Clean Power Plan Proposal
Climate (CO2) Benefits
Steven Rose
Energy and Environmental Analysis Research Group, EPRI
RFF/EPRI Webinar
December 16, 2014
Clean Power Plan Benefits & Costs
Estimated 2020 Benefits & Compliance Costs for
Proposed Option 1 State Compliance Approach
However,
issues to
consider with
Social Cost of
Carbon (SCC)
estimation &
application.
$100
Air pollution
health
co-benefits
$80
billions 2011$
Climate (CO2)
benefits the
minority or
majority of
benefits.
$60
Climate (CO2)
benefits
$40
$20
Low
High
3% DR Health Ben.
Figure developed from U.S. EPA Clean Power Plan Proposed Rule, June 2, 2014,
http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule.
© 2014 Electric Power Research Institute, Inc. All rights reserved.
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CO2 reduction2020
X
Net benefits
-$20
X
Lowest SCC2020
Total
compliance
costs
$0
Highest SCC2020
CO2 reduction2020
Low/high =
lowest/highest climate &
air pollution benefit
estimates
Two Topics
• Social Cost of Carbon Estimation
– US Government SCCs
• Social Cost of Carbon Application
– CO2 benefits
– Cost-benefit analysis
© 2014 Electric Power Research Institute, Inc. All rights reserved.
3
Two Topics
• Social Cost of Carbon Estimation
– US Government SCCs
• Social Cost of Carbon Application
– CO2 benefits
– Cost-benefit analysis
© 2014 Electric Power Research Institute, Inc. All rights reserved.
4
The Social Cost of Carbon (SCC)
Definition: The net present value of global climate change
impacts from one additional net global tonne of carbon dioxide
emitted to the atmosphere at a particular point in time
Socioeconomics
Emissions (CO2, etc.)
Temperature
Climate damages
Population
Income
2000
2000
2000
2000
2000
Dashed = after
CO2 pulse
CO2 pulse
2300
2300
2300
© 2014 Electric Power Research Institute, Inc. All rights reserved.
2300
2300
2000
2000
2300 2000
2300
2000
2300
2300
SCC in 2020 is the discounted value of the
additional net damages from the marginal
emissions increase in 2020
5
US Government SCC Values
US Government Social Costs of Carbon by Discount Rate
$200
$180
$160
3% (95th
percentile)
Solid = USG (2013) estimates
Dashed = USG (2010) estimates
2007$ / CO2
$140
$120
$12 to $128/tCO2
$100
$80
2.5%
“Central”
values
What do these mean?3%
$60
$40
5%
$20
$0
2010
2020
2030
Source: Developed from USG (2010) and USG (2013)
© 2014 Electric Power Research Institute, Inc. All rights reserved.
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2040
2050
EPRI SCC Technical Assessment Study –
Trying to Better Understand the SCC Modeling
• Currently difficult to interpret and evaluate the SCCs
– Behind each value significant aggregation – models, scenarios, time,
regions, sectors
• Making sense of the SCCs requires delving into the details
– We examine inner workings of the models and assess raw
modeling and results (undiscounted, disaggregated)
– Elucidating and assessing components & overall approach
Socioeconomics
Emissions (CO2, etc.)
Temperature
Climate damages
Population
Income
2000
2000
2000
2000
2000
Dashed = after
CO2 pulse
CO2 pulse
2300
2300
2300
2000
2300
2300
2000
2000
2000
2300
2300
2300
2300
Component 1
© 2014 Electric Power Research Institute, Inc. All rights reserved.
Component 2
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Component 3
Reviewing modeling,
programming
components, running
diagnostic scenarios,
comparing, exploring
many perspectives
Significant Differences in Climate Responses
e.g., Projected Incremental Temperatures for a 1 billion tC pulse in 2020
0.0025
For the same incremental emissions
scenario, significant differences in the
incremental temperature change over time
Always higher response off
lower emissions scenario
USG5
0.002
DICE
0.0015
deg C
FUND
USG2
PAGE
0.001
Driven by modeling differences in
carbon cycle, non-CO2 forcing,
forcing to temperature translation,
climate sensitivity responsiveness,
and implementation
0.0005
0
2000
2010
2020
© 2014 Electric Power Research Institute, Inc. All rights reserved.
2030
2040
2050
2060
8
2070
2080
2090
2100
Significant Differences in Damage Responses
e.g., Projected Incremental Global Damages for Incremental Climate Signal
For the same
incremental
temperature
change scenario,
~4x variation in
incremental
damages
Driven by differences
in damage modeling
structure &
parameterization
© 2014 Electric Power Research Institute, Inc. All rights reserved.
