Module 2
Mitigation Assessment:
Concepts, Structure and Steps
a.
Introduction
•
•
•
•
b.
c.
d.
Why do a mitigation assessment?
Preparation, structure and steps
Data collection
Key participants
Baseline scenarios
Screening
Mitigation scenarios
2.1
Module 2a
Introduction
(Preparation, structure, steps, data collection, key participants)
2.2
Why do Mitigation Assessment?
• To meet the principles and objectives of the UNFCCC.
Under Article 4, all Parties are required to assess
programs and measures that will mitigate climate
change.
• To provide policy makers with an evaluation of
technologies and practices that can mitigate climate
change and also contribute to national development
objectives.
• To understand the costs of avoiding climate disruption.
• To identify potential project/programme investments.
2.3
UNFCCC, GHG Inventories, and GHG Mitigation
INVENTORY
ASSESSMENT
Inventory of
GHG Sources
and Sinks
MITIGATION
IDENTIFICATION
Taxonomy of
Mitigation Options
GHG Reduction
& Sequestration
UNFCCC
Reporting
Assessment of
Mitigation Options
GHG Mitigation
Projects & Policies
PROJECT
DEVELOPMENT
and FINANCE
National
Action Plans
STRATEGIC
PLANNING
2.4
…and What Will it Cost?
Cost curve
(all eligible options)
50
40
Abatement costs
(in US dollars 1990 per tonne)
30
20
10
0
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
1,6
1,8
-10
-20
-30
-40
Source: ECN, SEI & AED, 1999
-50
Abatement potential
(Gigatonnes CO2 equivalent)
• Ability to aggregate is limited by inconsistency in definition of
costs and baseline assumptions across studies.
• Some studies excluded significant mitigation options.
• Studies may neglect or under estimate transaction and barrier
reduction costs.
2.6
Preparing for a Mitigation
Assessment
• Define Time Frame (typically long run)
• Define Scope (energy demand & supply, agriculture, land-use,
forestry, solid waste, geological sequestration).
• Define participants and key stakeholders (policy makers, scientific
community, NGOs).
• Define desired results.
• Select methodologies consistent with data and expertise availability.
• Standardize key parameters (base year, end year, discount rate,
etc.)
• Define project boundaries (consistent with approach used to
develop emissions inventories)
• Define scenarios (typically at least two: “baseline” and “mitigation”)
2.7
Structure of a Mitigation Assessment
Source: UNEP Economics of Greenhouse Gas Limitations Guidelines (1999)
2.8
Steps of a Mitigation Assessment
Depends on goals, scope & sectors, but has common steps:
1. Collect data.
2. Assemble base year/historical data on activities,
technologies, practices and emission factors.
3. Calibrate base year to standardized statistics such as
national energy balance or emissions inventory.
4. Prepare baseline scenario(s).
5. Screen mitigation options.
6. Prepare mitigation scenario(s) and sensitivity analyses.
7. Assess impacts (social, economic, environmental).
8. Develop Mitigation Strategy.
9. Prepare reports.
2.9
Timeframe for Assessments
• Ideally, should be long-term to reflect economic lifetime
and potential for stock turnover of major technologies
(e.g. 30-40 years in the energy sector).
• But development of long-term projections are very
difficult, especially in developing countries, due to
uncertainties over future development and limited
statistical data.
• Nearer term assessments (10-20 years) based on
national plans and sectoral assessments are more
practical for most developing countries.
• These nearer term assessments could usefully be
complemented by more aggregate assessments of
longer-term trends.
2.10
Integrating with GHG Inventories and
Vulnerability and Adaptation (V&A) Assessments
•
•
•
•
Mitigation assessments should be closed linked to the other national
communications: GHG inventories and V&A assessments.
Should be consistent with data and assumptions used in those assessments (e.g.
demographic and economic assumptions).
Reporting on the 3 elements should be harmonized and closely coordinated.
GHG Inventories:
–
–
•
will identify major sources and sinks of GHGs, helping to determine the scope and emphasis
in the mitigation assessment.
Mitigation assessment accounts should use inventories accounting procedures and emission
factors wherever possible.
