Hybrid Linking TIAM-KLEM: Assessing technological pathways ... · Post Paris Policy Context...

Hybrid Linking TIAM-KLEM: Assessing technological pathways from INDCs towards 1.5C

James Glynn, Frédric Ghersi, Franck Lecocq,

Brian Ó Gallachóir

ERI-UCC, CIRED - IEW2016 Cork, IRELAND

Outline

• Research Question:• How far below 2°C is feasible? (if at all?)

• What would the macroeconomic impacts, demand response and sectoral dynamics be?

• Presentation in two sections

• TIAM-MACRO• How far below 2C towards 1.5C can we go?

• TIAM-KLEM• Hybrid linking methods between KLEM and ETSAP-TIAM

• What we have done

• What we haven’t done

• What we hope to do

Post Paris Policy Context –COP21Highlight figures.

• CP21, Article 2.1(a) Holding the increase in the global average temperature to well below 2˚C above pre-industrial levels and pursuing efforts to limit temperature increase to 1.5 ˚C would significantly reduce risks and impacts of climate change

• AR5 carbon budget for the total global cumulative emissions since 2011 that are consistent with a global average temperature rise of 1.5C above pre industrial levels with 50% probability is 550GtCO2.

• Considering the aggregate effect of INDCs, global cumulative CO2 emissions are expected to equal 97% by 2025 and 134% by 2030 of the cumulative emissions consistent with achieving a temperature increase of less than 1.5˚C

• INDCs result in ~52GtCO2e/yr in 2030• Not on a 2 ˚C least cost consistent path

GLOBAL ETSAP-TIAM model

• Linear programming bottom-up energy system model of IEA-ETSAP

• Integrated model of the entire energy system

• Prospective analysis on medium to long term horizon (2100)• Demand driven by exogenous energy service demands

• Partial and dynamic equilibrium (perfect market)

• Optimal technology selection

• Minimizes the total system cost

• Environmental constraints• Integrated Climate Model

• 15 Region Global Model

• Price-elastic demands

• Macro Stand Alone• Single consumer-producer, multi-regional, inter-temporal general equilibrium

model which maximises regional utility.• The utility is a logarithmic function of the consumption of a single generic

consumer.• Production inputs are labour, capital and energy.• Energy demand and energy costs from ETSAP-TIAM model.• MSA Re-estimates Energy Service Demands based on energy cost

Scenario Definitions

• Incremental Carbon Budgets from 1400GtCO2-400GtCO2• Climate model controlling concentrations of CH4 and N20 for 2 ˚C in 2100

• Delaying action where feasible 2010, 2020, 2030, 2040

• Find the feasible solution space in AR5 carbon budgets between 2˚C and 1.5˚C• AR5 all working group Synthesis Report Table 2.2

<1.5C <2C>3.5C

Carbon Budget GtCO2 66% 50% 33% 66% 50%

Start Year/Delayed Action

400 500 550 600 700 800 850 900 1000 1300 1400 Base

2005 <1.5C 66% <1.5C 50% <1.5C 50% <1.5C 50% <1.5C 33% <1.5C 33% <1.5C 33% <1.5C 33% <2C 66% <2C 50% <2C 50% 4DS

2010 <1.5C 66% <1.5C50% <1.5C50% <1.5C50% <1.5C 33% <1.5C 33% <1.5C 33% <1.5C 33% <2C 66% <2C 50% <2C 50%

2020 <1.5C 66% <1.5C50% <1.5C50% <1.5C50% <1.5C 33% <1.5C 33% <1.5C 33% <1.5C 33% <2C 66% <2C 50% <2C 50%

2030 <1.5C 66% <1.5C50% <1.5C50% <1.5C50% <1.5C 33% <1.5C 33% <1.5C 33% <1.5C 33% <2C 66% <2C 66% <2C 50%

2040 <1.5C 66% <1.5C50% <1.5C50% <1.5C50% <1.5C 33% <1.5C 33% <1.5C 33% <1.5C 33% <2C 66% <2C 66% <2C 50%

MACRO

RUNS

CO2 Trajectories

-20

-10

0

10

20

30

40

50

60

70

1990 2010 2030 2050 2070 2090

CO

2 (O

NLY

) (G

t/yr

)

