Transcript Climate4Media British Council Sponsored

Economics Department
Centre for Computational Finance and Economic Agents
Climate4Media
Workshop: Future of
Low Carbon
Transportation
Sponsored by British
Council, China
25-30 July 2010
Carbon,Congestion and
Climate Change Models
Professor Sheri Markose
University of Essex, United
Kingdom
1
Road Map 1:
Climate Change and how we deal
with congestion and carbon is the biggest challenge of
the 21st century
• Challenges posed by road transportation in
meeting Kyoto carbon reduction obligations
• Road transportation major contributor (30% in
US/UK countries) to CO2 emissions and global
warming (2010 study by Nadine Unger of NASA's Goddard
Institute for Space Studies (GISS))
• Growing sector with car ownership increasing in
China and India
• How effective will electric cars be in CO2
abatement ?
• Smart, green, intelligent infrastructure
solutions to city centres : Some new thinking and 2
Road Map 2
• Behaviour change, market solutions such as congestion
charging, carbon tax vs. carbon abatement technological
innovation
• Red Queen arms race among corporates and countries
in the green technology race
• New methodological perspectives needed in extant
climate change model : based on reduced form
equations and static parameters
• Essex Economics Dept. pioneering Agent Based
Computational Economics (ACE)
• ACE allows full digital maps for economic environment –
be it a city centre congestion hot spot or a financial
networks; electronic market rebuilds
• Multi scale complex system modelling possible
• Provides platform for testbedding: Ask what if ?
questions and stress testing and wind tunnels prior to 3
implementation
Applaud the Climate Cool Media Workshop:
Future of Low Carbon Transportation
• Why have regional workshops with media, business, local and
regional authorities and rank and file ?
• Chief Economist Talking to Chief Economist Or Elites Talking
behind electrified fences on climate change issues : that is no
good
• Why? Individual behaviour change; business and risk
management innovation; govt. to coordinate with all three; all
being informed and taking responsibility
• 2007 : My experience of regional climate workshops co-hosted a
East of England Congestion and Carbon Conference; 2008 East
Yorkshire and Humberside Climate Conference
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Car
Ownership
per
1000
persons
(Source UN World Stat Handbook and Statisitical Yearbook : Total
cars: China 13.3 m ; India 13.8 mn; UK 62 m; USA
Rank
235m
Countries
Amount
#1
United States:
765 motor vehicles per 100 p
#2
Luxembourg:
686 motor vehicles per 100 p
#3
Malaysia:
641 motor vehicles per 100 p
#4
Australia:
619 motor vehicles per 100 p
#5
Malta:
607 motor vehicles per 100 p
#6
Italy:
566 motor vehicles per 100 p
#7
Canada:
563 motor vehicles per 100 p
#8
New Zealand:
560 motor vehicles per 100 p
#9
Austria:
558 motor vehicles per 100 p
# 10
Japan:
543 motor vehicles per 100 p
# 11
Portugal:
537 motor vehicles per 100 p
# 12
Iceland:
522 motor vehicles per 100 p
# 13
Norway:
494 motor vehicles per 100 p
# 14
Belgium:
484 motor vehicles per 100 p
# 15
Spain:
471 motor vehicles per 100 p
# 16
Cyprus:
450 motor vehicles per 100 p
# 17
Lebanon:
434 motor vehicles per 100 p
# 18
United Kingdom:
426 motor vehicles per 100 p
= 102
India:
12 motor vehicles per 100 p
= 105
Honduras:
11 motor vehicles per 100 p
= 105
Sierra Leone:
11 motor vehicles per 100 p
= 107
Belize:
10 motor vehicles per 100 p
= 107
China:
10 motor vehicles per 100 p
5
Weighted Average Global Car Ownership 164 per 1000 x
World Pop 6.8 bn Estimate: 723mn cars
• If India and China were to have car
ownership rates a la US – cities will
become ‘unliveable’ with total gridlock
• If present trends continue, the number of cars on
Earth will double in the next 30 years
• Roads a public good; non-exclusive so cars spill
onto roads
• There are two ways to reduce transportation
emissions: travel less, or increase vehicle
efficiency.