V&A Assessments:
–
–
Will identify possible changes in natural resource conditions and management practices,
which could effect baseline resource conditions as well as the applicability of mitigation
options.
For example: climate change might affect hydro potential, irrigation energy requirements, and
biomass productivity, and alter the effectiveness of mitigation strategies such as afforestation
or the reduction of agricultural emissions.
2.11
Key Study Parameters
•
•
•
•
•
•
Base year of study
Time horizon
System boundaries
Costing perspective (societal or market)
Discount rate
Treatment of avoided emissions:
– Should they be discounted?
2.12
Analysis of Costs
• Actions taken to mitigate climate change will often cause
economic resources to be diverted away from alternative
uses.
• Mitigation assessments normally attempt to estimate the
value of these resources using cost-benefit analysis
techniques.
• Incremental Costs are measured relative to a “no action”
counterfactual situation (the baseline).
• As far as possible, assessments should try and include
all costs. Some costs may be negative (“no regrets”).
• Multi-attribute analysis is a technique for integrating
different quantitative indicators in an overall decision
framework based on scores and weights. Allows factors
that are hard to cost to be included in an overall decision
framework.
2.13
Cost of Saved Carbon (CSC)
CSC is a common numeraire for reporting and
comparing costs of GHG mitigation options.
NPVi $
$ 
CSC   
 tC  NPE j tC 
NPV - net present value of option at discount rate i
NPE - net present value, or discounted sum of
emissions (E) at discount rate j
 - difference between mitigation and reference
(baseline) option
2.14
Issues Over Discounting Carbon
• Reported CSCs typically embody a time preference for emission
savings or “carbon discount rate” (CDR), often equal to the
monetary discount rate used
• Discounting C at 7% suggests it’s better to save 1 ton C today
than 2 tons C in 10 years, even though climate will be worse off.
• CSCs for a given abatement measure can vary by a factor of four
or higher depending on CDR method used.
• Carbon discounting approach seldom noted in literature.
• Lack of consistent approach can lead to misleading results.
2.15
Data Collection
• Specific data requirements depend on scope and
objectives of study.
• Depending on methodology, may need to collect data
only for a base year, or may need to collect historical
time series data (e.g. if using econometric methods).
• Decide on level of data disaggregation: avoid temptation
to be “data driven”.
• Primary focus should be collation of secondary data, but
some primary data collection may be required and
assumptions/judgment will be needed to fill data gaps.
2.16
Key Participants
•
•
•
•
•
The development of mitigation assessments will require close cooperation
among a wide range of stakeholders.
Energy, environment and finance ministries will all likely need to be
involved. Some tasks may be undertaken by outside consultants or the
academic community.
Expert skills required include: statisticians, energy policy experts, engineers,
modelers, statisticians & technical writers.
However, mitigation assessments are not simply technocratic exercises:
they involve much broader judgments about how mitigation activities can fit
into national development priorities.
Thus, the context for defining mitigation priorities will in large part depend
on the process by which priorities are expressed in each country (e.g.
whether priorities are set by the Government alone or in consultation with
other stakeholders such as NGOs, industries, the scientific community, etc.)
2.17
From Mitigation Assessments to
National Action Plans…
• Developing a national action plan on mitigation is beyond the scope
of this workshop.
• Involves a much more ambitious scope of work.
• Key components of this challenge include:
– Plan development must involve a diverse group of government
agencies.
– Requires participation of non-governmental stakeholders.
– Must focus on well-defined objectives.
– Should emphasize implementation and have a practical focus.
– Should have local control and ownership: not be driven by donors.
– Should include aspects that aim to increase public awareness of climate
change.
– Plans should be living documents and viewed as part of an ongoing
process to address climate change.
2.18
Module 2b
Baseline Scenarios
2.19
Baseline Scenarios
•
•
•
•
•
•
A baseline is a plausible and consistent description of how a system might
evolve into the future in the absence of explicit new GHG mitigation policies.
Assessments will typically require one or more baseline scenarios: the
counterfactuals against which mitigation scenarios will be evaluated.
A baseline should not be considered a forecast of what will happen in the
future, since the future is inherently unpredictable and depends, in part, on
planning and the adoption of policies.
