Cost of Greenhouse Gas Mitigation
Cost of Greenhouse Gas Mitigation
The Cost of Greenhouse
Gas Mitigation: A Brief
AT 760: Global Carbon Cycle
December 18, 2003
Increasing Greenhouse Gas (GHG) emissions
may cause considerable global and regional
climate change leading to significant economic,
environmental, and ecological costs over the
Global Warming Potentials (over 100 y):
World GHG Emissions by Sector§
CO2 Emissions (GtC)
(Total energy emissions accounted for 5.5 GtC emissions in 1995).
§ Energy usage only, does not include other emissions such as cement production, landfill emissions,
and land-use changes such as forest management, etc.
† Average annual growth rate from 1971-1995
‡ The agriculture sector accounts for 20% of CO2 equivalents because of methane emissions.
[Adapted from Price et al. 1998, 1999, out of table in Climate Change 2001: Mitigation, 3rd
Assessment Report (TAR), IPCC Working Group 3]
Current Energy Usage of USA
[U.S. EPA Inventory of Greenhouse Gas Emissions, April 2002]
Worldwide Energy Trends
The average annual growth rate of global energy consumption was 2.4%
from 1971-1990, but dropped to 1.3% from 1990-1998.
The average annual growth rate of global energy-related CO2 emissions
dropped from 2.1% to 1.4% in the same periods.
Improved energy efficiencies
Increased fuel switching to less carbon-intensive sources
Adoption of renewable energy sources
Dramatic decrease in countries with economies in transition (EIT) as a result of
Why aren’t emissions dropping then?
Countervailing trends of population growth, economic growth, increased energy
usage per capita, and development of the Third World.
Uses integrated macro-economic models to estimate
the cost of GHG reduction activities.
Good for examining the effectiveness of overall
Estimates the cost of GHG reduction from a given
technology or mitigation activity.
Must compare to some baseline emissions from
current or expected technology portfolio.
What is the ‘cost’ anyway?
Direct (levelized) costs of delivered energy includes:
Capital costs (plant infrastructure)
Cost of capital (depends on interest rates)
Operation costs (personnel, etc.)
Fuel costs (mining, drilling, transport)
Opportunity cost of land use
Distortion to the economy
Opportunity cost of capital, export of capital for import of energy
Competition for resources (physical and personnel)
Effect on economic stability – energy security
Equality on local, regional, and global scales
Cost of GHG reductions
Compare a current energy production method or
portfolio to an alternative one
Compute difference in GHG emissions
Compute difference in direct and indirect costs
Arrive at cost of GHG avoidance ($/tC)
Proper analysis includes direct and indirect
costs, and macroeconomic effects
Mitigation of Greenhouse Gases
Low or no carbon energy production
The U.S. spends over $216 billion on electricity each year (out of a total energy
expenditure of $558 billion, mostly petroleum)
Current installed capacity is 816 GW, average production is ~750 GW, or 5000 TWh/y
Growth rate is ~1.6% per year
Current electrical production portfolio of the USA is:
Current best efficiency
1170 (peak, reserve)
gas combined cycle
Estimated total costs of various
forms of electricity production
For power production in Switzerland
The human cost of energy
Current U.S. Electrical Trends
To a good approximation,
all additional electrical
capacity over the next 5
years will be natural gas
Natural gas-fired turbines
are roughly twice as
efficient as existing coalfired power plants and
emit roughly half as much
C per unit energy
kg C emitted
per GJ energy
Wind energy has become cost-competitive with other sources of
production for high wind classes.
The doubling time of installed capacity is now 3-4 years
For each doubling, costs drop ~15%
Costs in 2006 should be 35-40% less than costs in 1996
By 2030, the wind farms in the best wind classes could be as low as
2.2 ¢/kW-h, cheaper than even natural gas-fired electricity.
In the U.S.
Total installed US Wind Power capacity is now 5.3 GW as of Oct. 27,
2003 (0.6% of total installed electrical capacity)
1.6 GW of new U.S. wind capacity coming online by the end of 2003
1.5 ¢/kW-h production tax credit (expires Dec 31, 2003) has provided
~$5 billion subsidy over the past 10 years
U.S. Installed Capacity (MW)
Total Installed U.S. Wind Energy Capacity: 5,325.7 MW as of Oct 27, 2003
[American Wind Energy Association]
U.S. Installed Wind Capacity (MW)
1981 1986 1991 1996 2001
Conclusions: Best Strategies
The most cost effective short-term (2-20 y) strategies for avoiding emissions due to
electricity production are:
For the longer term (20-100 y), the following methods of electricity production may
become cost effective as fossil fuel costs increase:
Substitute natural gas for coal
Substitute nuclear for coal
Substitute wind for coal
Substitute hydro for coal
More wind, nuclear, and hydro
Biomass and energy cropping
Coal fired electricity, hydrogen production with sequestration
Technology wildcards that probably aren’t likely, but could radically alter the mix:
Current cost of energy in the U.S. is 5% of GDP
If the cost of mitigation is $100/tC avoided, then this
would add an expense of $200-300 billion per year, or 23% of GDP
Perhaps up to half of the initial reductions actually have
negative direct costs (due to energy saved)
How does this compare with other economic costs?
