Context
This workshop took place against a backdrop of dramatic economic change in China. The Chinese economy has grown 9 percent or more per year since 2002—even faster, according to some economists—and energy demand apparently grew even faster than the economy. This ratio, if it stands the test of time, would represent a sharp reversal of previous Chinese experience. China for two decades had achieved a GDP elasticity of energy demand of only 0.5.[1] Based on official statistics, that coefficient now stands at 1.4 or more. This figure means energy demand is growing forty percent faster than GDP in 2002-2003, marking what could be a momentous change in prospects for controlling global greenhouse gas emissions.
It should be noted, however, that Chinese per capita energy use and greenhouse gas emissions average just one-twelfth that of the United States. While China ranks as the world’s second largest energy consumer and the second largest national source of greenhouse gas emissions, the United States, with only one-quarter of China’s population, continues to rank first in global greenhouse gas emissions.
The recent change in the trend for Chinese energy intensity stems at least in part from rapid economic growth, which drives demand for energy-intensive materials. China now consumes two-fifths, one quarter, and one-fifth of the world’s cement, aluminum, and steel, respectively.[2] Chinese car production and sales were up 69 percent between 2002 and 2003, yet automobile ownership remains low, with only 20 cars per 1,000 people.
China has displaced Japan to rank second in world oil consumption, and now imports one-third of its supply. Though oil and gas use are growing rapidly, two-thirds of China’s energy use is still supplied by coal. Renewable energy supply has a mixed record in China, though the nation boasts the world’s largest solar water heating market. China’s power sector has undergone significant changes over the past two decades. Total installed capacity has increased from 52 gigawatts in 1983 to 384 gigawatts in 2003. Per capita consumption remains only half the world average, however, and current power shortages are estimated at over 20 gigawatts despite the rapid addition of new capacity. More than 20 provinces recently experienced power “brownouts” and “blackouts.”
Workshop participants were well-prepared to address both this short term context and to put it in context with the long-term views of the economic-environmental modeling frameworks which formed the core interest of this workshop. Participants shared their methodologies, results, and skills, and helped to frame this larger picture with special attention to policy relevance.
Acknowledgments: This U.S.-China-Korea workshop was one in a series sponsored by the U.S. Environmental Protection Agency, jointly funded by the Economic Analysis Branch (led by Michael Shelby, Chief), and the International Capacity Building Branch (represented by Mark Heil, Senior Economist). 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. Korean participation was led by Seung Jick Yoo of the Korean Energy Economics Institute. Participants collectively provided substance and deliberation.
Notes:
1. Technically speaking,
China’s GDP elasticity of energy demand has averaged roughly 0.5 for over
20 years. See William Chandler, Roberto Schaeffer, Zhou Dadi, PR Shukla, Fernando
Tudela, Ogunlade Davidson, Sema Alpan-Atamer, Climate Change Mitigation in Developing
Countries: Brazil, China, India, Mexico, South Africa, and Turkey, Pew Center
on Global Climate Change, Washington, October 2002.
2. Jeffrey Logan, International Energy Agency, private communication, Beijing,
April 2004.
The session title links will take you to a short summary of the presentations in that session. From the summary, the speaker's names are links to PDF versions of their slide presentations. The links from the presentation titles in the agenda also go to the PDF versions of the slides.
Co-Chairs:
Jiang Kejun, Energy Research Institute of the National Development and Reform
Commission
William Chandler, Pacific Northwest National Laboratory
8:30-9:00 Registration
9:00-9:10 Welcoming Remarks, Zhou Dadi, General Director, Energy Research Institute
Session I: Introductory Remarks
9:10-9:30 China Climate Modeling Perspective, Jiang Kejun, Energy Research Institute, China National Development and Reform Commission
9:30-9:50 U.S. Climate Modeling Perspective, Mark Heil, U.S. Environmental Protection Agency
9:50-10:10 Energy Forecasting and Korean Climate Modeling Perspective, Seung Jick Yoo, KEEI
10:10-10:25 Discussion
10:25-10:40 Break
Session II: Energy and Emissions Outlook
10:40-11:00 World Energy Mix Transition: Vintage Model and Renewable Energy, Yong Seok Moon, Korea Energy Economics Institute
11:00-11:20 China Energy Scenario Analysis, Zhu Yuezhong,
Energy Research Institute, NDRC
11:20-11:40 U.S. EIA Energy and Related Carbon Emissions
Projections for China, John Conti, U.S. Energy Information Administration
11:40-12-10 Chinese Scenarios for 2020: The Outlook for Energy and Emissions, Mark Levine, Associate Director, Lawrence Berkeley Nat. Lab.