Baselines are highly uncertain over the long run and may be controversial,
particularly in developing countries.
– For example, should a baseline assume that the Millennium
Development Goals will actually be met, and if so what does this imply
for the energy systems of the poorest countries?
Ideally, multiple baselines should be constructed to reflect uncertainties
(sensitivity analysis). Each baseline requires separate mitigation analyses.
In practice, some reasonable balance will need to be struck between this
ideal and keeping the assessment manageable.
2.20
Baseline Scenarios (2)
• Reasonable baselines are critical to a mitigation analysis since
mitigation scenarios are largely judged on the basis of the
incremental costs and benefits relative to the baseline scenario.
• Baselines should not be a simple extrapolation of current trends:
they should consider likely evolution of activities that effect GHG
sources and sinks including consideration of:
–
–
–
–
Macroeconomic and demographic trends.
Structural shifts in the economy
Projections of the main GHG emitting activities and sinks.
Evolution of technologies and practices, including saturation effects and
the likely adoption of efficient technologies that effect GHG emissions.
2.21
Baseline Scenarios Typology
Three approaches to defining baselines:
1. Economic efficiency case: assumes perfect allocation of resources: mitigation
will always imply economic losses.
2. Business as usual case: a continuation of current trends.
3. Most likely case: markets and institutions are NOT assumed to behave
perfectly. May imply the existence of “no regrets” mitigation options.
• Many real-world examples of economic inefficiency, particularly in large
sectors such as energy and transport in both the OECD and the developing
world (“efficiency gap”).
• “Efficiency gap” may be due to market distortions and barriers, or to broader
social, political and cultural reasons.
• Plausible baselines must consider “most likely case”: How persistent will be
the “efficiency gap”, given high economic growth rates and the potential for
rapid turnover of technology stocks.
2.22
Module 2c
Screening of Mitigation Options
2.23
Screening Mitigation Options
•
•
•
•
•
•
•
Enables a rough assessment of the potential feasibility of options.
Particularly important when using bottom-up methodologies in which a wide
range of technologies and policies need to be considered.
May include a quantitative assessment of the mitigation potential (T CO2)
and cost of saved carbon ($/TC) of each option. May also include qualitative
factors.
One approach is to prepare a matrix and assign scores or rankings to
options in order to identify those options that need to be included in the
more in depth analysis.
Gives the opportunity to explicitly consider a comprehensive set of options
while reducing the level of effort required in the later more in-depth
mitigation analysis.
Reduces likelihood of overlooking important options.
Screening criteria should be consistent with overall framing of mitigation
scenario.
2.24
Possible Screening Criteria
•
•
•
Potential for large impact on greenhouse gases (GHGs)
Consistency with national development goals
Consistency with national environmental goals, such as:
–
–
–
–
–
•
•
•
•
Potential effectiveness of implementation policies
Sustainability of an option
Data availability for evaluation
Institutional considerations such as:
–
–
–
•
emissions reduction of local air pollutants
effect on biodiversity
soil conservation
watershed management
indoor air quality, etc.
Institutional capacity needed (data collection, monitoring, enforcement, permitting, etc.)
Political Feasibility
Replicability (adaptability to different geographical, socio-economic-cultural, legal, and
regulatory settings)
Other sector-specific criteria
2.25
Possible Economic and
Social Screening Criteria
• Cost-effectiveness
– Average and marginal costs
• Project-level considerations
– Capital and operating costs, opportunity costs, incremental
costs
• Macro-economic considerations
– GDP, jobs created or lost, effects on inflation or interest rates,
implications for long-term development, foreign exchange and
trade, other economic benefits or drawbacks
• Equity considerations
– Differential impacts on countries, income groups or future
generations
2.26
Screening Matrix
Examples of Criteria
Mitigation Potential
Direct Costs
Indirect Costs
- Increase in domestic employment
- Decrease in import payments
Consistency with Development Goals
- Potential for wealth generation
- Consistency with MDGs
Consistency with Environmental Goals
-Potential for reducing air, water and other pollution
Long term sustainability of option
Data
-Availability
-Quality
Feasibility (political, social, technical)
Mitigation Option 1
Tonnes CO2,
score or ranking (low, medium)
$/Tonne, C/B ratio, score or ranking
Option 2
Option 3
Score or ranking
Score or ranking
Score or ranking
Score or ranking
Score or ranking
Score or ranking
Score or ranking
Score or ranking
Score or ranking
2.27
Screening with Cost Curves
• A technique for screening
and ranking GHG mitigation
options.