Years

BASE_0

Historical FFI

2DS_CM_1400GtCO2

2DS_CM_1400GtCO2_DA10

2DS_CM_1400GtCO2_DA10_MSA



2DS_CM_1300GtCO2



2DS_CM_1000GtCO2


2DS_CM_900GtCO2

2DS_CM_850GtCO2

2DS_CM_800GtCO2

2DS_CM_700GtCO2

2DS_CM_600GtCO2

2DS_CM_550GtCO2

2DS_CM_500GtCO2

How low (<2°C) can we go?1.5C – Temperature threshold or 2100 Target

0

0.5

1

1.5

2

2.5

3

3.5

4

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110

Tem

per

atu

re C

han

ge (

°C)

BASE_0_CM

2DS_CM_1400GtCO2






2DS_CM_1300GtCO2




2DS_CM_1000GtCO2




2DS_CM_900GtCO2

2DS_CM_850GtCO2

2DS_CM_800GtCO2

2DS_CM_700GtCO2

2DS_CM_600GtCO2

2DS_CM_550GtCO2

Temperature Change1.5C – Threshold or 2100 Target

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

2.5

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Tem

per

atu

re C

han

ge (

°C)

BASE_0_CM







Marginal Abatement costsbreak by starting year…

0

2000

4000

6000

8000

10000

12000

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110

Mar

gin

al A

bat

emen

t C

ost

($2

005/

tCO

2

2DS_CM_1400GtCO2

2DS_CM_1300GtCO2

2DS_CM_900GtCO2

2DS_CM_850GtCO2

2DS_CM_800GtCO2

2DS_CM_700GtCO2

2DS_CM_600GtCO2

2DS_CM_550GtCO2

2DS_CM_500GtCO2

2DS_CM_400GtCO2








2DS 66% Energy System in 21001,000 GtCO2 Budget 2020 – 2100

Primary Energy Supply

-

5,000

10,000

15,000

20,000

25,000

30,000

4DS . 4DS 2DS50%

2DS50%

DA30

2DS66%

. 4DS 2DS50%

2DS50%

DA30

2DS66%

. 4DS 2DS50%

2DS50%

DA30

2DS66%

. 4DS 2DS50%

2DS50%

DA30

2DS66%

2005 2030 2050 2070 2100

Pri

mar

y En

ergy

Su

pp

ly (

Mto

e)

Coal Oil Gas Nuclear Hydro Biomass Renewable except hydro and biomass

Power System production

-

5,000

10,000

15,000

20,000

25,000

30,000

4DS . 4DS 2DS50%

2DS50%

DA30

2DS66%

. 4DS 2DS50%

2DS50%

DA30

2DS66%

. 4DS 2DS50%

2DS50%

DA30

2DS66%

. 4DS 2DS50%

2DS50%

DA30

2DS66%

2005 2030 2050 2070 2100

Elec

tric

ity

Cap

acit

y (G

W) Solar PV

Solar Thermal

Wind

Geo and Tidal

Biomass CCS

Biomass

Hydro

Nuclear

Gas and Oil

Coal

GDP losses & Delayed Action

0 2 4 6 8 10 12 14 16 18 20

2DS 50%

2DS 50% DA20

2DS 50%

2DS 50% DA20

2DS 50%

2DS 50% DA20

2DS 50%

2DS 50% DA20

20

30

20

50

20

70

21

00

GDP Loss %

Former Soviet Union

Australia & NZ

South Korea

Other Developing Asia

Canada

Middle East

China

East Europe

Africa

India

West Europe

Japan

USA

Central South America

Mexico

The KLEM modeland its linkage to TIAMFrédéric Ghersi (CNRS/CIRED)

Why Hybrid Linking?

• Update TIAM Macroeconomic outlook(s)

• Harmonisation of energy service demands with changing economic outlook.

• Aim for Best of both worlds.

• Technological Explicitness

• Macroeconomic realism

• Sectoral Dynamics (Energy, Non Energy, Households)

• Demand response (adaptation) is critical to meet deep decarbonisation scenarios.

• Moving forward from TIAM-MACRO

• Investigate multi-sector dynamics

• Better represent socio-economic dynamics

Overview of linkage

• TIMES-MACRO (Remme & Blesl, 2006)

• TIAM-KLEM

TIAM

Energy p&qs

KLEM

Labour

ES investment

Households’ consumption

Public consumption

International trade

Investment

Non-E/E Capital

Non-E output

Simultaneously

Iteratively

?Non-E prices?