12:10-12:30 Discussion
12:30-13:30 Lunch
Session III: Modeling Non-CO2 Gases and Agriculture/Land Use Issues
13:30-13:50 IPAC for Non-CO2 Emission, Jiang Kejun, ERI
13:50-14:10 Non-CO2 Gases in the Second Generation Model, Michael Shelby, Environmental Protection Agency
14:10-14:30 Forestry Issues and Land-Use Modeling, Jayant Sathaye, Lawrence Berkeley National Laboratory
14:30-15:00 Discussion
15:00-15:15 Break
Session IV: New Issues in Top-down/Bottom-up Modeling
15:15-15:35 Bottom-Up Modeling in a CGE Framework: Using AMIGA in China, Jia Li, Consulting Economist, Argonne National Laboratory
15:35-15:55 Up-grading framework of 3E model, Zhang Aling, Tsinghua University
15:55-16:10 Framework Design of Regional CGE Model for China, He Jianwu, DRC
Discussion
16:10 Break for the day
Session V: Co-Benefit Analysis
9:00-9:20 Policy Implications of Co-benefit: Challenges and opportunities for China, Hu Tao, National Environmental Protection Agency (NEPA)
9:20-9:40 Co-Benefit Analysis for China, He Kebin, Tsinghua Univ.
9:40-10:00 Modeling the Effects of Pollution Control Policies On Health and CO2, Mun Ho, Resources for the Future and Harvard University
10:00-10:20 Discussion
10:20-10:40 Break
Session VI: Modeling Applications
10:40-11:10 Long-term Technology Strategy, Ron Sands, Pacific Northwest National Laboratory
11:10-11:40 Technology Options for Urban Transport in China, Liu Qiang, ERI
11:40-12:00 Discussion
12:00-13:30 Lunch
13:30-13:45 Climate Mitigation Technologies in GTEM, Helal Ahammad, ABARE
13:45-14:00 Effects of Technology Transfer on CO2
Reduction, Toshihiko Masui, Japanese National Institute for Environmental
Studies
14:00-14:15 Benefits of Coalition Formation in International Emissions Trading, Gyeong Lyeob Cho, Korea Energy Economics Institute
14:15-14:30 Discussion
14:30-15:00 Break
SESSION VII: Policy Implications and Workshop Summary
15:00-16:00 Discussants
Gao Feng, Deputy Director General, Department of Treaty and Law, Chinese Ministry of Foreign Affairs
Sun Cuihua, Director, Office for Climate Change Policy Coordination, Chinese National Development and Reform Commission
Hu Tao, Senior Research Fellow, Research Center for Policy, Chinese National Environmental Protection Agency
Mark Heil, Senior Economist, U.S. Environmental Protection Agency
Jaekyu Lim, Research Fellow, Korean Energy Economics Institute
Mark Levine, Associate Director, Lawrence Berkeley National Laboratory
William Chandler, Senior Staff Scientist (Laboratory Fellow), Pacific Northwest National Laboratory
Zhou Dadi, Director General of the Energy Research Institute, opened the workshop and welcomed participants. He reminded us that the purpose of the workshop was to share our technical skills and analytical results. He observed that Chinese policy makers today place a premium on foresight, particularly now that they have been surprised by the recent surge in economic growth and the resulting spurt in demand for energy and power. Leaders are demanding better understanding of what is now going on in energy supply and demand. And they want better short-range planning tools as well as better understanding of long-term prospects for development, technological change, and environmental problems including climate change.
