Patrick Criqui, LEPII-EPE, CNRS-UPMF
Alban Kitous, ENERDATA
Cédric Philibert, IEA
Combining options for commitments AIXG, OECD, 22 March 2005 1


The POLES model: key features
 The Baseline projection
 A Carbon Constraint Case to 2050
 Exploring alternative scenarios:
1.
Impacts of non-binding targets for DCs
2.
Introducing price caps
3.
Introducing indexed targets
4.
Strengthening the carbon constraint
Combining options for commitments AIXG, OECD, 22 March 2005 2

 A partial equilibrium model for the world energy system …
 with a year-by-year recursive simulation process from 2004 to 2050
 and 46 key countries and regions
 Endogenous supply and demand on international energy markets and prices
 Low-emission technologies introduced
3 Combining options for commitments AIXG, OECD, 22 March 2005

 Supposes no major change in world energy and environmental policies
 World energy consumption in 2030 is nearly the same as in WEO but fuel mix differs, with more coal, less oil and gas
 2030 energy-related CO
2 emissions :
43 GtCO
2 against 38 GtCO
2 in WEO
 In 2050 more than 50 GtCO
2 from energy, i.e. twice current levels; close to IPCC scenarios leading to 1000 ppmv CO
2 or more (e.g. A1B)
4 Combining options for commitments AIXG, OECD, 22 March 2005

 US carbon intensity decreases by 2%/year, with technology policies:
On top of pre-existing efficiency improvements and price effects …
Revival of the nuclear option
Full-scale phase-in of CCS technologies
 The rest of Annex 1 (or Annex 1*) adopts fixed targets in 2050, at 50 % of 1990 emissions
 Non Annex 1 countries accept non-binding targets slightly under their BaU emissions:
90 % of their baseline 2030 emissions
80 % of their baseline 2050 emissions
5 Combining options for commitments AIXG, OECD, 22 March 2005

2
 Emissions peak at 40 GtCO
2 in
2040, close to IPCC scenarios for stabilisation at 750 ppmv
 Reduction from Baseline: 25% in 2050
 Emissions Trading is allowed among the Annex 1* and developing countries
 A carbon value of 19 €/tCO
2 in
2030 and 44 €/tCO
2 in 2050
 Emissions trading largely compensates the abatement costs for developing countries
60
50
40
30
20
10
0
2000 2010
World Emissions
2020 2030
Baseline
CCC
2040 2050
Combining options for commitments AIXG, OECD, 22 March 2005 6


Assumption: one key non
Annex 1 region gets a higherthan-expected economic growth
60
World Emissions
 As a result, this region renounces to fully meet its non-binding target and cannot sell CO
2 surplus
 Global emissions increase:
by 7% in the Baseline
by up to 18% in the CCC
 But the permit price increases only from 44 to 46 €/tCO
2 as higher energy prices partly offset reduced permit supply
50
40
30
20
10
0
2000 2010 2020 2030
Baseline
CCC
Baseline +
CCC +
2040 2050
7 Combining options for commitments AIXG, OECD, 22 March 2005

 Assumes a price-cap is introduced for Annex 1* with a linear increase to 50 €/tCO
2 in 2050 (i.e. above forecasted costs)
 and a key developing region experiences a higherthan-expected economic growth and renounces to meet its non-binding target and to trade CO
2 surplus

… then despite the absence of cheap reduction from this country, marginal abatement costs may not reach the price cap level, due to indirect effects on energy markets

This case reveals no “domino effect” of non binding targets on the other countries’ emissions
Combining options for commitments AIXG, OECD, 22 March 2005 8

 In case of economic surprises, indexed targets would result in the same global emissions as non-binding targets, but with relatively lower abatement costs for Annex I* countries, as all countries would continue to trade
 The risk for the other regions of reaching a possible price cap level set above forecasted costs is in that case lower than with nonbinding targets
Combining options for commitments AIXG, OECD, 22 March 2005 9

 Assumes that Annex I* countries strengthen their targets, down to 25% of 1990 levels (« Factor 4 »)
Global emissions are reduced to 37.5 GtCO
2 with a permit price of 58 €/tCO
2
(i.e. a 700 ppmv profile)
The relatively limited impact results from the small share of
Annex 1* countries in global 2050 emissions (19 %)
 A price cap may make this commitment easier. If it is set at 50 €/tCO
2 and if abatement costs are:
as forecasted (58 €/tCO
2
), the price cap level is reached, but emissions remain almost unaffected at 38 vs. 37.5 GtCO
2
lower than forecasted, then the more stringent target is reached at lower costs
higher than forecasted, emissions increase beyond the initial scenario
Combining options for commitments AIXG, OECD, 22 March 2005 10


“Combined options scenarios” may result in global reductions in the range of 25 % from Baseline in 2050
 In case of unexpectedly high economic growth, nonbinding targets or dynamic targets will indeed entail deviation from targets
 But may not have a strong effect on the emissions of the parties under a price cap, due to interactions with energy markets

Price cap may also help strengthening the constraint… with however limited effects on global emissions if the corresponding region is too small
Combining options for commitments AIXG, OECD, 22 March 2005 11