Total health care expenditures in 2001 were 13.9% (8.4%
average for OECD countries)
Total spending on defense in the U.S. has fallen to 3-5%
[Defense and the National Interest web page]
Even if we ignore the climate effects, other issues
could come into play
Recommended Policies: Kyoto
Institute a moderate carbon tax on refined gasoline, coal
Reduce or eliminate subsidies for oil and coal
Promote increased infrastructure capacity for natural gas
transport, eventual hydrogen transport
Modernize the electrical grid, allow for distributed
Continue R&D on ‘clean’ coal technologies (with
sequestration), with transition to hydrogen production
Continue R&D towards commercialization of solar
Increase tax credits and incentives for use of renewable
sources (wind, solar, biomass)
Continue tax credits and incentives for efficiency
General Conclusions for the GHG
We (the U.S.) can definitely afford to keep moving
towards a lower carbon-intensive economy.
Accelerating our movement on this path will incur
nominal additional costs for our energy.
Future costs of GHG emissions avoidance may be even
lower as technologies mature.
Stabilization to 550 ppm will not be excessively hard to
achieve, but 450 ppm will be very expensive.
We still have a bit of time left – stabilization will be much
harder with departures beyond 2030 (T. Wigley, 1997).
The primary reference for this presentation is Climate Change 2001: Mitigation, the 3 rd Intergovernmental Panel on Climate Change
(IPCC) report, Working Group 3. Chapter 3 was most relevant to this presentation. The report can be obtained online at:
A secondary reference for energy issues can be found in the World Energy Assessment: Energy and the Challenge of Sustainability,
2000. United Nations Development Programme (UNDP). This report can be obtained online at:
Price, L., L. Michaelis, E. Worrell, and M. Khrushch, 1998: Sectoral Trends and Driving Forces of Global Energy Use and Greenhouse Gas
Emissions. Mitigation and Adaptation Strategies for Global Change, 3, 263-319.
Price, L., E. Worrell, and M. Khrushch, 1999: Sector Trends and Driving Forces of Global Energy Use and Greenhouse Gas Emissions:
Focus on Buildings and Industry. Lawrence Berkeley National Laboratory, LBNL-43746, Pergamon Press, Berkeley, CA.
Wigley, T. M. L., 1997: Implications of recent CO2 emission-limitation proposals for stabilization of atmospheric concentrations. Nature,
Williams, Robin. H., 2001: Nuclear and Alternative Energy Supply Options for an Environmentally Constrained World: A Long-term
Perspective. Prepared for the Nuclear Control Institute Conference Nuclear Power and the Spread of Nuclear Weapons: Can We Have
One Without the Other? Washington, D.C., April 2001.
On the web:
Statistics on U.S. wind energy production (American Wind Energy Association): http://www.awea.org/projects/index.html
Current News on Wind Energy Production Tax Credit: http://www.awea.org/news/news031125ptc.html
Defense Spending as % of GDP (Defense and the National Interest webpage): http://www.d-ni.net/charts_data/defense_percent_gdp_1940_2000.htm
U.S. Inventory of Greenhouse Gas Emissions (EPA): http://yosemite.epa.gov/oar/globalwarming.nsf/content/Emissions.html
Terasen Gas Greensheet: Natural Gas and the Environment
Energy Information Administration (EIA), U.S. Department of Energy (DOE): http://www.eia.doe.gov
External costs of electricity production, GaBE Project – Comprehensive Assessment of Energy Systems, Paul Scherrer Institut:
Energy subsidies and external costs, UIC Nuclear Issues Briefing #71: http://www.uic.com.au/nip71.htm
“‘Too Little’ Oil for Global Warming”, New Scientist, Oct 2003: http://www.newscientist.com/news/print.jsp?id=ns99994216
Upsalla Protocol: http://www.isv.uu.se/uhdsg/UppsalaProtocol.html