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Energy and the Environment. Fall 2012 Instructor: Xiaodong Chu Email : [email protected] Office Tel.: 81696127. Global Warming: Controlling CO 2 Emissions. Emission reductions of CO 2 can be accomplished by a combination of several of the following approaches

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Energy and the environment

Energy and the Environment

Fall 2012

Instructor: Xiaodong Chu

Email:[email protected]

Office Tel.: 81696127

Global warming controlling co 2 emissions

Global Warming: Controlling CO2 Emissions

  • Emission reductions of CO2 can be accomplished by a combination of several of the following approaches

    • End-use efficiency improvements and conservation

    • Supply side efficiency improvements

    • Capture and sequestration of CO2 (二氧化碳的捕获与封存) in subterranean reservoirs(地下水库) or in the deep ocean

    • Utilization of CO2 for enhanced oil and natural gas recovery and for enhanced biomass production (photosynthesis)

    • Shift to non-fossil energy sources

Global warming controlling co 2 emissions1

Global Warming: Controlling CO2 Emissions

  • The simplest and most cost-effective approach to reducing carbon emissions is by end-use efficiency improvements and conservation

  • In the residential–commercial sector, they range from lowering the thermostat in the winter (less heating), raising it in the summer (less air conditioning), better insulation, less hot water use, replacement of incandescent(白炽灯) with fluorescent lighting(荧光灯), replacement of electric clothes dryers with gas dryers, and so on

  • In the industrial sector the largest savings could come from reductions in direct use of fossil fuels (e.g., coal for process heat or smelting(冶炼)), process modification, energy-efficient motors, better heat exchangers, and so on

Global warming controlling co 2 emissions2

Global Warming: Controlling CO2 Emissions

  • In the transportation sector, fossil fuel energy consumption is growing by leaps and bounds (跨越式发展) all over the world

  • Increasing population and living standards, coupled with the movement from agricultural to urban-industrial societies, puts more and more people and cargo in automobiles, trucks, trains, airplanes, and ships

  • Because it is unrealistic to expect that the number of transportation vehicles, or the distances covered, will diminish, the only chances for reducing carbon emissions in the transportation sector lie in efficiency improvements

Global warming controlling co 2 emissions3

Global Warming: Controlling CO2 Emissions

  • By supply-side efficiency improvements we mean principally electricity supply

  • The electricity industry has many options to reduce carbon emissions while supplying an ever-increasing electricity demand

    • Shift from coal

    • Replacement of single-cycle gas-fired power plants with combined cycle gas turbine plants (CCGT) (联合循环燃气轮机电厂)

      • Because single-cycle power plant thermal efficiencies are in the range 35–40%, whereas the combined cycle plants can achieve 50–55%, the carbon emission savings are in the range of 10–20%

    • Replacement of single-cycle coal-fired power plants with gas-fired CCGT

      • The carbon emission savings are in the range 60–70%(50% on account of shift from coal to gas, and 10–20% on account of higher efficiency)

Global warming controlling co 2 emissions4

Global Warming: Controlling CO2 Emissions

  • Replacement of single-cycle coal-fired power plants with coal-derived synthetic gas-fired (煤基合成气) combined cycle gas turbine plants

    • The efficiency of such plants is 40–45% based on the coal input energy

    • Here, the carbon emission savings would be only on the order of 5–10%

    • While a CCGT has a higher efficiency than a single-cycle plant, coal gasification requires some of the coal energy to be spent on gasification

Global warming controlling co 2 emissions5

Global Warming: Controlling CO2 Emissions

  • The capture of CO2 is only worthwhile in large power plants, especially those burning coal (because coal emits more CO2 than oil or gas)

  • A 1000-MW coal-fired power plant emits between 6 and 8 Mt y−1 of CO2

  • The capture of CO2 from all the world’s large coal-fired power plants would make a significant dent in the global carbon emissions

  • The following technologies for CO2 capture from power plants are being developed

    • Air separation–CO2 recycling(空气分离—二氧化碳循环)

    • Solvent absorption(溶剂吸收)

    • Membrane gas separation(膜气体分离)

Global warming controlling co 2 emissions6

Global Warming: Controlling CO2 Emissions

  • Air separation–CO2 recycling

    • This method is based on combustion of the fossil fuel in pure oxygen, instead of air

    • A plant using this method requires an air separation unit (ASU)(空气分离装置)