Prerequisites

• National accounting framework to access

• Complete cost structures K, L, E, M(1,…,n)

• Inter-industry flows i.e. structural change, dematerialisation

• Market instruments recycling options

• Distributive issues, at least firms/government/households

• Dual accounting in monetary and physical units

• To keep track of energy volumes in stand-alone versions

• To model agent-specific pricing

• Explicit investment profiles

• To account for transitional strain on shorter time intervals

KLEM at a glimpse

• CGEM with 2 primary factors L and K, 1 E good, 1non-E good

• Recursive dynamics driven by

• Exogenous L supply and productivity (SSP)

• K accumulation via exogenous investment & depreciation rates

• Public expenses constant share of GDP, constant (rough) tax system

• Operates on hybrid energy/economy matrix obtained from crossing GTAP and TIAM data

18/16

B$ Non-E E C G I X Uses

Non-E 14 085 90 9 022 3 235 3 410 2 158 32 000

E 430 627 249 - - 269 1 574

L net 5 859 41

L taxes 2 060 15

Y taxes 649 87

K 5 681 137

M 1 980 461

SM non-E - 103

SM E - -14

SM C - -58

SM X - -30

Sales taxes 1 257 116

Resources 32 000 1 574

Base year (2007) IOT, WEU



Non-E 14 085 90 9 022 3 235 3 410 2 158 32 000

E 430 627 249 - - 269 1 574

L net 5 859 41

L taxes 2 060 15

Y taxes 649 87

K 5 681 137

M 1 980 461

SM non-E - 103

SM E - -14

SM C - -58

SM X - -30



E uses and imports are TIAM data with explicit p x q decomposition



Non-E 14 085 90 9 022 3 235 3 410 2 158 32 000

E 430 627 249 - - 269 1 574

L net 5 859 41

L taxes 2 060 15

Y taxes 649 87

K 5 681 137

M 1 980 461

SM non-E - 103

SM E - -14

SM C - -58

SM X - -30



Remainder of E resource structure scaled up/down from GTAP to balance uses




Non-E 14 085 90 9 022 3 235 3 410 2 158 32 000

E 430 627 249 - - 269 1 574

L net 5 859 41

L taxes 2 060 15

Y taxes 649 87

K 5 681 137

M 1 980 461

SM non-E - 103

SM E - -14

SM C - -58

SM X - -30



Calibrated zero-sum specific margins warrant agent-specific E prices


Remainder of E resource structure scaled up/down from GTAP to balance uses



Non-E 14 085 90 9 022 3 235 3 410 2 158 32 000

E 430 627 249 - - 269 1 574

L net 5 859 41

L taxes 2 060 15

Y taxes 649 87

K 5 681 137

M 1 980 461

SM non-E - 103

SM E - -14

SM C - -58

SM X - -30



Non-E data deduced from GTAP totals

KLEM behavioural assumptions

• Output sequential trade-off of K vs. L then KL vs. E then KLE vs. ‘M’ (aggregate of non-E goods)

• K vs. L, KLE vs. M settled by CES functions

• KL (VA) vs. E from TIAMunder a maintained CES assumption for KLE

• Aggregate savings rate exogenous (recursive dynamics)

• Households’ E consumption from TIAM

• International trade

• E trade from TIAM

• Non-E trade: ratio of M to Y isoelastic to terms of trade; X settled by international good CES of exported goods (Armington)

24/16

At each period from 2010 to 2100


Non-E 14 085 90 9 022 3 235 3 410 2 158 32 000

E ### ### ### - - ### ###

L net 5 859 41

L taxes 2 060 15

Y taxes 649 87

K 5 681 ###

M 1 980 ###

SM non-E - 103

SM E - -14

SM C - -58

SM X - -30



TIAM trajectory prescribes E uses and imports as well as E investment requirements, which drive KEaccumulation

K rental price adjusts to balance remainder of K supply and K demand by non-E production



Non-E 14 085 90 9 022 3 235 3 410 2 158 32 000

E ### ### ### - - ### ###

L net 5 859 ###

L taxes 2 060 ###

Y taxes 649 87

K 5 681 ###

M 1 980 ###

SM non-E - 103

SM E - -14

SM C - -58

SM X - -30



Labour intensity of E production assumed constant, wage adjusts to balance remainder of L supply and Ldemand by non-E production

Optional imperfect L market magnifies cost of E investment crowding out non-E investment



