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Targeting one bird with two stones: The impact of combining a renewable electricity standard and a vehicle fuel economy standard. Valerie J. Karplus, Ph.D. Jennifer Morris, Ph.D. candidate MIT Joint Program on the Science and Policy of Global Change June 21, 2011.

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Valerie J. Karplus, Ph.D. Jennifer Morris, Ph.D. candidate

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Valerie j karplus ph d jennifer morris ph d candidate

Targeting one bird with two stones: The impact of combining a renewable electricity standard and a vehicle fuel economy standard

Valerie J. Karplus, Ph.D.

Jennifer Morris, Ph.D. candidate

MIT Joint Program on the Science and Policy of Global Change

June 21, 2011


Valerie j karplus ph d jennifer morris ph d candidate

Background – Model – Combining Reg. – Conclusions

Passenger vehicles and electric power generation together account for aroundhalf of U.S. GHG emissions…

Passenger vehicles

Electric Power

  • Electric power :

  • 30% of total U.S. GHG emissions

  • Passenger vehicles :

  • 16% of total U.S. GHG emissions

  • Generation mix

  • (40% of U.S. petroleum use)

Coal

Source: EIA, Emissions of Greenhouse Gases Report, (2009).


Comparing two options for reducing ghg emissions and petroleum use

Background – Model – Combining Reg. – Conclusions

Comparing two options for reducing GHG emissions (and petroleum use)

1) Combine policies focused on individual sectors :

One bird,

two stones

Electric Power

Passenger vehicles

Renewable electricity standard

(State-level RES policies)

Fuel economy standard

(U.S. Corporate Average Fuel Economy Standards)

2) Achieve same reduction with single economy-wide policy :

Cover many sectors, incentivize reductions at least cost

One bird,

one stone

How do the costs of each approach compare?


Valerie j karplus ph d jennifer morris ph d candidate

Background – Model – Combining Reg. – Conclusions

Electricity sector and passenger vehicle fleet detail were added into an economy-wide macroeconomic model

The MIT Emissions Prediction and Policy Analysis Model

New passenger vehicle sector

Detailed physical accounting

Primary Factors

Income

Consumers

Passenger

Vehicles

Producers

(includes electricity)

(1) Travel demand

(2) Fuel efficiency

Expenditures

(3) Alt. Technology

Goods and Services

EPPA-HTRN

  • Multi-sector, multi-regional general equilibrium model

  • Technologies compete based on cost

  • Prices are determined inside the model

  • Can apply policies, e.g. cap-and-trade, fuel tax


Representing policies in the eppa model

Background – Model – Combining Reg. – Conclusions

Representing policies in the EPPA model

Renewable Electricity Standard

Vehicle fuel economy standard

New vehicles

Electricity generation

Halves vehicle fuel consumption by 2030, constant thereafter.

Reaches 22.5% by 2030 and constant thereafter.


Impact on the electricity sector

Background – Model – Combining Reg. – Conclusions

Impact on the electricity sector

Changes in Installed Capacity

Electricity – Primary fuel use


What if ghg emissions were instead limited by a cap and trade policy

Background – Model – Combining Reg. – Conclusions

What if GHG emissions were instead limited by a cap-and-trade policy?

Capped emissions are equivalent to combined FES + RES policy

CAT policy covers all sectors of the economy.

Emissions are reduced relative to reference, but modest.


Regulatory policy combination is 3x more costly than cap and trade policy

GHG Emissions Reduction and Economic Cost

Background – Model – Combining Reg. – Conclusions

Regulatory policy combination is 3X more costly than cap-and-trade policy


What are the effects of combining the regulatory policies with a tough cap and trade policy

Background – Model – Combining Reg. – Conclusions

What are the effects of combining the regulatory policies with a tough cap-and-trade policy?

  • Why combine?

  • Many current examples

Oil

FES

RES

Economy

Wide


Valerie j karplus ph d jennifer morris ph d candidate

Background – Model – Combining Reg. – Conclusions

What is the effect of adding the two regulatory policies in the background of a more stringent cap-and-trade policy?


Conclusions

Background – Model – Combining Reg. – Conclusions

Conclusions

  • Should we combine fuel economy standard + renewable electricity standard?

    No. Can achieve same GHG reduction at 1/3 of the cost with cap-and-trade system!

  • What about if we combine them with a tough cap-and-trade system?

    It will cost you more to get the same reduction, regardless of whether technology cost is high or low…

  • Future work : Regulations versus cap-and-trade—how do costs and GHG emissions outcomes compare under uncertainty?


Thank you

MIT Joint Program on the Science and Policy of Global Change

[email protected]

[email protected]

Thank you!

Prof. John Heywood

Prof. Jake Jacoby

Prof. Kenneth Oye

Prof. John Reilly

  • Prof. Mort Webster (chair)

Dr. Mustafa Babiker (Saudi Aramco)

Prof. Dick Eckaus

Prof. Jerry Hausman

Prof. Kenneth Train (Berkeley)

Rosie Albinson (BP)

Dr. Sebastian Rausch

Dr. Niven Winchester

Awesome JP & SAL students

E-mail: [email protected]


Co 2 emissions comparison for small to midsize u s car eppa result march 4 2010

CO2 emissions comparison for small to midsize U.S. carEPPA Result – March 4, 2010

Error bars on 2010 PHEV and EV indicate emissions using electricity exclusively from coal (high) or wind (low).


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