Global warming controlling co 2 emissions7

Global Warming: Controlling CO2 Emissions

  • Air separation–CO2 recycling

    • The world's first "clean coal" power plant (Schwarze Pumpe power station) went on-line in September 2008 in Germany

    • The facility captures CO2 and sulfides, separates them, and compresses the CO2 into a liquid state

    • Plans are to inject the CO2 into depleted natural gas fields or other geological formations

Global warming controlling co 2 emissions8

Global Warming: Controlling CO2 Emissions

  • Solvent absorption

    • Carbon dioxide is soluble in some solvents, notably ethanolamines, e.g., monoethanolamine (MEA)(乙醇胺,例如,单乙醇胺)

Global warming controlling co 2 emissions9

Global Warming: Controlling CO2 Emissions

  • Membrane gas separation

    • Gas separation by membranes relies on the different permeation rates of gases through the membrane pores

    • The membrane method could be used for capturing CO2 from a mixture of CO2 and H2, which is the product of coal gasification and the water shift reaction(煤的气化和水转移反应)

Global warming controlling co 2 emissions10

Global Warming: Controlling CO2 Emissions

  • After capture, the CO2 needs to be sequestered in a reservoir for an indefinite period, so it will not reemerge into the atmosphere

  • The following reservoirs are being investigated, and in some instances already employed, for sequestering CO2

    • Depleted oil and gas reservoirs

    • Deep ocean

    • Deep aquifers (蓄水层)

Global warming controlling co 2 emissions11

Global Warming: Controlling CO2 Emissions

  • Depleted oil and gas reservoirs

    • Oil and gas reservoirs are usually covered by an impenetrable layer of rock, so that CO2 deposited into the reservoirs would not reemerge into the atmosphere

    • In respect to sequestering CO2, oil and gas reservoirs behave differently

    • Whereas CO2 can be injected into oil reservoirs while the oil is being pumped out of it, it can be injected into gas reservoirs only after depletion of the gas

    • In fact, injecting CO2 into semi-depleted oil reservoirs is a well-established technology, which is not done for sequestering CO2, but rather for enhanced oil recovery (EOR)

Global warming controlling co 2 emissions12

Global Warming: Controlling CO2 Emissions

  • Deep ocean

    • The ocean is a natural repository for CO2

    • The ocean is vast: It covers about 70% of the earth’s surface, and the average depth is 3800 m

    • There is a continuous exchange of CO2 between the atmosphere and the ocean

    • The ocean is a net absorber of carbon, which probably is part of the reason that CO2 concentrations in the atmosphere do not increase as fast as expected from anthropogenic emissions

Global warming controlling co 2 emissions13

Global Warming: Controlling CO2 Emissions

  • Deep aquifers

    • Deep aquifers may underlay vast areas under the continents and oceans

    • The deep aquifers themselves consist of permeable, porous rock, such as sedimentary shale-, lime-, or sandstone, the pores of which are saturated with brine

    • The injected CO2 (in liquid or supercritical phase) would dissolve in the brine as carbonic acid

    • In the case of limestone formation, some of the carbonate would dissolve into bicarbonate, furthering the absorption capacity of the reservoir and reducing the risk of leakage

Global warming controlling co 2 emissions14

Global Warming: Controlling CO2 Emissions

  • Flue gas CO2 can be used for enhanced oil or gas recovery

  • Other uses would be for dry ice manufacturing, for carbonated drinks(碳酸饮料), and as a raw material for chemical products, such as urea, methanol, or other oxygenated fuels(尿素、甲醇或其他含氧燃料)

  • The problem with such propositions

    • Most of the carbon in the product would eventually burn up or decompose back to CO2 and would wind up in the atmosphere

    • The reduction of CO2 into the useful product requires virtually the same amount of energy as was given off when carbon oxidized into CO2

    • The present market for chemical products that could be based on CO2 is quite limited

Global warming controlling co 2 emissions15

Global Warming: Controlling CO2 Emissions

  • Shift to non-carbon energy sources eliminates CO2 emissions completely, except perhaps for the fossil energy (mainly coal) used in smelting steel and other construction materials used in the non-fossil energy conversion devices

  • Because a shift to nuclear energy appears for the foreseeable future unacceptable to the public and body politic in most countries, the only recourse would be a shift to renewables

  • Among the renewables, hydro energy also appears to run into public opposition

  • All expectations are turned toward solar, wind, geothermal, and ocean energy

Energy efficiency improvements

Energy Efficiency Improvements

  • Improvements in energy efficiency are seen as a key mechanism for reducing energy dependence and meeting sustainability and security of supply goals