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Models Considering Significantly Different
Climate & Damage Uncertainty
DICE
FUND
PAGE
Incremental global temperature
0.0030
DICE - USG2
0.0030
FUND - USG2
0.0025
0.0025
0.0020
0.0020
0.0020
0.0015
0.0010
0.0005
degrees C
0.0025
degrees C
degrees C
0.0030
0.0015
0.0010
2050
2100
0.0000
2000
2050
2100
25%
50%
0.0015
75%
0.0010
95%
0.0000
2000
-0.0005
99%
Mean
2050
Incremental global damages
FUND has broader
damage
distribution
© 2014 Electric Power Research Institute, Inc. All rights reserved.
1%
5%
0.0005
0.0005
0.0000
2000
PAGE has broader
PAGE -temp
USG2 distribution
Results for USG2 scenarios with
10 sensitivity 3˚C
climate
PAGE has higher
mean
Means
2100
Det
Overall Observations
• Significant structural & response differences across models –
need to evaluate if they reflect differences in expert opinion
• Some uncertainty is captured, however reasonable alternative
specifications, additional uncertainties, and artificial variation
• Inconsistencies across modeling & inter-model relationships –
raises issue of statistical comparability (required for approach)
• Results sensitive & reasonable alternative assumptions and
modeling – should evaluate robustness of current results (i.e.,
sensitivity to alternatives)
• Issues with the overall framework, in particular the multi-model
approach (consistency and comparability)
Study Reference: Understanding the Social Cost of Carbon: A Technical
Assessment, http://epri.co/3002004657.
© 2014 Electric Power Research Institute, Inc. All rights reserved.
11
Two Topics
• Social Cost of Carbon Estimation
– USG SCCs
• Social Cost of Carbon Application
– CO2 benefits
– Cost-benefit analysis
© 2014 Electric Power Research Institute, Inc. All rights reserved.
12
SCC Application Issues
• Estimating net global CO2 changes
– SCC is the value of a net incremental change in GLOBAL CO2
– Policies applying USG SCCs typically do not estimate
– Do we need to revise CO2 benefits estimates? For CPP, CO2 leakage
beyond the US power sector? (x% = x% lower CO2 benefits)
• Consistency between estimated benefits and costs
– Do we need consistency in socioeconomic & emissions assumptions in
estimating compliance costs, CO2 reductions, and SCC estimates?
– Can we compare levelized costs to annual benefits? Want to compare
net present values to capture temporal profiles of costs & benefits.
• Use of multiple SCC values
– Which SCC should be used? In this rule, across rules, across agencies?
– Need guidance
© 2014 Electric Power Research Institute, Inc. All rights reserved.
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Consistency in Socioeconomic & Emissions
Assumptions
Inconsistency in assumptions for compliance costs, CO2 reductions, & SCCs?
Costs & CO2 reductions: 1 future (AEO2013 Reference Case)
SCC: 5 futures (USG1, USG2, USG3, USG5, USG5)
Socioecon/emissions assumptions matter for the SCC
Mean & 1st - 99th percentile 2020 SCCs by
model and socio/emissions scenario (DR=3%)
Average across models 2020 SCCs by
socio/emissions scenario (DR=3%)
$800
$60
~55% variation
$700
$600
$40
$500
$30
$400
2007$ per tCO2
$20
$10
$0
Even more variation with
individual models
(60-100% in the means)
$300
$200
$100
$0
Official
SCC
Figures developed from USG (2013)
© 2014 Electric Power Research Institute, Inc. All rights reserved.
DICE
14
FUND
PAGE
USG5
USG4
USG3
USG2
USG1
USG5
USG4
USG3
USG2
-$100
USG1
USG5
USG5
USG4
USG4
USG3
USG3
USG2
USG1
USG1
USG2
2007$ per tCO2
$50
Concluding Remarks
• Social Cost of Carbon Estimation
– The social cost of carbon (SCC) is important
– However, current estimates are difficult to interpret & assess
– Greater technical clarity on what underlies and drives the
estimates is needed
– We undertook a research effort designed to better understand
the current modeling and facilitate future modeling and
application and climate research more broadly
– From our detailed technical assessment, we observe some
fundamental challenges and issues
• Social Cost of Carbon Application
– There are also methodological issues related to application of
SCC values in CO2 benefits calculations & cost-benefit
assessment
© 2014 Electric Power Research Institute, Inc. All rights reserved.
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Thank You!
Questions/comments:
Steven Rose
srose@epri.com
202-293-6183
© 2014 Electric Power Research Institute, Inc. All rights reserved.
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