Both alternatives must be pursued vigorously
6
FORECAST UK CO2 EMISSIONS BY
SOURCE (1990- 2021) MtC
DfT et al (2005) – Transport Statistics: Great Britain 2005 - 31st edition,
October 2005, The Stationary Office,
London, Table 3.7, pp. 53.
Forecast from 2010 -2020
.
1990 1995 2000 2005
Road transport 29.7 30.1 31.7
Other transport 2.3
2.2
2.1
2010
2015
2020
32.4
34.5
36.5
38.2
1.8
1 .9
2.0
2.1
118
106
104
104
142
144
Rest of the
economy
133 121 119
Total 165
154 153
152
142
7
Situation in UK : Typical car produces 164
g/km ; EU target for 2008 140 g/km
• If current trends continue in UK, EU target for new cars
to 140g/km by 2008 would not be reached in the UK until
2021
• Market preferences for bigger,more powerful models.
Recent sales of small cars fell to their lowest level for
seven years last year while large vehicles secured their
highest share of the market yet. This means that the
average emissions of carbon dioxide for new cars fell by
only 1.2 % in 2005.
• Voluntary agreement between EC and car industry to
improve fuel efficiency by 25% relative to 1995 base
• Very slow progress !
8
Electric Car :If using hydro power based electricity to
charge battery - can reduce typical CO2 emission to 124.2
g/km which is a 11.28% improvement
• Energy efficient. Electric motors convert 75% of the
chemical energy from the batteries to power the
wheels—internal combustion engines (ICEs) only
convert 20% of the energy stored in gasoline
• Solar, wind and other non-hydrocarbon source of
electricity better CO2 emission reduction entailed
• However, Electric Car not a silver bullet
• Hidden emissions from road building;
• Increased electricity demand (though better utilization of
off peak electricity) might result in higher power rates for
consumers.
• The expense of adding recharging infrastructure
• Manufacture of lithium batteries mostly in Asia
9
Future Trends in Electric Car
Uptake
• International Energy Agency (IEA) forecast sales of
electric vehicles and plug-in hybrids at about 5 million
globally by 2020,
• This could grow to a 50 per cent market share by 2050.
• Germany projected to have 1 million electric vehicles on
its roads by 2020
• Nissan’s Leaf all-electric car, for release in 2011 was
unveiled at the 80th Geneva International Motor Show in
the March quarter 2010. Nissan Leaf US price US$
32,780, with substantial discounts by the US and state
governments.
• The Leaf promises zero tailpipe emissions, and a range
of 160 km (100 miles) on a single lithium-ion battery
charge. A 50 kW direct current charger will be available
to charge the battery up to 80 per cent in under 30
10
minutes.
Growth of Car Ownership Rates in China
and India Implies that even 50% ‘Green’
Cars by 2050 leads to Unsustainablility
• Hidden emissions from increased road
building or gridlock
• Electric cars an advance only if there is
growth in green (solar, wind ) electricity
• More radical transportation solutions
needed to reduce GHG emissions; Vehicle
units on roads must be reduced as current
trend is to have over 14 bn cars in 2050
11
Future Intelligent Infrastructure
2007 Project funded by
UK Office of Science and Technology
Intelligent Charging: Smart
Market
Protocols for Road Transport
Sheri M. Markose Amadeo Alentorn and Deddy Koesrindartoto
Economics Department and Centre For Computational Finance and Economic
Agents (CCFEA), University of Essex,
Phil Blythe, Sergio Grosso, Anett Ehlert and Dilum Dissanayake
Transport Operations Research Group (TORG), University of Newcastle upon Tyne
And
Peter Allen
Complex Systems Management Centre, Cranfield School of Management
12
Purpose: How to change travel
behaviour, fewer journeys
• Smart Markets could bring intelligence into the
road transport network to address congestion;
planning of green infrastructure can be done
with digitally based agent based models of city
centres
• A Smart Market is an on-line auction:
– Potential users submit bids
– Auction determines the price and ‘winners’
– Infrastructure operators pre-set the limits (slots)
We explore a road pricing regime which fixes (Cap) the
number of vehicles able to use the roads at peak time13