  • An improvement in energy efficiency means an increase in the effective productive services generated by a given amount of energy inputs

    • Do more with less

    • Reduce energy waste

Energy and the environment

Energy Inputs







U.S. economy





Nonrenewable fossil fuels

Useful energy

Nonrenewable nuclear


Hydropower, geothermal, wind, solar

Unavoidable energy waste


Unnecessary energy waste

Energy efficiency improvements1

Energy Efficiency Improvements

  • There are a variety of technologies for sharply increasing the energy efficiency of industrial operations, motor vehicles, and buildings

    • In industry

      • Cogeneration or combined heat and power (CHP)

      • Replace energy-wasting electric motors

      • Recycle materials

      • Switch from low-efficiency incandescent lighting to higher-efficiency fluorescent and LED lighting

Energy efficiency improvements2

Energy Efficiency Improvements

  • There are a variety of technologies for sharply increasing the energy efficiency of industrial operations, motor vehicles, and buildings

    • In transportation

      • Corporate average fuel standards

      • Fuel-efficient cars on the way: superefficient and ultra-light car, energy-efficient diesel car, gasoline-electric hybrid car, plug-in electric vehicle, electric vehicle with a fuel cell

      • Hidden prices in the gasoline

      • Subsidies for buying fuel-efficient cars

Energy and the environment







Miles per gallon (mpg)





United States






Energy efficiency improvements3

Energy Efficiency Improvements

  • There are a variety of technologies for sharply increasing the energy efficiency of industrial operations, motor vehicles, and buildings

    • For buildings

      • Green architecture

      • Living or green roofs

      • Straw bale houses

Energy and the environment

A Green or Living Roof in Chicago

Energy efficiency improvements4

Energy Efficiency Improvements

  • Will an increase in energy efficiency in itself lead to a reduction in energy use?

    • Energy remains artificially cheap

    • Few large and long-lasting government incentives

    • The rebound effect

Rebound effects

Rebound Effects

  • Steam engines

    • Efficiency led first to drop in coal use

    • Over time, steam engines were used in more applications

    • Eventually expanded use of steam resulted in increased use of coal

Rebound effects1

Rebound Effects

  • Computers

    • Large, energy inefficient processors gave off substantial heat and required large, cumbersome cooling systems

    • Microprocessors lowered energy consumption both in the computer and for cooling

    • Then the desktop replaced the central computing facility, followed by laptops, PDAs, cell phones…

Rebound effects2

Rebound Effects

  • Would a 1% increase in energy efficiency result in a 1% reduction in the consumption of energy?

    • A technological boost in energy efficiency reduces the price of energy in efficiency units, which tends to stimulate the demand for energy

      • The technical effect, where we need less energy to produce a given unit of output

      • A substitution effect, where energy is substituted for other inputs as it is now effectively cheaper

      • An output/competitiveness effect (e.g. on exports), from this beneficial supply-side shock

      • A compositional effect, since different goods vary in their energy intensities

Rebound effects3

Rebound Effects

  • At the system-wide level, the demand for energy (in physical units) from a 1% improvement in energy efficiency could

    • Fall by 1% (zero rebound)

    • Fall by less than 1% (rebound)

    • Remain unchanged (complete rebound)

    • Increase (backfire)

  • The extent of rebound reflects the responsiveness of the system to changes in energy prices, i.e. the general equilibrium own-price elasticity

    • Zero rebound is unbelievable

Energy and the environment

Price of vmt (vehicle-miles traveled)

Effect of efficiency improvement

“Rebound effect”

Before mpg improvement

After mpg improvement


Gasoline consumption

Energy and the environment

Price of vmt

Effect of efficiency improvement

“Rebound effect”

Before mpg improvement

After mpg improvement


Gasoline consumption

Rebound effects4

Rebound Effects

  • Categories

    • Direct rebound effect: increased fuel efficiency lowers the cost of consumption, and hence increases the consumption of that good because of the substitution effect

    • Indirect rebound effect: through the income effect, decreased cost of the good enables increased household consumption of other goods and services, increasing the consumption of the resource embodied in those goods and services

    • Economy wide rebound effects: new technology creates new production possibilities in and increases economic growth

Rebound effects5

Rebound Effects

  • Direct rebound effect

    • Can be decomposed into substitution and income effects

    • A change in relative prices leaves over income that can be spent on more services and/or more other goods

