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Greenhouse Gas Policy and CO 2 Cost Assumptions GRAC Meeting January 22, 2009

This meeting will discuss the summary of ECO Securities reports, carbon reduction targets and costs, possible analyses for the 6th plan, review of 5th plan assumptions, and discussion of 6th plan assumptions.

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Greenhouse Gas Policy and CO 2 Cost Assumptions GRAC Meeting January 22, 2009

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  1. Greenhouse Gas PolicyandCO2 Cost AssumptionsGRAC MeetingJanuary 22, 2009

  2. Outline • Summary of ECO Securities Reports • Carbon reduction targets and cost for three general cases • Possible analyses for the 6th plan • Review of 5th plan assumptions • Discussion of 6th plan assumptions 2

  3. ECO Securities Reports • Literature review of carbon cost forecasts • Carbon reduction supply curves • Sequestration and storage • High-level estimate of carbon cost for three specific scenarios 3

  4. Assessing Carbon Cost • Uncertainty surrounding future carbon market prices is great due in part to the many variables that affect it. • Short-term forecast: driven by policy and market variables • Long-term forecast: driven by population and economic growth assumptions 4

  5. Three General Cases Examined • Case 1: WCI only, no national or global policies • Case 2: National and international policies target emissions to 1990 levels by 2030 • Case 3: Aggressive national and global policies target CO2 concentrations at 550 PPM by 2100 5

  6. Carbon Reduction Targets • Case 1: WCI • 15% below 2005 levels by 2020 • 125 million tons reduction • Case 2: National • 15% below 2005 levels by 2030 • Estimated 2030 emissions 8.5 billion tons • 2.3 billion tons reduction • Case 3: Global • Limit concentrations to 550 PPM • 30 billion tons reduction by 2100 globally from current emissions (40 billion tons) 6

  7. Estimated Carbon Cost • Case 1: • $10 to $20 per ton (no time line) • Case 2: • $20 to $50 per ton (no time line) • Case 3: • $30 in 2020 and $50 in 2030 7

  8. Possible 6th Plan Analyses • NW RPS mandates, assumed carbon costs (ECO Securities or elsewhere) and probability distribution – assess CO2 emission total • Remove NW RPS, change carbon penalty until emission total equals the total in the base case • Multiple cases with increasing carbon allowance prices to create a reduction supply curve for the NW power system 8

  9. 5th Power Plan Assumptions • CO2 tax can arise in any election year • Appears in about two-thirds of simulated futures • Uniform distribution between $0 and $15 per ton from 2008-16 and between $0 and $30 after 2016 9

  10. 5th Plan CO2 Tax Deciles 10

  11. What we need for the Plan • Base case CO2 allowance cost through 2030 • For the electricity price forecast • For the Portfolio Model analysis • High and low range of allowance cost and associated 20-year profiles for the Portfolio Model • Probability distribution for the 20-year allowance cost profiles for the Portfolio Model • What do we assume about green tags and tax credits and how do they correlate with the carbon allowance? 11

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