Zhou addressed the recent, dramatic changes in China’s economy and energy sector, and summarized China’s energy policy. He reflected on the surge in energy demand, the widespread appearance of power shortages—more than 20 provinces regularly experience blackouts—and put the changes in context of the overheated economy.
Zhou noted that Chinese officials consider policy tools inadequate for current market conditions, and are planning to use more-effective ways to promote energy efficiency and renewable energy.[1] He suggested that the “Eleventh Five Year Plan” will provide new or strengthened policies for demand side management (DSM) and integrated resources planning, promote energy management companies, establish government procurement policies for energy efficient products, and support development of advanced renewable energy technologies, including wind power, biomass generation, and solar power.
He noted that China has recently imposed automobile fuel economy standards similar to the U.S. corporate average fuel economy standards (CAFE), only higher. The law, when fully implemented in 2008, would increase the fleet fuel economy of Chinese cars to five miles per gallon more than the current U.S. car standard of 27.5 miles per gallon (8.5 liters per 100 km).{2}
Zhou suggested that many greenhouse gas emission mitigation opportunities remain and are consistent with economic development.
Notes:
1. Ren Long, Deputy Director-General, Department of Policy and Regulations,
National Development and Reform Commission, “Supporting China’s
Strategy for Sustainable Energy Development,” Terminal Tripartite Review
Meeting, United Nations Development Program, Beijing, China, 12 December 2003.
2. New York Times, “China Set to Act on Fuel Economy,”
18 November 2003.
Jiang Kejun, Energy Research Institute, China National Development and Reform Commission workshop co-chair, Senior Economist and Director of international cooperation at ERI, introduced a China Climate Modeling Perspective. He described modeling types being applied in China, ranging from linear programming to computable general equilibrium (CGE) models, and including local, regional, national, and multi-regional approaches. The diversity of modeling tools has been growing in China and now includes tools developed in collaboration with American, Australian, and Japanese institutions. This growth in human capacity has been facilitated in part by international collaborations such as this workshop, sponsored by EPA.
Jiang noted that Chinese energy demand could grow nearly four-fold by 2050.[1] Economic restructuring, fuel switching, population planning, and other measures could dramatically slow demand growth and reduce China’s emissions trajectory. China’s energy policy makers appear to be at a turning point. Their impending choices will lead to slower, more-manageable growth in greenhouse gas emissions, or to rapid growth that could overwhelm domestic Chinese and international mitigation efforts.
A next step in IPAC modeling is to understand better and to incorporate the surprising trends in energy use in China, and to understand better demand for energy-intensive materials like steel and cement. Moreover, the future range of forecasts is large and reducing the uncertainty represented by this range would constitute a major contribution to the field.
During the discussion, Jiang Kejun suggested the change in energy/GDP trends after the year 2000 stems at least in part from a “data problem.” Zhou Dadi added that perhaps China had come into a period of high growth in high energy-intensive materials utilization. But one has to ask if this level of growth in materials use is sustainable.
Note
1. BP Statistical Review of World Energy 2003, available at www.bp.com.
Mark Heil, U.S. Climate Modeling Perspective
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 we are not discussing climate negotiating positions, and we are not introducing new research. The role of modeling, in his view, is to examine the feasibility of policy goals, economic costs, equity issues, and long-term prospects. In recent years, Heil noted, there have been many improvements to modeling techniques and human capacity to apply them.
Heil proposed continuing the international workshop series, with sessions tentatively scheduled in 2005 involving Mexico, China, and Korea. Priorities for collaboration in the coming months include data sharing, updating and improving representations of Chinese and Korean economies, producing joint research papers, and linkages with the Stanford Energy Modeling Forum.
Seung Jick Yoo of the Korean Energy Economics Institute provided a Korean Energy Forecasting and Climate Modeling Perspective. He stated that Korea is happy to participate in this workshop series, and introduced the situation in the energy economy of Korea, particularly how it is affected by plans for economic restructuring and reform. Key policies include a push toward a more competitive energy market, including privatization of public energy companies supplying electricity and natural gas.