    • Due to decreasing marginal utility, rebound effects expected to be smaller for high income households

Rebound effects6

Rebound Effects

  • Indirect rebound effect

    • Embodied Energy: new equipment requires energy to produce and energy to install

    • Secondary Effects

      • Other good goods / services purchased that require energy to produce and transport

      • ‘Steam engine’ effect: technological improvement →improved productivity → increased economic growth

      • Large scale decrease in energy demand from use of new technology → fall in energy prices → increased demand in energy from other types of users

      • Cost of energy-intensive goods fall more than those of non-intensive goods → people re-allocate budgets towards more (fewer) of the former (latter)

Rebound effects7

Rebound Effects

  • Economic wide rebound effects

    • Sum of all direct and indirect rebound effects

    • Usually measured as a percentage

      • 50% →one half of potential (according to engineering estimates) energy benefits realized

      • 100% → no net benefits realized

      • > 100% → backfire

Rebound effects8

Rebound Effects

  • How big are rebound effects?

  • Depends on

    • How big the substitution effect is

    • How big the income effect is

    • How much energy is embedded in the production and installation of the technology

    • Nature and sizes of the set of secondary effects

Rebound effects9

Rebound Effects

  • The scale of rebound and backfire effects is an empirical issue

  • Little current evidence, especially on macroeconomic or system-wide effects of energy efficiency changes

    • Usually cannot do controlled experiments, especially for long-run impacts, many factors may have changed

    • Usually do not know what energy consumption would have been in the absence of the new technology

    • Sometimes not clear which way causality runs: do people change their driving habits because they have a more fuel efficient car? or do people buy a more fuel efficient car because they have changed their driving habits?

Example 12 1 estimated magnitudes of rebound effects

Example 12.1: Estimated Magnitudes of Rebound Effects

  • Private vehicles

    • Long-run direct rebounds from 10 to 30%→ 70+ % of potential benefits realized

    • Short-run as low as 4.5%

  • Household Heating

    • Direct rebounds as high as 50% relative to engineering estimates

    • Part of this may be due to the limited usefulness of high-efficiency equipment if there are problems with the thermal envelope

    • Rebounds higher for low income households who may have previously settled for poor thermal comfort

Tax policy mitigating rebound effects

Tax Policy Mitigating Rebound Effects

  • The limitations to using improved energy efficiency to achieve sustainability targets stem from the increased choice presented by such improvements, e.g., rebound effects

    • The increase in energy efficiency allows greater consumption and encourages greater energy use

  • One response to this is that the government could use tax or subsidy policy to change the prices faced by producers so as to bring about a more appropriate allocation of resources

    • If energy use is too high after the introduction of improvements in energy efficiency, the government could place an appropriate tax on energy to improve the allocative efficiency of the market mechanism in the attainment of sustainability goals

Tax policy mitigating rebound effects1

Tax Policy Mitigating Rebound Effects

  • An analysis of energy policy related rebound effects across 30 sectors, show a large variation of rebound across sectors

  • Therefore, the effect of sectoral based measures e.g. carbon taxes results may vary and a uniform tax across all sectors could unfairly penalise sectors

  • This would indicate that sector specific instruments that aim to deliver energy consumption reductions with least cost to economic welfare, may be more effective and equitable in practice

Renewable energy

Renewable Energy

  • Increasing prices of conventional energy resources, environmental concerns / sustainability, and energy security issues have led to a growing interest in mass production of energy based on renewable energy such as solar, wind, biomass, and etc.

  • Growth of renewable energy has been about 2.3% per year (starting from a very small base) over past 3 decades (higher than overall growth rate of primary energy supply)

Renewable energy1

Renewable Energy

  • Wide variations across regions, with renewable energy accounting for

    • Almost 50% of primary energy in Africa

    • Over 30% of primary energy in Latin America

    • Over 25% of primary energy in much of Asia

  • In low income countries, mostly ‘traditional’ energies: bio-mass

    • Not necessarily sustainable (deforestation, for example)

    • Not necessarily clean (particulate matter);

    • Low conversion efficiency compared to other sources of energy

    • Primarily used in the residential sector

Renewable energy potential

Renewable Energy - Potential

  • Technically, with current technologies, it may be possible to generate

    • 43 PWh of wind-based energy

    • 939 PWh of Solar-Photo Voltaic

    • 7 PWh of biomass energy

  • Technical progress should increase these potentials

  • Current global electricity use: 13.3 PWh

Renewable energy barriers

Renewable Energy - Barriers

  • Technical: intermittency of supply (e.g., the wind does not necessarily blow at the right time)

