Context
The workshop took place at a key time for policy analysts in China. The Chinese government released the 11th 5-year plan where they outlined several major environmental and economic goals. These goals included doubling China 's GDP, reducing China's energy intensity (E/GDP) by 20%, and significantly reducing air pollution between 2000 and 2010. Attaining these potentially conflicting goals requires thoughtful consideration before implementation. To that end, analysts in China are working diligently towards offering the government policy recommendations that will not only meet the 11th 5-year plan goals, but will also provide a least-cost solution, protect employment, and reduce poverty.
In addition to the domestic activities, China has become actively involved with international negotiations on climate change, including the Asia-Pacific Partnership on Clean Development and Climate, Post Kyoto Negotiations and the G8 summit. Policy analysts have supported these negotiations by providing their delegates with information on the impacts of technology transfer, carbon taxes, and other policies.
Korean participants showcased their research on Korea 's industrial issues and recent legislation. With economic growth in Korea came increased air pollution. Seoul recently enacted air quality standards in order to address the increasing PM10 and NO2 levels as well as CO2. Modeling teams in Korea are actively researching the best policies to reach these goals.
The U.S. and Japanese modeling teams have been working on improving the representation of energy and agricultural sources of greenhouse gas emissions as well as technology representations in both medium-term and long-term scenarios. New scenarios based on multi-gas and new technologies are emerging.
The workshop provided a forum to present current work and allowed other teams to understand the assumptions and methodologies that lead to a particular conclusion. Presenters showcased a wide range of analyses, from short-term, sector specific air pollution issues to long-term global impacts of climate change. Discussions focused on the differences in the circumstances of each country and how methodologies might be applied to other regions.
Acknowledgments: This U.S.-China-Korea workshop was one in a series sponsored by the U.S. Environmental Protection Agency. The Energy Research Institute of China's National Development and Reform Commission organized and hosted this event under the direction of Jiang Kejun, Director for International Cooperation Division.
The session title links will take you to a short summary of the presentations in that session. The links, both in the agenda and the summary, are links to PDF versions of the slide presentations.
Co-Chairs:
Jiang Kejun, Energy Research Institute of the National Development and Reform
Commission
Mark Heil, U.S. Environmental Protection Agency
8:30-9:00 Registration
9:00-9:10 Jiang Kejun, Energy Research Institute (ERI) of the National Development and Reform Commission (NDRC)
9:10-9:20 Mark Heil, U.S. Environmental Protection Agency
Keynote Address
9:20-9:45 Energy in China, Han Wenke, Energy Research Institute
Session I: Post Kyoto Developments in Economic-Environmental Modeling
9:45-10:05 U.S. Modeling Perspective, Jae Edmonds, Pacific Northwest National Laboratory
10:05-10:30 China 's Energy Future and Policies, Jiang Kejun, ERI
10:30-11:00 break
11:00-11:20 "The Welfare Consequences of Carbon Tax in the Economy with the Endogenous Labor Migration, Jeong Hwan Bae, Korea Energy and Economic Institute (KEEI)
11:20-12:00 Discussion
12:00-13:00 Lunch
Session II: Energy and Emissions Outlook: Year 2050 Reduction Paths
13:00-13:30 China Energy and Emissions Scenario Analysis to 2050, Hu Xiulian, Energy Research Institute, NDRC
13:30-14:00 Year 2050 Low Carbon Scenario for Japan, Mikiko Kainuma, National Institute of Environmental Studies (NIES), Japan
14:00-14:30 Long-term Technology Strategy, Ron Sands, Pacific Northwest National Laboratory
14:30-15:00 Discussion
15:00-15:20 Break
Session III: Bottom-Up Modeling Perspectives
15:20-15:50 GHG Emissions Reduction Potential in Industrial Sector-Case Study of Cement Industry in Korea, Dong-Woon Noh, KEEI
15:50-16:10 China 's Changing Energy Intensity, William Chandler and Kong Bo, Johns Hopkins University
16:10-16:30 Measures for Meeting China's 20 Percent Energy Intensity Reduction Goal, Yu Cong, ERI, NRDC
16:30-17:00 Discussion
Session IV: Non-CO2 Gases and Co-benefits
9:00-9:20 Non-CO2 Greenhouse Gases: Data and Methodologies, Casey Delhotal, RTI International
9:20-9:40 IES Korea Project: CO2 Emission Reduction and Health Benefits of Seoul Air Quality Management Plan (SAQMP), Yeora Chae, Korea Environment Institute (KEI)
9:40-10:00 Necessity of Co-Control of Both SO2 and CO2 in China, Hu Tao, Policy Research Center
10:00-10:20 Discussion
10:20-10:35 Break
Session V: Modeling Applications
10:35-10:55 Capturing the Costs of Fossil Energy in the Reduction of Carbon Emissions, Phillip Tseng, Energy Information Administration.
