The Pan EU NEEDS TIMES model: main results of scenario analysis

1. SIXTH FRAMEWORK PROGRAMME [6.1] [ Sustainable Energy Systems] The Pan EU NEEDS TIMES model:main results of scenario analysis Denise Van Regemorter, CES KULeuven NEEDS Final Conference RS2a: “Modelling Pan European Energy Scenarios” Brussels, February 17 2008 CES KULeuven

2. Scenarios with PEM TIMES • Focus: the EU energy and environmental objectives and policy targets • Energy target: competitiveness and energy security, through energy efficiency and enhancement of domestic resources • Environmental targets: climate and local pollution • The scenarios: • Reference scenario, without specific policies • CO2 climate policy scenario: -70% in 2050 compared to 2000 • Internalisation of external cost of local pollution scenario, in association with climate scenario and renewable target CES KULeuven

3. The Reference scenario • Growth rate and international energy price assumptions, derived from POLES and GEM-E3, as in the EU Impact assessment • Exogenous evolution in technology development • No specific country policies, except the nuclear phase-out when decided and low CO2tax of 5€/tCO2 • EU Primary energy demand increases with 0.4% per year, while CO2 emissions decrease till 2020 (-0.2%) but then increase again (+0.5%) because of coal use. CES KULeuven

4. Internalisation of external cost of local pollution in TIMES • The external cost associated with local pollution (damage per emission from RS1b stream) are computed in TIMES: • either ex-post • either included in the optimisation process and then internalized • So always included in the welfare/system cost (not the case for CO2) • With internalisation, synergies between policy targets (climate and air quality) are fully exploited in the choices of reduction measures • Caveat: the direct abatement options are not yet extensively modelled. CES KULeuven

5. Internalisation of external cost of local pollution in Reference • Sharp reduction in local pollution through internalisation • Only small impact on CO2 emissions CES KULeuven

6. Climate policy scenario and internalisation of external cost • Climate policy • Overall EU CO2 target of 70% in 2050 compared to 2000, with -12% in 2020 • Covers only CO2 because other gasses not yet completely modelled and other gasses only partly from energy • No CDM or JI here because the target takes it already in account (therefore cost is only cost reduction in EU), neither burden sharing • Cost efficiency scenario with full trading in the EU • Nuclear phase-out as in reference • With and without internalisation of external cost from local pollutants CES KULeuven

7. Additional pollutant reduction through internalisation • Mainly an impact at the beginning of the horizon • Slightly no impact on CO2 emissions because of target CES KULeuven

8. Impact on Primary energy (EU30) • Primary energy consumption decreases: • decrease in demand for energy services, esp. 2020, after more similar (around -5%) • Shift from solids to gas and to biomass in industry and electricity (role of CO2 capture) but shift to coal derived fuel in transport (at least till 2030) (maybe linked to abatement options in model) CES KULeuven

9. Welfare Loss(EU30,% difference compared to reference) • internalisation reduces the damage from local pollution (damage from CO2 not included) • the joint policy is slightly less costly in terms of welfare loss (excluding reduction of damage) than the sum of the losses of both policies separately • Climate and air quality jointly allows taking into account the interaction between the pollutants reduction options (depends on policy in place) CES KULeuven

10. Climate policy and renewable/biofuel target • Scenario • Climate policy, as in previous • Renewable target: as defined in the EU climate energy/climate package) with the possibility of trade of green certificates • Biofuel target CES KULeuven

11. Renewable and Biofuel targets • Results compared to CO2 only • only significant impact before 2030 • Reduces import dependency • greater shift towards biomass and slower penetration of carbon capture • small impact on cost • local pollution remain very close, so still need for internalisation CES KULeuven

12. Overview of the integrated scenarios results • Overall cost remains limited given assumptions of the model (optimisation, perfect foresight, no adjustment cost) • Reduction of local pollution damage needs appropriate policy in conjunction of climate policy • Renewable target significant impact before 2030 CES KULeuven

13. Conclusion • Mix of options to reach severe energy/climate targets • Decrease in demand of energy services • efficiency improvement and shift to low carbon energy at start • Renewables, carbon capture, hydrogen with higher target • Climate policies brings also ancillary benefits by reducing damage from local pollutants (SO2, NOx, PM,VOC) but policy aiming directly at better air quality is more effective (though synergies) • Climate policy alone is not sufficient for the renewable target in 2020 and a renewable policy contribute only slightly to the climate target, more for learning by doing for future technologies • Importance of an integrated modelling framework for climate/energy policy to exploit synergies and trade-offs • integrated in terms of demand and supply in the energy system • geographical integration • covering all environmental dimensions linked to energy • Caveats of the modelling framework must be kept in mind and further development of the technology database is important CES KULeuven