  • Uneven playing field (externalities: prices of fossil fuels do not reflect their full social costs)

  • Market barriers (access to grid, regulatory barriers, lack of incentives)

  • Non-market barriers (administrative, information)

Renewable energy power generation

Renewable Energy - Power Generation

  • Feasibility of various renewable options vary according to regional characteristics

  • Possible renewable generation sources:

    • Hydro

    • Wind*

    • Solar*

    • Tidal*

    • Biomass

      • * Supply is intermittent, not feasible as part of baseload generation

Renewable energy power generation costs

Renewable Energy - Power Generation Costs

  • Relatively lower operating / variable costs (no need to purchase fuels)

  • The majority of costs are related to installing and maintaining the generation capacity

  • Fewer (although not necessarily zero) externalities

Renewable energy power generation issues

Renewable Energy - Power Generation Issues

  • Many sources not always available and output is not easily storable → provides complications for merit-order dispatch

  • Low capacity utilization rates → affects financial viability

  • Externalities (noise, aesthetics) associated some sources such as wind farms

  • Must be complemented with more reliable supplies (often based on fossil-fuel generation)

Case 12 1 economics of bio fules

Case 12.1: Economics of Bio-fules

  • Largely be used in transportation sector

  • Bio-ethanol can be produced from a variety of feed stocks such as sugarcane, sugar beets or corn

  • Bio-diesel can be produced from oil seeds such as canola

  • Liquid fuels can be produced from animal fats and biomass

  • Trade-off between land use for energy production vs. land use for food production

Case 12 1 economics of bio fules1

Case 12.1: Economics of Bio-fules

  • Bio-ethanol

    • Major cost component: feedstock

    • Substantial labour and energy costs

    • Cost of production falls with size of conversion plant (economies of scale); competitive with other fuels in Brazil

    • Increased demand for feedstock →impact on food price of feedstock →diversion of land away from food-based agricultural activities →impact on food supply and prices (with a large impact on those with low incomes)

Case 12 1 economics of bio fules2

Case 12.1: Economics of Bio-fules

  • Bio-diesel

    • Major cost component: feedstock (80%)

    • Competition from other uses (cooking) makes the feedstock expensive

    • Not yet cost-competitive anywhere

    • Support mechanisms used to promote bio-diesel

Policy tools for promoting renewable energy

Policy Tools for Promoting Renewable Energy

  • Feed-in Tariffs:

    • Utilities required to buy renewable electricity at prices that are usually higher than the market price (US, Europe);

    • Cost often passed on to customers

    • Promotes high cost supply

    • May lead to oversupply, with the utility ‘on the hook’ for purchasing this supply

    • Suppliers may earn ‘rents’ (price greater than MC)

Policy tools for promoting renewable energy1

Policy Tools for Promoting Renewable Energy

  • Renewable Obligations

    • Examples: Renewable Portfolio Standard (US); Renewable Obligation system (UK); EU bio-fuels directive

    • Electricity suppliers obligated to purchase a percentage of their product from renewable sources (or EU members required to ensure minimum bio-fuel supplies in their markets)

Policy tools for promoting renewable energy2

Policy Tools for Promoting Renewable Energy

  • Competitive Bidding

    • In jurisdictions where there are mandates for renewable energy contributions in the electricity generation mix the set of suppliers can be selected through a competitive bidding process

    • Proposals accepted based on bid price up to the desired quantity (if each supplier gets price that it bids→rents not earned on low cost projects)

Policy tools for promoting renewable energy3

Policy Tools for Promoting Renewable Energy

  • Financial Incentives

    • Fiscal measures designed to reduce the cost of production or increase the revenues for producers of “renewables” or “clean” conventional options

    • May include tax exemptions or reductions, investment credits, accelerated depreciation allowances, direct subsidies, rebates, low interest loans

    • They usually reflect preferences for one set of technologies over another

Policy tools for promoting renewable energy4

Policy Tools for Promoting Renewable Energy

  • Carbon Taxes

    • Can be used to capture the full costs of using fossil fuels→ price signal

    • Common in many European countries

    • Burden may be shifted to consumers (providing an incentive to switch to other energy sources?)

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