Non-E 14 085 ### 9 022 3 235 3 410 2 158 32 000

E ### ### ### - - ### ###

L net 5 859 ###

L taxes 2 060 ###

Y taxes 649 ###

K 5 681 ###

M 1 980 ###

SM non-E - 103

SM E - -14

SM C - -58

SM X - -30

Sales taxes 1 257 ###


‘M’ (non-E) intensity of E production trades off with KLE aggregate under a constant elasticity of substitution assumption

Output and sales taxes constant ad valorem rates



Non-E 14 085 ### 9 022 3 235 3 410 2 158 32 000

E ### ### ### - - ### ###

L net 5 859 ###

L taxes 2 060 ###

Y taxes 649 ###

K 5 681 ###

M 1 980 ###

SM non-E - ###

SM E - ###

SM C - ###

SM X - ###


Resources 32 000 ###

Specific margins adjust to have E end-use prices match TIAM agent-specific prices



Non-E 14 085 ### 9 022 3 235 3 410 2 158 32 000

E ### ### ### - - ### ###

L net ### ###

L taxes ### ###

Y taxes 649 ###

K ### ###

M 1 980 ###

SM non-E - ###

SM E - ###

SM C - ###

SM X - ###



In non-E production

K and L trade off with constant elasticity to produce aggregate KL (VA) considering wage and rent adjusted to clear markets

Optional imperfect L market magnifies cost of E investment crowding-out non-E investment

Resulting K, L and E combine into aggregate KLE following CES specification



Non-E ### ### 9 022 3 235 3 410 2 158 32 000

E ### ### ### - - ### ###

L net ### ###

L taxes ### ###

Y taxes 649 ###

K ### ###

M 1 980 ###

SM non-E - ###

SM E - ###

SM C - ###

SM X - ###



In non-E production

Non-E intensity of non-E production and KLE aggregate trade off to produce domestic output Y

The price of the non-E good is the weighted average of domestic and import prices



Non-E ### ### 9 022 3 235 3 410 2 158 32 000

E ### ### ### - - ### ###

L net ### ###

L taxes ### ###

Y taxes 649 ###

K ### ###

M ### ###

SM non-E - ###

SM E - ###

SM C - ###

SM X - ###



In non-E production

The ratio of imports to domestic output in (volumes) is isoelastic to the ratio of their prices



Non-E ### ### 9 022 3 235 3 410 2 158 32 000

E ### ### ### - - ### ###

L net ### ###

L taxes ### ###

Y taxes ### ###

K ### ###

M ### ###

SM non-E - ###

SM E - ###

SM C - ###

SM X - ###

Sales taxes 1 ### ###


In non-E production

Exogenous tax rates



Non-E ### ### ### ### ### ### ###

E ### ### ### - - ### ###

L net ### ###

L taxes ### ###

Y taxes ### ###

K ### ###

M ### ###

SM non-E - ###

SM E - ###

SM C - ###

SM X - ###

Sales taxes 1 ### ###

Resources ### ###

Final non-E consumptions

G and I are exogenous shares of GDP

X trades off with Xs of other regions at constant elasticity of substitution (Armington) to provide sum of Ms

Closure of accounting balance defines C

Overview of linkage

• TIMES-MACRO (Remme & Blesl, 2006)

• TIAM-KLEM

TIAM

Energy p&qs

KLEM

Labour

ES investment

Households’ consumption

Public consumption

International trade

Investment

Non-E/E Capital

Non-E output

Simultaneously

Iteratively

?Non-E prices?

Conclusions

• Achieving below 2C is highly improbable and near infeasible. • 1.9°C – 1.8°C – simple climate model

• GDP losses in the utility maximising least cost scenario for delayed action to 2020 is regionally varied and inequitable.

• Greater structural resolution and flexibility is required in hybrid models to better account for limits to substation and structure change.

• This hybrid type of approach steps towards sectoral specific dynamics of decarbonising from a bottom up technology explicit perspective

• Unemployment, structural changes, sectoral outputs

• Could inform targeted regional/sector specific transition policies

Acknowledgements

Centre International de Recherchesur l’Environnement et le Développement

Environmental Research Institute

Instiúd Taighde Comshaoil

Energy Policy and Modelling Group

www.ucc.ie/energypolicy

@james_glynn

[email protected]

Hybrid Linking TIAM-KLEM: Assessing technological pathways ... · Post Paris Policy Context...

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