10:55-11:15 Energy and Emission in Ammonia Sector, Liu Qiang, ERI, NDRC
11:15-11:35 Energy and Environment Policies by CGE Model, He Jianwu, Development Research Center (DRC) of the State Council
11:35-12:00 Discussion
12:00-13:10 Lunch
SESSION VI: Modeling Applications (Continued)
13:10-13:40 Energy and Economy analysis by CGE, Fan Mingtai, Chinese Academy of Social Sciences
13:40-14:00 A New Method of Technology Choosing in the Optimized Model of Energy System: the application of the Theory of Technology Commercialization Cycle, Li Jifeng, Zhang Aling, Tsinghua University
14:00-14:30 Co-benefit Analysis for China, He Kebin, Tsinghua University
14:30-15:00 Discussion
15:00-15:30 Break
SESSION VII: Policy Implications and Workshop Summary
15:30-16:30 Discussants
Li Liyan, China Climate Change Policy Coordinating Office, National Development and Climate Change
Sun Cuihua, Chinese National Development and Reform Commission
Dong-Woon Noh, KEEI
Mark Heil, U.S. Environmental Protection Agency
Jae Edmonds, PNNL
Liu Desun, Tsinghua University
Wei Liwei, Tsinghua University
Jiang Kejun, Energy Research Institute, China National Development and Reform Commission workshop co-chair, Senior Economist and Director of international cooperation at ERI, welcomed participants from the U.S., Japan, Korea and China . He noted that the issues to be discussed at the workshop were becoming increasingly more important. Jiang explained that the workshop itself conflicted with a meeting in the U.S. on the Asia-Pacific Partnership which would bring many countries together to discuss issues related to technology transfer and that Zhou Dadi, who was scheduled to talk at the meeting, could not make it because of a meeting with Prime Minister Wen Jiaobao on issues related to China's energy intensity goal.
Jiang stated that the purpose of the meeting was to share information on the modeling studies that focus on energy, economic and environmental issues. He hoped that the workshop will promote cooperation between the modeling teams.
Mark Heil, Senior Economist with the U.S. Environmental Protection Agency introduced workshop goals from the sponsor's point of view. Key goals included:
Heil summarized the history of previous workshops and noted that the workshops purpose was not to discuss climate negotiating positions, nor introduce new research. The role of the workshop was technical in nature and its purpose was to provide a forum for open discussion and an exchange of viewpoints on key modeling issues. Heil noted that the role of economic and environmental modeling is to make significant contributions to the design of climate and economic policies, examine the feasibility of attaining a policy goal, find the least cost solution to the achieving the goal, identify promising cost-effective technologies and address equity questions. In order to achieve this, the capabilities of the modeling teams must be strengthened through continued cooperation between modeling teams.