‘CAP’ and TRADE: Smart Market for Congestion
• Rationale : ‘CAP’’ and trade
• Application to a typical congestion ‘hotspot’
in Gateshead
• How to ‘cap’ or determine optimal
congestion? TORG /Vissim Traffic Micro
Simulator
• Cross Sectional demand analysis : Bid
Submission (from individuals)
• SMPRT Algorithm for Price Determination
• Winners and losers
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• Intelligent infra-structure planning
Why Cap & Trade Works
• Emission Cap
– Limits emissions and
maintains reductions
– Provides market value and
certainty
– Allows trading without
government approval
Limited Supply of
allowances (cap)
Demand for
allowances
Economic value
for allowances
• Trading
– Minimizes costs through
compliance flexibility
– Creates incentives to reduce
costs going forward
Economic incentives
to reduce emissions
15
The actual Central Gateshead
Congestion ‘Hotspot’
16
17
Routes that cross Central
Gateshead:
South to North
North to South
18
TORG /Vissim Traffic Micro Simulation
Results
The cap is
• the maximum number of road users permitted to use
the road during a time slice in terms of the criteria.
 Based on the ‘production function’ of traffic, the cap is:
 maximum total distance travelled in the time slice;
 begins to drop with incremental growth in vehicle
volumes; and
 the point at which vehicular emissions grow
exponentially.
 The PCU volumes are scaled from base-line demands
in the transport model from between 10% and 170% of
current demand
 The cap is given as X# passenger car units (PCUs):
11720 PCUs
19
IV.SMPRT Protocol: Winners of auction,
Market Clearing Price
• SMPRT based on a uniform sealed bid
Dutch Auction Design where the X* highest
bid that clears the market for X* travel slots
applies to all bidders who bid above this.
SMPRT price algorithm can also adjust for
environmental externality costs
20
21
The socio-economic status of
commuters
Tyne & Wear
higher managerial & professional
lower managerial & professional
intermediate
small employers & own account
lower supervisory & technical
semi-routine
routine
% In
% Out
16%
32%
16%
3%
11%
11%
9%
15%
30%
11%
3%
15%
10%
12%
We also know the income distributions for different classes of
Professionals for the North East:
This enables us to calculate the sensitivity to
Road User Charges from the different commuters
22
The income distribution of 16740 car drivers traversing Gateshead cordon
area (i.e. commuters with income greater than £10,500) (Mean annual
income is £ 21990.39)
200
180
Number Car Drivers
160
140
120
100
80
60
40
20
0
£10k £14k £18k £22k £26k £30k £34k £38k £42k £46k £50k £54k More
Income
23
Distribution of winners across socio-economic groups for various ‘cap’ travel slots
Current
demand
(a)
20% reduction
in travel slots
(c)
30% reduction
in travel slots
10% reduction in
travel slots
(b)
(d)
24
Digital ACE model pin points where
persons who are priced out live and
work
• Intelligent public transport infrastructure
can be organized for them
• This analysis can be done for any city
congestion hotspot
• Radical urban planning solutions needed
• ‘Roll on’ Roll off’ trams/trains for bikes in
cities like Beijing
• Over head pathways in high rise buildings
25
Mitigation of Carbon Emissions: Market
Solutions and Technology Arms Race
• Mr. Stern presents climate change as the
biggest market failure. Over use and
degradation of resources due to missing
markets
• Appropriate prices that reflect the cost of
damage from economic activities
• We need a price for carbon so that companies
and consumers would pay for their emissions
26
Economic Impacts of Climate
Change: Further modelling
• Examples of this : Statistical models starting from impact of climate
change on El Nino and El Nana oceanic systems followed by
implied variations on regional of the globe and estimated damage
(2006, Calzadilla, Pauli and Roson)
• Modelling climate change risk and extreme climate events still in
infancy
• Climate change affects communities and societies ; also companies
and the financial sector. Extreme weather events can ruin
companies and destroy economical value.