Yoo described KEEI modeling applications, which are based on computable general equilibrium (CGE) models. He presented model results for emissions mitigation costs based on implementation of Kyoto, with and without U.S. participation.
While Korean energy supply today is dominated by petroleum, including LNG, Korean analysts expect rapid growth rate of nuclear power over the next 20 years. Analysts, according to Yoo, also expect an increase in the shares of total energy demand for the industrial and transportation sectors.
A questioner remarked that the model results presented suggest that Korean per capita energy use in 2020 will reach current U.S. per capita consumption levels. Yoo confirmed that this is an anticipated outcome. He observed that energy use is driven by GDP growth and the current GDP elasticity of demand would “naturally” drive per capita consumption of energy in Korea to U.S. levels over the next decade and a half.
Young-Seok Moon of the Korean Energy Economics Institute spoke on the mix of fuels and the possibility of transition to renewables and other energy sources. He described the production function on which the model is built and mathematical formulations for implementation of the model. Moon compared two scenarios with a 30 percent emissions mitigation scenario, one with and one without an energy tax coupled with revenue recycling, with the revenues used to subsidize alternative fuels. The latter scenario resulted in higher welfare and lower mitigation costs.
Zhu Yuezhong of the Beijing Energy Efficiency Center described updated China energy scenario analysis using 2020 as the endpoint. A strength of the work he cited was its effort to “sort out the main drivers of Chinese energy demand,” a difficult task, as noted above. His team uses a bottom-up modeling approach to this end, modified by the so-called “Delphi method.” The model framework is capable of disentangling structural shifts, technical change, and changes in energy supply. This effort produces a detailed end-use model. Zhu noted that much effort is now being devoted to the incorporation of private car ownership and use in Chinese models.
John Conti, U.S. Energy Information Administration, presented the results of the Energy Information Administration’s (EIA) International Energy Outlook 2004, the Department of Energy’s annual assessment of world energy markets with projections to 2025. EIA’s model uses a linear programming framework. John introduced his agency’s carbon emission projections for China, suggesting that the highest rate of growth in the world will be in China, due to its high rate of GDP growth. Coal use will continue to dominate China and India’s energy markets through 2025. This presentation prompted discussion of the proper way of handling long-term energy price assumptions in the face of short-term trends. Specifically, this related to the EIA assumption of $18 per barrel oil over the next decade or two, versus the $35+ price of oil at the time of the workshop.
Mark Levine, Director, Environmental Energy Technologies Division, Lawrence Berkeley National Laboratory, recounted Chinese Scenarios for 2020, with attention to energy use and emissions. Mark memorably stated what many workshop participants were feeling, that in the 15 years of work on energy in China, we have never had less understanding of what is actually going on than today. He explained that apparent changes in energy intensity—and lack of confidence in GDP and energy demand numbers—leads to a healthy skepticism about the numbers, but also puzzlement about what has actually changed and why. Levine drew practical policy implications from recent scenarios, including observations that oil and gas demand growth would continue to be greater than overall energy demand growth, and that overall demand could, with appropriate policies, fall substantially below baseline projections. Levine suggested that although long-term projections made today for China are higher than they were a few years ago, the differences are not great, despite the recent spike in energy demand. He added that an investment in improving China’s data collection system would reduce the costs of making policy without having a clear picture of what is actually happening.
Jiang Kejun made a second presentation, this one on the cost of mitigation of multiple—as opposed to carbon dioxide only—greenhouse gases. His presentation was a reflection of work done as part of the “EMF-21” study. The “IPAC-Emission Model” Jiang described was used to conduct a global multi-gas mitigation study, comparing multi-gas mitigation scenario and carbon-only mitigation scenario. The exercise found a large potential for non-carbon dioxide emissions mitigation, especially before 2020. Some options for non-carbon mitigation could be adopted right now, but additional options could be explored for longer-term application. The multi-gas approach could reduce GDP losses associated with emissions mitigation by 20-30 percent over the next century, compared with carbon dioxide-only mitigation policies.