Session I: Post Kyoto Developments in Economic-Environmental Modeling
Jae Edmonds from the U.S. Pacific Northwest National Laboratory discussed the laboratories resent updates to and key findings of their resent work on climate change scenarios. Dr. Edmonds introduced the MiniCAM model, which has 14 regions, provides data on 15 gas emissions and is linked to population and economic growth assumptions. MiniCAM uses radiative forcing to compare greenhouse gases as opposed to global warming potentials (GWPs). The new scenarios are based on higher transportation costs, higher fuel demand, and lower population growth expectations. This leads to a baseline scenario with higher CO2 emissions and lower CH4 emissions. A key finding of the scenario analysis is the difficulty of reaching a stabilization target. Meeting a stabilization target will require the development of new technologies that have the ability to drastically reduce emissions and meet the more stringent targets.
Jiang Kejun of China 's Energy Research Institute discussed recent work on energy and climate change. ERI's work includes: new scenarios for the IPCC Fourth Assessment Report and the Stanford University's Energy Modeling Forum, policy analysis for the Chinese government including how to reach a 20% reduction in energy intensity in China, monitoring work such as the 1000 Enterprise Monitoring Plan for China, drafting regulations such as the new Energy Law and the Oil and Natural Gas Law, and contributions to international forum such as the Asian-Pacific Partnership and the G8 summit. The work to date shows the significant challenges faced by the Chinese government in increasing energy efficiency and lowering greenhouse gas and air pollution emissions. Future studies by ERI will focus on energy scenarios, energy tax analysis, and post-Kyoto commitment among others.
Jeong Hwan Bae of the Korean Energy Economics Institute (KEEI) presented finding from his recent work on the welfare consequences of a carbon tax using Pennsylvania as the case study. The study explored the consequences of open migration of labor on welfare under a carbon tax regime. Jeong used a static CGE model with 17 industrial sectors and labor/capital as the key inputs. The study showed that under the right circumstances, a reduction in labor taxes under a carbon tax regime could lead to welfare gains. However, as some of the assumptions of the model are relaxed, results may differ.
The general discussion after the presentations focused on what key points came out of the results presented. The presenters pointed out that the results are not certain, so a finding in their results should be taken only as an indication of what might be an important technology, or what types of problems to look for and try to correct later. For example, Dr. Edmonds results show clean coal technology is critical to reaching a climate target. However other, currently unknown technologies may be created that have the same influence. Modeling efforts can also highlight potential problems such as interregional competition and inequities under a carbon tax regime.
Session II:Energy and Emissions Outlook: Year 2050 Reduction Paths
Hu Xiulian from the Energy Research Institute in China presented energy and emission scenarios for China out to 2050, showing China 's energy intensity is currently above the world average and is even higher than India 's. Hu showed past trends in energy consumption by sector, including by households and transportation. She noted that the fuel efficiency of cars in China is 25% lower than that of Europe and since 2000, China has increased building space by 1.2-1.6 billion m2 annually. Passenger vehicles are predicted to increase from 25 million to 250 million by 2030 and building area increase to 90 billion m2 by 2020. Because of this, emissions are projected to increase to 3250 Mt-C by 2050 unless policies are introduced to conserve energy. Ms. Hu concluded that in order to achieve lower energy intensity, China needs to develop and adopt energy efficient technologies; potentially encourage adoption of technologies through an energy tax and encourage international cooperation and technology transfer.
Mikiko Kainuma of NIES, Japan took a slightly different approach to creating medium-term energy use scenarios by combining both qualitative and quantitative aspects in their analysis. The focus of her teams work is to envision what a highly energy-efficient world would look like in 2050 and then design scenarios to reach this vision. Two types of scenarios were designed: a "technology-drive" scenario where you have significant technological breakthroughs and convenience oriented products, and a "natural-oriented" scenario, where growth is decentralized (local production and consumption) and the focus is on social and cultural values over convenience. This type of analysis allows for the team to envision the specific technologies needed to reach a potentially severe target and break current trends in consumption patterns and lifestyle choices. The scenario design can then provide plausible pathways and R&D goals to achieve economic, social and environmental targets.