• Plot cumulative GHG
reduction from successive
mitigation options (e.g.
tonnes of CO2 avoided)
against cost per unit of GHG
reduction (e.g. $/tonne).
• Area under curve yields total
cost of avoided emissions.
• Care should be taken to
consider interdependencies
among options (e.g. benefits
such as fuel switching in
electric sector may be
reduced by end-use
efficiency programs).
Source: Sathaye & Meyers. Greenhouse Gas Mitigation Assessment: A Guidebook (1995)
2.28
Three Approaches to
Developing Cost Curves
• Partial approach
• Retrospective systems approach
• Integrated systems approach
2.29
The Partial Approach
• Each technology is evaluated separately
and compared to a reference technology.
• Overall emission reductions and costs are
created by combining options while
assuming no interaction between options.
• Simple to conduct, but relies on analyst to
identify interdependencies among options.
2.30
The Retrospective System
Approach
• Step 1: Independent ranking of options (like
partial approach)
• Step 2: Include most cost effective option in
a scenario and then recalculate costs and
emission reductions for all other options.
• Step 3: Include next option and recalculate.
• Continue until cost curve meets mitigation
objectives.
2.31
The Retrospective System
Approach (continued)
• Takes into account interdependencies
between an option and previous options
on curve
• May not account for impacts that more
expensive options have on cheaper
options already chosen
• May be important for efficiency options.
2.32
Integrated System Approach
• Accounts for interdependencies among options.
• Requires an integrated model that can chose marginal options
based on their cost per emission reduction.
• Automatically develops least cost curves within technical
parameters and model constraints.
• Powerful but complex modeling process - may be difficult to
equate reductions with specific options (points on cost curve
are a mix of options).
• Hard to examine interactions between the energy and nonenergy sectors.
2.33
Macroeconomic Implications
• “Bottom-Up” approach only captures direct economic
costs, not impacts on GDP growth, employment, industrial
structure, etc.
• Estimating macroeconomic effects requires linkage to
macroeconomic model (e.g. through as investment
requirements, fuel expenditures, imports/exports, etc.)
• Macroeconomic effects may in turn feedback to effect
energy system.
• In a general equilibrium approach, whole system will be
interdependent – but such models are complex and
controversial.
2.34
Module 2d
Mitigation Scenarios
2.35
Mitigation Scenarios
• Reflect a future in which explicit policies and measures
are adopted to reduce the sources (or enhance the
sinks) of GHGs.
• Mitigation scenarios should take into account the
common but differentiated responsibilities of the Parties
and the specific national and regional development
priorities, objectives and circumstances.
• Mitigation scenarios should not simply reflect current
plans. Instead they should assess what would be
hypothetically achievable based on the goals of the
scenario.
2.36
Steps in Constructing
Mitigation Scenarios
• Establish framing.
• Create option portfolios (identify synergistic and/or mutually
exclusive options & double counting), estimate penetration
rates.
• Construct integrated scenarios using chosen modeling
methodology.
• Calculate overall costs, benefits and GHG mitigation potential.
2.37
Framing Mitigation Scenarios
Scenario frameworks include:
• An emission reduction target
– relative to the baseline,
– relative to emissions in some historical year, or
– Relative to some indicator such as CO2/capita or CO2/$
• All options up to a certain cost per unit of emissions reduction
(equivalent to a carbon tax).
• “No regrets” (cost-effective options only).
• Specific options or technologies: included based on
perceived technical and/or political feasibility.
• Parties may wish to assess more than one mitigation
scenario.
2.38
Possible Topics for Discussion
• What approach makes most sense: topdown/macroeconomic or bottom-up?
• What are the challenges in defining a baseline?
– what does “no action” really mean?
• What scenario framing approach makes most
sense (e.g., no regrets, reduction target, all
options up to a cost ceiling, etc.)?
• What criteria could be used in a screening?
2.39