Michael Shelby, Chief, Economic Analysis Branch of the U.S. Environmental Protection Agency, introduced the capability of the Second Generation Model (SGM) to compare and contrast “carbon dioxide-only” mitigation with “multi-gas” mitigation for given global emissions scenarios and targets. Shelby drew on analysis done in conjunction with the Stanford Energy Modeling Forum. Michael also compared and contrasted the results of this modeling framework with that of a half dozen other modeling frameworks from around the world. He presented model results suggesting significant cost savings associated with a multi-gas—as opposed to carbon dioxide only—mitigation approach. At a $100 per ton carbon mitigation price, U.S. annual emissions reductions from baseline could total almost 900 million tons of carbon equivalent in 2050. At a mitigation price of $200 per ton, the total potential emissions reduction from the baseline climbs to 1,600 million tons of carbon equivalent. At the latter price, the U.S. emissions trajectory from 2010 to 2050 could be essentially flat. Shelby also presented estimates of GDP loss in the multi-gas mitigation approach compared with carbon dioxide-only mitigation. In 2030, for example, U.S. mitigation-related costs might reach a GDP loss of roughly 0.4 and 0.8 percent under the multi-gas and carbon-only approaches, respectively.
Jayant Sathaye, Lawrence Berkeley National Laboratory, presented results from an EMF 21 exercise addressing the global potential for and cost of carbon dioxide sequestration and avoided emissions in the forestry sector. He noted variations in the mitigation potential as a function of six carbon price scenarios. In particular, he presented estimates of the cost of “avoided deforestation.” In China, a massive afforestation program already involves 1.4 million hectares per year and this effort, though made for water conservation and to control erosion and desertification, could be considered a substantial subsidy for carbon emissions mitigation. Sathaye presented model results investigating the future mitigation potential of China’s afforestation program, suggesting that in 45 years China would exhaust land available for planting and restoration for sequestration purposes. In India, a similar exhaustion of afforestation potential would occur by 2040. Sathaye suggested that a modest price for carbon sequestration could in theory halt deforestation in Africa and Latin America. Achieving this would require substantial institutional changes at the national and local levels and a way to provide alternative livelihoods for those who would be dispossessed.
Jia Li, representing Argonne National Laboratory, introduced the AMIGA model, which she noted in passing means “female friend” in Spanish. AMIGA uses a CGE framework, and is a computable-modular structure. Li noted that both prices and demand are outputs of the model. The model is rich in its ability to handle technology detail and provide insight for specific areas of the economy, such as the electric power or transportation sector. This structure permits consideration of energy-efficiency improvement opportunities in relation to capital equipment investment and replacement to meet growth in energy demand. The model permits the user to test policy implications of end-use measures such as voluntary measures or appliance standards. China is incorporated as a separate country in the model. Preliminary analysis showed that end-use energy efficiency policies aimed to reduce electricity consumption would yield real savings to the economy in China.
Zhang Aling described the framework of the Three-E Model applied by her team at Tsinghua University. Zhang explained that the model is being upgraded to permit consideration of feedbacks from energy system changes to the overall economy. The previous version of the model progressed step-wise from a “macro-econometric” module the output of which is used in a second module to project demand for energy services which, in turn, feeds into a inter-temporal linear optimization model which provides a cost-effective solution to meet demand. The framework will be extended in the coming year to link a CGE model with the 3-E model.
Friday, 21 May
Hu Tao, Senior Research Fellow, Research Center for Policy, Chinese National Environmental Protection Agency, drew policy implications of co-benefits opportunities in China by reviewing the value of air pollution control benefits for human health and agricultural production, drawing on bottom-up analyses using three modeling frameworks. He presented a case study of co-benefits for Shanghai, where air pollution control measures could be used to avoid premature deaths as a result of reducing particulate matter concentrations. The estimated benefits of these reductions could be U.S. $113 million to $950 million in 2010, and $327 million to $2,884 million in 2020. He related this work to the challenge of policy-making in China, where voluntary climate measures could usefully be combined with local air pollution control measures, and to support Chinese participation in the “Clean Development Mechanism.” Hu presented scenarios with and without co-benefits consideration with the former some 40 percent below the latter in 2050. He concluded that co-benefits could be significant for China and should not be ignored.