Ron Sands of the U.S. Pacific Northwest National Laboratory presented his teams current activities using the Second Generation Model (SGM). SGM is a 14 region model where many of the regional models are developed by an institution in that region and connected to the global version of SGM. The focus of SGM is analyzing energy trends and greenhouse gas emissions, with some agricultural representation. SGM is currently undergoing peer review in the U.S. by the Science Advisory Board. As part of that review, the modeling team is looking at key issues with the model and expanding its capabilities including reviewing the Global Trade Database Project's data and improving SGM's agricultural and land-use modules.
Session III: Bottom-up Modeling Perspectives
Dong Woon Noh of KEEI presented his study on improving energy efficiency and reducing CO2 emissions from the cement industry in Korea . Energy use per output of cement has been decreasing since 1991, however emissions of CO2 have been increasing. Using a MARKAL model, Dr. Noh estimated the cost and potential for reducing CO2 emissions for a variety of technology and policy scenarios. The scenarios included the utilization of waste tires, utilization of slag cement, a new technology scenario, a carbon tax and an energy tax. The technology scenarios were far more cost-effective. The use of waste tires in place of coal actually produced a significant cost savings for the firm. Dr. Noh concluded that a combination of economic and technology instruments implemented by the government could attain significant reductions.
Yu Cong of ERI presented a more detailed discussion about how China could reach its goal of a 20 percent reduction in energy intensity by 2010. Ms. Yu highlighted the difficulties in implementing the target, including lack of experience in implementing an intensity target, no clear method for disaggregating a national target to the local or firm level, and the lack of a strong market mechanism to improve energy efficiency. The presentation also highlighted a list of necessary policy changes required to meet the target. These policies included taxes, increasing prices on inputs, publishing results to the public to increase public awareness of the issues and enhancing government oversight, particularly the implementation of the energy conservation law. She emphasized that only a combination of governmental policy and effective market based measures would allow China to reach this goal.
William Chandler and Kong Bo of Johns-Hopkins University asked three questions:
The conclusions of their analysis were that the uncertainty behind the coal data could cause considerable changes in the energy intensity estimates. In addition to the data issue, the structural change in the Chinese economy, resulting in increased output from heavy industry, is causing the current increases in energy intensity. This trend is not captured in the modeling, but modeling teams should pay more attention to these issues.
Friday, 23 April
Session IV: Non-CO2 Gases and Co-Benefits
Casey Delhotal of RTI International presented work funded by the U.S. Environmental Protection Agency on the cost and potential of reduction non-CO2 greenhouse gas emissions. The purpose of the presentation was to give a general overview of how the non-CO2 greenhouse gas emissions and cost data was estimated and what data was available to the modeling teams for their use. The cost data was presented in the form of data tables for specific reduction technologies as well as in the form of national level marginal abatement cost curves for each sector. The work includes emissions from methane, nitrous oxide and the fluorinated gases.
Yeora Chae of the Korea Environment Institute presented her teams work on analyzing progress towards Seoul 's goal of "See the Yellow Sea from the center of Seoul by the year 2014." The Seoul air quality management plan focuses on the co-benefits of reductions in CO2, PM10, SOx, NOx, and ozone. The reductions would come from a combination of fuel switching, cogeneration, solar heating, and switching to hybrid or electric vehicles. The analysis showed that up to 4,170 lives could be saved in Seoul alone by achieving a goal of ug/m3 of PM10. The plan would also reduce CO2 by approximately 0.5 million metric tons.
Hu Tao of China 's Environmental Protection Agency's, Policy Research Center presented analysis on the co-benefits of controlling CO2 and SO2. The analysis focused on the goals of the 11th 5-year Plan in China which include a doubling of GDP between 2000 and 2010, a 10% reduction in SO2 emissions and a 20% reduction in energy intensity. The analysis asked, "Can these three goals be reached through a coordinated policy?" and concluded that it is possible to coordinate these goals if actions are taken "before the pipe" as opposed to using "end of pipe" solutions. Using a CGE model, Hu estimated the effects of controlling SO2 and CO2 on GDP. When controlling both SO2 and CO2 emissions, the negative impact on GDP was lower than when controlling for each separately. However, how to implement such a program has not yet been resolved.