• Growing recognition that with a warming planet, risk and corporate
business must factor climate change risk
• Insurance penetration in the West for climate change has grown
substantially: courts seek to attribute liability from weather losses
• People living in vulnerable areas of developing countries are the
most affected by the effects of climate change due to lack of civil
society, market and social insurance
27
Duration
June 2007 Floods in UK ;Flooding in Hull1 in 150
year event
June 1, 2007— July 26, 2007
Damages
~£2 billion
Fatalities
~11
Source ITV
28
Global Market for Environmental Goods and Services: $548 billion in 2004
US, EU and Japan account for 94% DTI Report on Emerging markets in
Environmental Sector (J.Selwyn)
EGS Market by Country 2004
250
211 (38.5%)
210 (38.3%)
$ Billion
200
150
93 (17.0%)
100
50
45(8.2%)
UK
18 (3.2%)
14 (2.5%)
0
US
EU
Japan
China
India
(UK CEED, 2006)
29
45% growth in world markets to 2015
$ Billion
World EGS Markets to 2015
900
800
700
600
500
400
300
200
100
0
2002
2005
2010
2015
Year
(UK CEED, 2006)
30
Green Developments in China
• Bloomberg (May 28 2010) reports that China will likely set up a
domestic market for trading carbon emissions by 2014. Polluting
companies would have “half mandatory” targets for their greenhouse
gases. Feng Shengbo, deputy director of the China Clean
Development Mechanism Management Centre said this in an
interview.
• Source Wall Street Journal (June 7 2010): VantagePoint (major
shareholder in electric vehicles Tesla) set up a 35 company China
Low Carbon Index. (Criteria for selection in the index at least 50% or
3.5 bn yuan of annual revenue comes from low carbon business)
• China Beijing Environmental Exchange seeking to become trading
platform for environmental stocks
• 2009 nearly ½ of public offering in alternative energy IPOs were
Chinese
• Big green Chinese companies are Suntec Holdings or Yingli Green
Energy Holdings
31
More Radical Ideas: Personal carbon
allowances- Not Regressive like Carbon
Tax or Petrol Tax
• At the moment it’s about governments and
‘installations’, not about individuals.
What would an optimal system look like?
• Individuals given a tradable carbon
allowance;
• Incentives at the right level of decision
making;Problem = administrative costs;
• May be opportunities to start trading at LAD
level – but measurement issues.
32
Critique of Extant Economic Models of
Climate Change: Single parameters to
capture complex dynamics
• Main responses to climate change: Adaptation, Conservation
(reduce use of CO2 high energy with extant technology); CAT-I
Carbon Abatement Technology Innovation
• Consumer preferences unchanging during model horizon : hence no
consideration of diffusion of ‘green ethic’
Extensive study of household preference change: In the UK using
BHPS data
• No link up to institutional structures and incentives involved within
Sectors eg Emissions Trading ; Insurance and Finance sectors
involved in innovative risk management for extreme climate events
(catastrophe insurance )
• No model of competitive co-evolution arms race which already in
place for CAT-I where green sector growth and drive for market
share has started; New CAT-I firms becoming market leaders or
extant firms converting to CAT (eg Walmart/Asda and Honda
showcasing their green technology )
33
Multi-Scale Complex System Analysis
Needed
• Sectoral disaggregation alone not enough for policy analysis
•
•
•
•
•
Most of all no transitional path dependencies : Necessary to digitally and
dynamically track the transition of the economy from high carbon use to low
carbon
Marginal Cost- Benefit Analysis assume incremental change and not major
structural or emergent change
Micro-decisions of interconnected agents (household or firms ) can have
macro-systemic implications: CAT-I disruptive technology change
accelerated obsolescence of extant industry
How an economy transits to low carbon in terms of lost employment and
output in ‘old’ technology and drivers for GDP growth through a combination
Adaptation, Conservation and CAT-I requires ACE type frameworks
Why? Individual behaviour change; CAT-I technology race ; business
and risk management innovation; govt. to coordinate with all three; all
being informed and taking responsibility
34
Climace and Flame Needed
• Tracking household level consumption and
behaviour/preference change for green goods
• Dynamic tracking of interconnected multi-scale
firm level CAT-I and ETS Activity
• UK regional and sectoral adaptation projects
• Explicit incorporation of climate change risks to
business and climate change financial products
• Computational test beds for policy analysis
• Socio-economic sustainability index in addition
to DICE type cost benefit analysis
35
DIGITAL MAPPING OF UK FIRMS’ PARTICIPATION IN GREEN TECHNOLOGY CLUSTERS AND ETS
Methodology
Introduction
The UK transition to a low carbon economy requires the
large-scale development and implementation of CATs.