Hu pointed out that different policy makers have different priorities and are interested in different aspects of policy modeling. For example, the central government is promoting car ownership as a driver of economic development. On the other hand, local government officials are trying to cope with the pollution and congestion that comes with over-reliance on automobile transport. He noted in passing that the Chinese gasoline tax will in 2005 range from 0.7-1.3 Yuan per liter. Hu also commented on the growing need to model water supply, demand, and policies in China. He cited a forthcoming tripling in the price of water in one Chinese river basin.
He Kebin, Tsinghua University, presented his team’s estimates of the co-benefits of air pollution control in China. He’s on-going research is updating estimates of GDP losses due to air pollution. He presented the analytical and modeling framework he is applying to contribute to a national assessment of co-benefits of local air pollution control and climate emissions mitigation, work undertaken in collaboration between the U.S. and Chinese environmental protection agencies. Other studies from the 1990s suggested GDP loss of 2-7 percent in China due to air pollution, though he noted that those results remain “contentious.” He presented time series data showing a general decline overall during the last decade of Chinese emissions of sulfur, nitrogen, and particulates.
Mun Ho of Resources for the Future presented results from his work with Harvard University and Tsinghua University assessing national policies to reduce local health damages and coincidental carbon emissions reductions. Ho stated that his analysis and modeling results suggest that the value of one Chinese Yuan of coal burned produces nearly one Yuan in health damage. He indicated that his results suggest that a ‘green’ tax on fuels would provide a more effective policy for reducing damages compared to a ‘green’ tax on all goods. The magnitude of control costs in well-designed policies would be much smaller than the local benefits, even ignoring global benefits. Local pollution reduction would very likely involve carbon emission reduction. The short run adjustment costs may be higher than estimated here leading to less control effort by China if unaided by outside world. Richer countries may want to play a role in tipping the balance towards greater, earlier mitigation efforts.
A strong discussion followed Mun Ho’s presentation, centering on issues of flexibility in policy modeling and echoing long-standing critiques of modeling techniques. One questioner posed the issue in the form of the old joke, “Do modelers only ‘search under the street light,’ wondering aloud whether tax policies are modeled in preference to other policy tools because they are more amenable to the framework. These comments, of course, are generally relevant to the field.
Ron Sands, Senior Economist, Pacific Northwest National Laboratory, described technology options for long-term emissions mitigation to reduce risks associated with climate change. Sands presented model results assessing the efficacy of broad portfolio of known technologies plus new options—hydrogen, carbon capture with sequestration, and bio-technologies—which could reduce the cost of stabilizing emissions. Ron noted that energy is central to the climate change issue, and he asserted that stabilizing concentrations of greenhouse gases in the atmosphere requires fundamental change in the energy system. He suggested that research and development budgets around the world are not only under-funded, but declining.
Liu Qiang, Energy Research Institute, spoke on a technology options for urban transportation in China, a topic of intense interest as automobile ownership dramatically expands. He described his work using scenario analysis to determine technological options for emissions mitigation in urban transport in China. He explained his projections of vehicle stocks and use and his team’s application of a linear programming model to assess costs of mitigation options. Among the interesting details of his scenarios were assumptions indicating growth in the private car fleet in Beijing increasing from 1.4 million in 2000 to 4.8 million in 2020, and scenarios of the share of public transport in Beijing changing from 32 percent today to a low of 25 percent and a high of 36 percent in 2020. He replied, in response to a question, that the model does try to account for congestion and pollution costs. A commenter added that the Beijing vehicle fleet in 2003 has already reached 2 million, implicitly suggesting that the projection of 5 million cars in Beijing in 2020 may be conservative. Some participants shared wonderment as to how Beijing might handle so many cars.