Session V: Modeling Applications
Phillip Tseng of the U.S. Energy Information Administration (EIA) presented an overview of the challenges faced by the energy market and introduced EIA's SAGE model. Tseng emphasized that diversifying sources of fuels away from fossil fuels is important and could lower emissions of CO2, improve energy security, and lower expenditures on foreign oil. Tseng then introduced EIA's System for the Analysis of Global Energy (SAGE) model, which is designed to analyze technology choices in order to meet policy goals such as lower emissions. SAGE is a linear programming model based on specific technology characteristics that estimates the least cost solution to meeting an energy demand. From his experience using SAGE to analyze energy issues, Tseng stated that current investment patterns in fossil fuels could lock out more environmentally friendly technologies, but that higher prices for oil in the long run could mean opportunities for alternative fuels to enter the market.
Liu Qiang of Chinese Energy Research Institute presented a case study of the Ammonia Sector in China using the IPAC/AIM model. The model used technology information to predict energy consumption and emissions of the industry. The preliminary result from the analysis show the industry's energy consumption growing slowly over time, but because of the fuel type and technologies used, CO2 emissions will fall slightly. The industry will move away from coal burning towards use of natural gas and increase the scale of their plants. Because of this slow change towards natural gas and larger plants, Liu showed that a tax of 2 yuan/kg of CO2 would not significantly change the behavior of the ammonia industry.
He Jianwu of the Development Research Center of the Chinese State Council presented a CGE analysis of an energy tax and a pollution tax on emissions, regional trade, and regional inequity. Four scenarios were run - a pollution tax where the revenues were recycled to the household, pollution tax where the revenues were recycled to the firm, an environmental tax where the revenues were recycled to the household and an environmental tax where the revenues were recycled to the firm. The model is a three region model of Guangdong province, the largest exporter of goods in China, Shanxi province, which is the "coal warehouse of China," and the rest of China . The model also has 63 sectors, 14 households and 5 factors of production and relies on a statistical estimation of regional trade. The analysis highlights the regional disparities in China, as well as the disparities between the urban and rural populations, through changes in the gini coefficient. The largest positive changes to the gini coefficient were in urban areas.
Fan Mingtai of the Chinese Academy of Social Sciences presented the model PRC-GEM. PRC-GEM is a single country CGE model linked with the Global Trade Analysis Project database to represent international trade. The model has 124 goods, 5 energy goods and 31 regions. PRC-GEM has been used extensively for analyzing trade liberalization issues, environmental regulations and tax reform issues. Fan outlined the pros and cons of the model, including the ability of the model to simulate international trade and its effects and the issues of explaining a CGE structure to a policy maker.
Li Jifeng of Tsinghua University used MARKAL/TH-3EM model to analyze choices between various technologies with different energy efficient characteristics. His presentation focused on how to incorporate technology commercialization and adoption into a linear programming model. In order to do this, the model was constrained to follow the four stages of a typical commercialization path, including a) entering the market, b) growth of the market share, c) maturity and d) deterioration of market share. The result is a more realistic pattern of technology choice in the model.
He Kebin of Tsinghua University presented results from his study on the health and environmental benefits of reduction air pollution. The purpose of the study was to quantify the co-benefits of specific policies including reductions in energy demand, health benefits, and air pollution reductions. The methodology included using the LEAP model to estimate energy scenarios, using Model-3 to generate air quality trends based on these scenarios, and using BENMAP to evaluate the health impact of the scenarios. The underlying energy scenario was based on the 10th 5-year plan. Variations from this BAU included a climate change policy and a climate change policy with air pollution controls. While the results of the analysis are preliminary, the key conclusions are that a multi-pollutant control is necessary in order to achieve positive and sustainable benefits.Sun Cuihua (Climate Change Policy Coordinating Office of the NDRC) spoke briefly of the trends in the types of analyses being asked of her team. She noted that in the past several years' analysis of greenhouse gas issues has developed quickly, but there is still much to be done. Collaboration with foreign experts and the exchange of views between modeling teams are important to better develop models. Currently, there is a high demand for analyses to help work through and develop a national strategy for global climate change.
