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ENERGY POLICY SOLUTIONS:

CHINA EDITIONSONIA AGGARWALJULY 2016 BEIJ ING

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OUTLINE

1. Introduction to Energy Policy Simulator

2. Sector By Sector Policy Analysis

3. Insights from Policy Analysis and Accelerated Low Carbon Scenario

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WHAT POLICIES CAN DRIVE DOWN CARBON EMISSIONS IN CHINA? To help understand how

China can attack its pollution problem, we developed the Energy Policy Simulator

This model reports changes in emissions and cash flows from policies

2013

2015

2017

2019

2021

2023

2025

2027

2029

0

4,000

8,000

12,000

16,000

20,000CHINA’S CO2e EMISSIONS

Mill

ion

Met

ric

Tons

(M

MT)

Reference Scenario

Low Carbon Scenario

Accelerated Low Carbon ScenarioStrongest Internationally Observed Policies Scenario

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THE POLICY SOLUTIONS MODEL

More than 10,000 lines of code

1,300 variables 106 input data

tables 2 years in the

making

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AN NCSC, ERI, AND ENERGY INNOVATION COLLABORATION NCSC, ERI, and EI worked

together to build this model

NCSC and ERI have approved the model structure and data

The final report highlights two policy scenarios (one from NCSC and ERI, one from EI)

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EXTERNAL REVIEWERS, ADVISERS, AND CONTRIBUTORSParticipation and review by top academics and researchers

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SECTOR BY SECTOR RESULTS

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ABATEMENT POTENTIAL AND COST-EFFECTIVENESS

Maximum abatement potential is an approximation based on our scaling methodology

2,500

1,500

2,000

3,000

0

500

1,000

-3,000

-1,000

-500

-2,500

-2,000

-1,500

Transportation Demand

Management

Increased Fuel Economy

Standards for LDVs and HDVs

Feebate for LDVs

Enhanced Appliance Standards

Improved System

Design and Integration

Early Retirement of Inefficient

Industrial Facilities

Industrial Cogeneration and

Waste Heat Recovery

Improved Industrial

Equipment Efficiency

Enhanced Building Codes

Improved Appliance Labeling

Improved Contractor

Education and Training

Accelerated Building

Retrofitting

Rebate Program for Efficient

Components

Increased CHP for

District Heat

Reduction of Demand for Industrial Products

Nuclear Power Plant Lifetime

Extension

Subsidies for Non-Fossil Electricity

Generation

Cement Clinker Substitution

Worker Training

Avoided Non-Methane Non-CO2

GHG Venting

Accelerated CCS Deployment

Additional Early Retirement of Coal

Power Plants

Increased Electrification of LDVs and HDVs

Methane Capture and Destruction

Subsidy for Natural Gas Electricity

Industrial Fuel Switching

Renewable Energy

Standard

Total Change in Capital Equipment Expenditures per Ton CO2eTotal Change in Operating Expenditures per Ton CO2e

RMB/

ton

CO2e

1,000 MMT CO2e/year

Million metric tons CO2e/year

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INDUSTRY SECTOR POLICIES

2013

2015

2017

2019

2021

2023

2025

2027

2029

0

4,000

8,000

12,000

16,000

20,000CO2e ABATEMENT POTENTIAL BY

SECTOR

Mill

ion

Met

ric T

ons

CO2e

(M

MT)

Strongest Policies: Reduced Demand for Industrial Products, Improved Industrial Equipment Efficiency, Avoided Venting of F-Gases

Reduced Demand for Industrial Products: 36%

Improved Industrial Equipment Efficiency: 25%Avoided Venting

of F-Gases: 12%

Early Retirement of Inefficient Industrial Facilities: 8%

Industrial Fuel Switching: 6%

Methane Capture and Destruction: 5%

Cogeneration and Waste Heat Recovery: 4%

Improved System Design and Integration: 3%

Cement Clinker Substitution: 2%

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ELECTRICITY SECTOR POLICIES

2013

2015

2017

2019

2021

2023

2025

2027

2029

0

4,000

8,000

12,000

16,000

20,000CO2e ABATEMENT POTENTIAL BY

SECTOR

Mill

ion

Met

ric T

ons

CO2e

(M

MT)

Strongest Policies: Subsidy for Non-Fossil Electricity, Early Retirement of Coal Power Plants, Renewable Energy Standard

Subsidy for Non-Fossil Electricity: 36%

Additional Early Retirement of Coal Power Plants: 34%

Renewable Energy Standard: 29%

Subsidy for Natural Gas Electricity: <1%

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CROSS-SECTOR POLICIESStrongest Policies: Carbon Pricing, Increased Tax on Fossil Fuels, Increased Combined Heat and Power for District Heating

2013

2015

2017

2019

2021

2023

2025

2027

2029

0

4,000

8,000

12,000

16,000

20,000CO2e ABATEMENT POTENTIAL BY

SECTOR

Mill

ion

Met

ric T

ons

CO2e

(M

MT)

Carbon Pricing: 76%

Increased Tax on Fossil Fuels: 13%

Increased Combined Heat and Power for District Heating: 5%

Elimination of Fossil Fuel Subsidies: 3%

Increased Tax on Electricity: 2%

Accelerated Deployment of Carbon Capture and Storage: 1%

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BUILDINGS SECTOR POLICIESStrongest Policies: Building Codes, Building Retrofitting, Appliance Labeling