Helal Ahammad of the Australian Bureau of Agricultural and Resource Economics (ABARE) spoke on climate options as portrayed by the Global Technologies in Global Trade and Environment Model (GTEM), an Australian contribution to the field. The model incorporates 68 countries or regions and 62 energy producing or consuming sectors. Ahammad presented, for example, one graphic depicting mitigation costs for fugitive methane in China, Australia, Europe, and the United States. The graphic indicated that methane emission reductions of 40 percent could be achieve in each of these areas—except China—for only about $40 per ton. Interesting, the cost would be double that in China for a comparable percentage reduction, according to the GTEM results.
Toshihiko Masui, Japanese National Institute for Environmental Studies, acquainted workshop participants with his organization’s assessments of technology transfer for meeting carbon dioxide reduction targets. Masui addressed the issues of meeting the Kyoto goal in Japan, and the potential value of the Clean Development Mechanism (CDM), one of the flexible mechanisms that would be offered by the Kyoto Protocol. He explained the use of a CGE model to assess the value of Japanese CDM investments in China. Masui presented one graphic claiming a $100 billion value of reduced Kyoto compliance cost for Japanese CDM investment in China. He also presented the converse, though somewhat diminished, value to China of these same hypothetical Japanese investments.
In reply to a questioner, Masui indicated that the Japanese government has not decided whether it would consider a non-Kyoto proposal for cutting emissions. Other questioners raised practical concerns regarding the combination of policies of carbon taxation and investment subsidies for consumer investment for mitigation measures, leading to a general discussion of the merits of policies for what might be called “fee-bates,” or using pollution taxes to pay for subsidies for mitigation investments. Time did not permit a general resolution of these interesting questions.
Gao Feng (Deputy Director General, Department of Treaty and Law, Chinese Ministry of Foreign Affairs) expressed his strong opinion that dialogue between modelers and policy makers is important. He described the process by which he himself came to the conclusion that climate change policy is needed, explaining the simple “model” calculations that he did himself to grasp the magnitude of future energy demand, supply, emissions, and the costs of responding to the challenge of climate change. His calculations took into account future population, urbanization, economic development, and the implications for China for involvement of China in climate change action over the next 30-50 years. He implied that he concluded that it is possible for China to work on emissions mitigation rather than absolute emissions reductions. He noted the importance of professional modeling of these issues, and the need to make the results replicable, transparent, and credible.
Gao Feng further explained that right now energy and economic modeling is a hot topic in China as policy discussions continue on the crucial subjects of economic development and its connection to energy and environment policies. Gao mentioned that informal, international dialogue on climate policies has begun and has been made possible by meetings of negotiators and modelers.
Gao described four desired elements for assessing an acceptable future international agreement, including following the principals of the United Nations Framework Convention on Climate Change, the demands of economic development, using a bottom-up approach, and technology collaboration. All decisions require scientific support, including business-as-usual analysis and elaboration of means of policy participation, especially on how international mechanisms might apply to China. He expressed hope that dialogue could be continued to promote further international collaboration.
Sun Cuihua (Director, Office for Climate Change Policy Coordination, Chinese National Development and Reform Commission) expressed pleasure in joining the meeting. She has followed progress of this workshop series starting from the first workshop in 1998. She said that at that time that she was not sure the first modeling workshop would work well, but believes now that the series has contributed much to modeling studies in China. She added that the series has provided opportunities for modelers from other countries to better understand China. She noted that Chinese interest in sustainable development and rigorous policy development now places strong demands on economic and environmental modeling tools. For example, climate change policy making and energy demand modeling requires serious additional support. She reiterated her belief in the importance of the workshop and expressed hope that the series would continue. On behalf of the Office of Climate Change Policy Coordination in China, she expressed gratitude to U.S. EPA for supporting the modeling workshop.
