 e

mis

sio

ns

(Gg

)

2000 2010B 2010K 2020B 2020K 2030B 2030K

Non ETS Electricity CHP Other Comb RefineriesCoke oven Fe Metals Cement Lime GlassCeramics Pulp Paper

10%

7%

30%

43%

11%

6%

24%

48%

11%

5%

23%

49%

12%

4%

23%

48%

12%

5%

21%

50%

15%

6%

16%

50%

15%

6%

16%

49%

-2% to -6% +5% to -3% 0% to -5%

(90%) (69%)(80%) (40-54%)

(46%)


EU ETS in TIMES_PT – buy allowances

TRDSTOR• Stock = no. permits• Cost of permits

TSTORAGE_ELCT

TSTORAGE_IIST

TSTORAGE_SUPT

TSTORAGE_CHPT

TRDCO2N

ELCCO2N

ELCTCO2N

IISCO2N

IISTCO2N

IISCO2P

IISTCO2P

SUPCO2N

SUPTCO2N

SUPCO2P

SUPTCO2P

CHPCO2N

CHPTCO2N

(...)


Results


Bought quantities (Gg CO2)

2010 10eur/t 21eur/t 40eur/t

CO2 as 2000 3327 2721 2166

CO2 as Nat 0% / 1990 10149 9057 4986

CO2 as Nat -20% / 1990 14997 13803 8466


CO2 as 2000 5000 4149 4163

CO2 as Nat 0% / 1990 12000 5710 4163

CO2 as Nat -20% / 1990 17054 7673 5879


CO2 as 2000 4589 4536 3807

CO2 as Nat 0% / 1990 6608 6093 4314

CO2 as Nat -20% / 1990 9045 8159 6535

2010

% nat. %ETS

2000 5000 8 15

Nat 0% 12000 18 35

-20% 19000 29 56

increase price

incr

ease

res

tric

tion

Allowances stocks


0

2000

4000

6000

8000

10000

12000

14000

16000

2000-10eur

2000-21eur

2000-40eur

0%-10eur

0%-21eur

0%-40eur

-20%-10eur

-20%-21eur

-20%-40eur

CO

2 G

g

CHP Electricity Cement Glass Fe metals

Lime Ceramics Other comb. Pulp&paper Refineries

Buyers 2010


0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2000-10eur

2000-21eur

2000-40eur

0%-10eur

0%-21eur

0%-40eur

-20%-10eur

-20%-21eur

-20%-40eur

CO

2 G

g

CHP Electricity Cement Glass Fe metals

Lime Ceramics Other comb. Pulp&paper Refineries

Buyers 2020


System cost variations


CO2 as 2000 0.48 0.61 0.68

CO2 as Nat 0% / 1990 0.65 0.81 0.53

CO2 as Nat -20% / 1990 0.84 1.18 1.25


CO2 as 2000 0.40 0.52 0.73

CO2 as Nat 0% / 1990 0.58 0.69 0.87

CO2 as Nat -20% / 1990 0.81 0.70 1.15


CO2 as 2000 1.83 1.97 2.21

CO2 as Nat 0% / 1990 1.83 2.04 2.31

CO2 as Nat -20% / 1990 1.91 2.15 2.56

increase price

incr

ease

res

tric

tion

% change compared to Kyoto scenario


Next steps

• Test other allocation criteria• Verify results with sector marginal abatement curves• Model with national emission ceiling• Possibility to model selling allowances?

• Feed-in-tariffs for renewables• Acidifying emissions constraints


[email protected]

[email protected]

[email protected]

http://air.dcea.fct.unl.pt/projects/e2pol/


Departamento de Ciências e Engenharia do Ambiente

Research work funded by the FCT/MCES and POCI 2010, supported by FEDER


Primary Energy Potentials in TIMES_PT

2000 2030 ReferenceNon Energy Extr. costs (€/GJ) (VIEWLS project)

Wood Products (PJ) 71.7 100 (+28%)Assumed a maximum growth 30%

of 2000 capacity 4.89

Biogas (PJ) 0.1 29 (+100%)GPPAA & Extrapolation of PNAC

Waste Scenarios 32.85

Crops for Biofuel (PJ) 0.0 15 (+100%)Extrapolation of Renewable

Energy Portugal Forum 1.30

Biofuel production (PJ) 0.0 50 (+100%)Best guess based on 2008 expected installed capacity 28.50

Municipal Waste (PJ) 7.3 10 (+27%)Extrapolation of PNAC Waste

scenarios 5.81

Industrial Waste – Sludge (PJ) 0.0 2 (+100%) Best guess 5.81

Hydro (PJ) 40.2 95 (+58%) Ministery of Economy 0.00

Wind onshore (GW) 0.7 5 (+98%)Conservative assumption based

on REN 0.00

Wind offshore (GW) 0.0 2 (+100%) Best guess 0.00

Solar- heating (PJ) 0.8 38 (+98%)Extrapolation of Renewable Energy in Portugal Forum 0.00

Solar-electricity generation (GW) 0.0 2 (+100%) Best guess 0.00

Geothermal (PJ) 0.6 8 (+93%)Extrapolation of Renewable

Energy Portugal Forum 0.00

Waves (GW) 0.0 5 (+100%)Cruz, J., Sarmento, A. (2004).

Energia das Ondas 0.00

Assessing effects of EU ETS for Portugal – IEW 2007 Assessing the effects of the European...

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