This project examines how this occurs via market and
price incentives from participation in Emissions
Trading Schemes (ETS) and Green clusters. The
latter are local energy networks that provide energy to
local industry and households with increased energy
efficiency and large reductions in emissions. The aim of
this research project is to identify and understand the
drivers
for
the
implementation
of
CATs
in
UK
Background
DTI has identified several regions within the UK with
increased uptake of CATs and the development of
localised green clusters (UK CEED, 2006). Together
with increased shift towards regional planning offices
and regional innovation policies, the development of
green clusters provides an important step for the
transition
to aA low carbon economy.
Industry D
Generator
Generator B
Industry E
Generator C
domestic
From centralised
to green clusters
storage
Generator A
Industry D
Generator B
Industry E
Generator C
domestic
local production
The methodology consists of two steps:
1.Analysis of diffusion of CATs and infrastructure
development, localised incentives and UK-ETS on
regional clusters (’00 – ’09)
2.Development of Agent-Based Model for:
1.Modelling of complex interaction between
competition and technology development
2.Dynamic tracking of historical and future
transition of green clusters
3.Test bed for policy instruments
Model framework
Governance
socio-economic
sustainability
index
Micro-behaviour
Expected outcome
The following outcomes are expected from this
research project:
•Understanding of drivers for evolution of green
clusters and impact of ETS
•The role of competition in the development of CATs
•Understanding of interaction between local
governance and national and international
policies on energy & innovation
•Construction of a socio-economic sustainability index
•Test bed for exploration of existing and development
of new policy instruments
36
Concluding Remarks
*Electric Cars can be effective in CO2 only if wholesale use
of renewable sources of electricity is available
*In Asian cities (and world over ) each city roughly doubling
motor vehicle populations, due to the forecast rise in
income levels in the business-as-usual scenario, and
tripling of fuel use and CO2 emissions between 2005
and 2020; unsustainable choices made in the West to
date must be resisted by China and India and in so doing
will lead the green technology race
*Example of Shanghai where integrated and ICT base
intelligent road transport is designed “Among major
Chinese cities, Shanghai has one of the lowest ratios of
cars to population, even though it has one of the highest
gross domestic product per capita. This situation has
been achieved through a deliberate effort by the
municipal government to preserve the city’s character
and environment, largely through the use of regulations,37
incentives, and fees.” (Source ADA Study 2010)
References
•
Markose S., Alentorn A., Koesrindartoto D., Allen P., Blythe P. and Grosso S.,
2007, “A smart market for passenger road transport (SMPRT) congestion: An
application of computational mechanism design ”, Journal of Economic Dynamics
and Control , Volume 31, Issue 6, June 2007, Pages 2001-2032 , ISSN: 0165-1889.
• Essex Congestion and Carbon Conference, which covered topics on
Design and Public Policy: Markets for Congestion and Carbon
Trading (http://www.essex.ac.uk/eccc/ )
• CLIMACE
http://www.acefinmod.com/docs/CLIMACE%20Workshop%20May%
2009/6.%20Sheri%20Markose%20Cost%20Benefit%20analysis.ppt.
For full program see
http://www.acefinmod.com/climace.html
• Energy Efficiency and Climate Change Considerations for Onroad Transport in Asia
2010 Asian Development Bank
http://www.adb.org/Documents/Reports/Energy-EfficiencyTransport/chap02.pdf
38