In the coming two decades, energy consumption will be high and the government needs to better understand what policies will reduce energy consumption and emissions. In order to do this properly, NDRC and others need to expand their modeling capabilities.
Li Liyan (China Climate Change Policy Coordinating Office, National Development and Climate Change) spoke about the gap between modeling language and policy language. He noted that at first, policy makers are scared of models and do not fully understand them. However, with support from organizations such as USEPA, policy makers become educated about how modeling works. They then realize how important economic analysis is and learn the best way to use economic analysis.
Li went on to say that he sees the UNFCCC as a way forward on the issue of global climate change. He believes that sustainable development is the key factor in deciding the most appropriate path forward, but the issue is complicated which makes reaching a decision complicated. Technology and adaptation issues are also important considerations. China should do more to incorporate these issues into cost-benefit analysis of global climate change policies.
Dong-Woon Noh, ( KEEI) spoke about the importance of integrating top-down and bottom-up approaches in economic analyses. Many issues have both sectoral and trade aspects to them, requiring the use of both types of models. For example, it would require both a top-down and a bottom-up approach to analyze the trade, pollution and sectoral effects of an electricity market that included South Korea, North Korea, and Northeast China.Liu Desun (Tsinghua University ) spoke of the importance of long-term strategic modeling in address global climate change. Analysts should look at long-term scenarios and learn from these scenarios what is possible in both the short-term and long-term. He noted that countries are facing hard policy choices and that there is an urgent need to develop energy saving societies and make better use of our limited resources through recycling and reuse. The key is integrating sustainable development principles and "circular economy" principles into society in order to address the issues caused by limited resources and a large population. Models touch on these concepts, but should, in the future, reflect these goals more specifically.
Jae Edmonds (PNNL) cited four trends he is seeing in the current long-term modeling scenarios. First, the business-as-usual scenarios are showing higher emissions than before because the energy models are moving towards alternative sources of oil instead of alternative fuels. Second, "control" scenarios increasingly recognize the importance of technology in controlling costs and reducing emissions. Third, non-CO2 greenhouse gases are increasingly important, particularly at the margin. And finally, in stabilization scenarios, land-use emissions are extremely important because biomass is used as fuel in these scenarios and increased land-use change can work against the emissions reduction goal. Modelers need to better understand and do a better job representing land-use changes due to increases in bio-fuels in their models.
Wei Liwei ( Tsinghua University ) spoke about the improvement in communication between economic modelers and policy makers. He also noted that methodologies and results are being shared across fields, including environment, energy, economics, etc. However, he also noted that with so much information, it is difficult to evaluate the quality of the information. He suggested that comparing the results from more than one model when presenting results to a policy maker. This type of approach would help with the credibility of the conclusions. Wei also suggested that more effort be made to teach entrepreneurs about environmental issues in school. He felt this would help with the future acceptance of environmental regulations by industry. Finally, Wei noted that the transition from a planned to a market economy has weakened the governments control over environmental issues. Increasing awareness among the business community and the government about market mechanisms for environmental control is necessary to ensure environmental goals are reached.
Mark Heil (U.S. Environmental Protection Agency) noted he was pleased to see a significant amount of economic analysis being conducted in China . The relationship between policy and analysis is key. An analyst should pose questions, interpret results and communicate effectively with policy makers. Heil also noted the importance of environmental governance or by what mechanism does a government implement programs. Implementation strategies are important to consider in any analysis.
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Posted October 2006