2013

2015

2017

2019

2021

2023

2025

2027

2029

0

4,000

8,000

12,000

16,000

20,000CO2e ABATEMENT POTENTIAL BY

SECTOR

Mill

ion

Met

ric T

ons

CO2e

(M

MT)

Stronger Building Codes: 44%Accelerated

Building Retrofitting: 37%

Improved Appliance Labeling: 7%

Improved Contractor Education and Training: 5%

Enhanced Appliance Standards: 5%

Rebate Program for Efficient Building Components and Appliances: 2%

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CO2e SAVINGS FROM BUILDING CODES AND APPLIANCE STANDARDS

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

2041

2043

2045

2047

2049

2051

2053

2055

2057

2059

0

50

100

150

200

250

300

350

Mill

ion

Met

ric

Tons

(M

MT)

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TRANSPORTATION SECTOR POLICIESStrongest policies: Fuel Economy Standards for HDVs and LDVs, Feebate on LDVs

2013

2015

2017

2019

2021

2023

2025

2027

2029

0

4,000

8,000

12,000

16,000

20,000CO2e ABATEMENT POTENTIAL BY

SECTOR

Mill

ion

Met

ric T

ons

CO2e

(M

MT)

Increased Fuel Economy Standards for LDVs and HDVs: 44%Feebate

for LDVs: 37%

Increased Electrification of LDVs and HDVs: 7%

Transportation Demand Management: 5%

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CO2e SAVINGS FROM FUEL ECONOMY STANDARDS

0

100

200

300

400

500

600

Mill

ion

Met

ric

Tons

(M

MT)

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INSIGHTS FROM POLICY ANALYSIS

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TOP 5 POLICIES FOR CARBON ABATEMENTBased on carbon abatement potential and cost-effectiveness

1. Carbon Pricing2. Increased Electricity Capacity Targets/Renewable Energy

Standard3. Stronger Building Codes4. Industrial Product Demand Reduction5. Reduced Venting of F-Gases

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ACCELERATED LOW CARBON SCENARIOA mix of the strongest and most-cost effective policies can peak CO2e in 2030 with small costs

10,00011,00012,00013,00014,00015,00016,00017,00018,000

2015 2020 2025 2030

MM

T CO

2e

100%

INDUSTRYCROSS-SECTORBUILDINGSELECTRICITYTRANSPORT

0%

Reduction of Demand for Industrial Products

Reduced F-Gases

Industrial Efficiency Standards

Early Retirement of Inefficient Industrial Facilities

Clean On-Site Industrial Energy

Carbon Pricing

Elimination of Fossil Fuel Subsidies

Building Codes and Appliance Standards

Accelerated Building Retrofitting

Additional Demand Response Capacity

Renewable Energy Standard

Additional Coal Plant Retirements

Additional Grid Electricity Storage

Increased Fuel Economy Standards

Urban Mobility

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CHINA CAN PEAK CO2e BY 2030, AND CO2 EARLIERWith a smart mix of policies, China can peak CO2 emissions early and can peak all greenhouse gas emissions by 2030

2013

2015

2017

2019

2021

2023

2025

2027

2029

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Mill

ion

Met

ric T

ons

CO2

(MM

T)

2013

2015

2017

2019

2021

2023

2025

2027

2029

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Mill

ion

Met

ric T

ons

CO2e

(M

MT)

CO2 EMISSIONS CO2e EMISSIONS

CO2 emissions peak in 2022CO2e emissions peak in 2030

Reference Scenario

Accelerated Low Carbon Scenario

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CHINA CAN PEAK EARLY AT LOW COSTPeaking CO2 in 2022 and CO2e in 2030 costs less than half a percent GDP

2013

2015

2017

2019

2021

2023

2025

2027

2029

-100

0

100

200

300

400

500

600

Capital Equipment Expenditures

Billi

on R

MB2030 GDP

2030 Change in Capital and Operating Expen-ditures in ALC Scenario

Increased capital equipment and operating expenditures in Accelerated Low Carbon Scenario are 0.38% of GDP

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METHANE AND F-GASES ARE IMPORTANTMethane and f-gases makeup a significant share of greenhouse gas emissions

2030 REFERENCE SCENARIO CO2e EMISSIONS BY POL-

LUTANTCO2F-gasesCH4NOxCON2OVOCs

Pollutant Percent of 2030 CO2e

Carbon Dioxide (CO2) 88%

F-gases 5%

Methane (CH4) 4%

Others <3%

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NATURAL GAS INCREASES COSTS WITH ONLY LIMITED ABATEMENT POTENTIAL

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

01,0002,0003,0004,0005,0006,000

ACCELERATED LOW CARBON SCENARIO PRIMARY ENERGY USE

Coal Oil Natural Gas Nuclear Fuel Hydro Wind Solar Other Renewables

Prim

ary

Ener

gy (

MTC

E)

23THANK YOU

SONIA AGGARWAL@CLEANTECHSONIA

WWW.ENERGYINNOVATION.ORG@ENERGYINNOVLLC