Hu Tao (Senior Research Fellow, Research Center for Policy, Chinese National Environmental Protection Agency) spoke on the role of NEPA in climate change and domestic environmental policy. Greenhouse gas emissions mitigation and air pollution control measures, in his opinion, have complementary benefits for China. Greenhouse gas emissions mitigation options could in general contribute to reducing sulfur dioxide and suspended particulates in China. China will implement additional sulfur and particulate emissions control policies, and this in turn, he said, could be good for carbon dioxide mitigation. More policy options should be analyzed to improve policy making. So far, Hu said, the effect of total emissions control policy has not worked very well because the target is too high. Now consideration is being given to change from total emission control to “emissions intensity” control. He also emphasized the importance of technology options, recycling, and technological research and development. China should use the opportunity of greenhouse gas emissions mitigation, Hu urged, to effect “a better local environment.”
Mark Heil (Senior Economist, U.S. Environmental Protection Agency) remarked that this was a very successful workshop. Heil suggested that the many questions raised and interesting discussions taking place were indicators of success, and he expressed hope the workshop activity could continue.
Heil also drew the following observations from the workshop:
Heil suggested that it would be useful to have further exchanges in modeling research, including additional modeling workshops as well as technology discussion meetings. It is important, he emphasized, to have more regular and ongoing exchanges between modelers and government officials in order to provide decision makers with the best available information, and to give modelers practical feedback on the analytical needs of policymakers. He suggested additional modeling studies on climate change policies.
Jaekyu Lim (Research Fellow, Korean Energy Economics Institute) said that with Korea becoming an “OECD” country, some analysts were concerned about the implications of “post-Kyoto negotiations.” With Korea seriously considering future possible climate change action, Korean analysts are assessing impacts of a variety of policies. For example, the introduction of an emissions trading system is being consideration. The policy climate in Korea is changing quickly and in a way that makes economic and environmental modeling and analysis very important. He observed there are many modeling studies in China and that KEEI should work to replicate this approach in Korea.
Lim said that KEEI is working to link top-down model and bottom-up models. He mentioned that co-benefits analysis is not yet a priority issue in Korea, implying that it should be. KEEI will join the Energy Modeling Forum study, he indicated, and at the next meeting will present comparisons of energy forecasts and emissions scenarios. He reiterated the potential significance of the Korean government’s decision to launch an emissions trading system in Korea.
Mark Levine (Director, Environmental Energy Technologies Division, Lawrence Berkeley National Laboratory) said he is impressed with the state of modeling in China, noting that many studies already exist on the Chinese energy system and its implication for climate change. But he emphasized the importance of improving data sources, a problem naturally made more difficult by China’s transition to a market economy. He suggested more discussion of co-benefits, and the incorporation of energy efficiency technologies and policies in energy modeling for China. Levine noted that the present time is a crucial one for creating new and vigorous policies for energy efficiency in China.
William Chandler (Director, Advanced International Studies, Pacific Northwest National Laboratory), summarized the discussion and the workshop. He recalled that Mark Heil, Michael Shelby, Zhou Dadi, and Jiang Kejun in the process of planning this workshop had articulated a premise for its justification, that developing better foresight in the form of analytical tools and economic models remains key, unfinished business. And that all countries need reliable economic and environmental models in order to accurately assess the costs and benefits of possible climate policies. Sharing technical skills and analytical results helps clarify choices and their consequences. This workshop, Chandler said, affirmed that observation.
Chandler noted one key conclusion could drawn from the two days of discussion: more can be done to make economic and environmental modeling policy relevant. This relevance could be improved in two ways.
First, analysts could improve understanding of the drivers of change. This implies better linking modeling theory to analysis and understanding of current trends. This need was illustrated by the discussions of China’s unprecedented progress over the past two decades in reducing energy intensity, and by the sudden and surprising reversal of that trend over the past couple of years. Second, analysts can adjust their tools better to match the needs and time horizons of policy makers. There is a perceived need to bridge short and long term perspectives, and to understand better the needs of government “clients.” For example, local and central government leaders will see decisions differently. These improvements can be made by:
Chandler concluded by observing with what seemed to be a consensus among participants—that
U.S. EPA had sponsored and the Energy Research Institute had hosted a sterling
program, with rich contributions from Chinese, Korean, Japanese, Australian,
and American colleagues.
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Posted August 2004