When prices don t steer

Transcription

1 When prices don t steer Mimicking ambitious carbon pricing with energy performance standards Jonas Sonnenschein, Jessika Luth Richter, Robert Van Buskirk & Carl Dalhammar iiiee THE INTERNATIONAL INSTITUTE FOR INDUSTRIAL ENVIRONMENTAL ECONOMICS 1

2 MEPS and Climate Change returning warming to below 1.5 C by 2100 becomes infeasible if final energy demand is not kept to very low levels (Rogelj et al. 2015, p. 526) 2

3 MEPS and Climate Change energy consumption of home appliances is large and growing rapidly (Cabeza et al. 2014) BAT is often 30-50% more efficient than what MEPS require (Lucon et al. 2014) MEPS can reduce final energy consumption in the residential sector by 20% in 2030 (Letschert et al. 2013, p. 80) MEPS for vehicles and appliances are among the best performing US climate policies (Sachs 2012), similar evidence for the EU (Kemna and Wierda 2015) 3

4 Rationale behind MEPS is not Climate Mitigation direct technological change by forcing manufacturers into innovation and consumers into the adoption of efficient technologies which is in their own interest as MEPS aim at minimum life-cycle costs for end-users BUT energy-consuming appliances cause external costs to society 4

5 Social Cost of Carbon (SCC) most common term to describe the value of the climate externality little scientific agreement: estimates differ between a few (Tol 2005) and several hundred USD (Moore and Diaz 2015; Ackerman and Stanton 2012) in theory, carbon pricing considered first-choice policy to internalise SCC in practice, carbon pricing is insufficient to reach climate targets (Edenhofer et al. 2015) too few emissions covered and price level too low (World Bank et al. 2016) 5

6 Marrying SCC and MEPS 1. integration of SCC into LCC modelling inclusion of SCC in the electricity price component of LCC models, which leads to a shift of average LCC in different efficiency classes and to a shift of LCC optima 2. computation of incentive-equivalent carbon prices carbon prices that are needed to make the LCC of less efficient but cheaper appliances on the market at least as high as the LCC of more efficient, but also more expensive, appliances 6

7 The Case: UK Market for Home Appliances we used 2016 market data from online market places four appliances were included:» refrigerators (n=978)» dishwashers (n=358)» tumble dryers (n=148)» televisions (n=232) 7

8 LCC = P A + PWF P E UEC Appliance price Present worth factor Electricity price Unit energy consumption 8

9 LCC = P A + PWF P E UEC Appliance price Present worth factor Electricity price Unit energy consumption feature-adjusted market price feature-adjusted consumption 9

10 LCC = P A + PWF P E UEC Appliance price Present worth factor Electricity price Unit energy consumption feature-adjusted market price 0.14 GBP/ kwh + feature-adjusted consumption 413 gco 2 / kwh * 150 USD/ tco 2 10

11 LCC = P A + PWF P E UEC Appliance price Present worth factor Electricity price Unit energy consumption feature-adjusted market price Dish Fridge TV Dry 0.14 GBP/ kwh + feature-adjusted consumption (reflecting a low DR of 3.5%) 413 gco 2 / kwh * 150 USD/ tco 2 11

12 GBP 1500 LCC with SCC Refrigerators Appliance price A+++ (142) A++ (205) LCC A+ (258) kwh/year 12

13 GBP 1500 Dishwashers 1000 A+++ (206) A++ (249) A+ (278) kwh/year 13

14 GBP 1500 Tumble Dryers (8kg) 1000 A+++ (172) A++ (233) A+ (304) B (573) kwh/year 14

15 GBP 1500 Televisions 1000 B (149) 500 A++ (61) A+ (89) A (116) 0 kwh/year 15

16 Estimation of the LCC minimum (with SCC) Quadratic LCC function near the minimum: LCC(UEC) = LCC min + C (UEC UEC min ) 2 Shift in UEC based on LCC optimisation with SCC included: UEC SCC_min = UEC min PWF (EF SCC) 2 C 16

17 LCC (GBP) Tumble Dryers UEC - UEC min (kwh/year) 17

18 LCC (GBP) Tumble Dryers the LCC minimum is 25 kwh/year lower if SCC is included UEC - UEC min (kwh/year) 18

19 LCC (GBP) Tumble Dryers but: the cost-effective efficiency potential on the market is higher for individual models the LCC minimum is 25 kwh/year lower if SCC is included UEC - UEC min (kwh/year) 19

20 LCC (GBP) 3000 Dishwashers the LCC minimum is 2.5 kwh/year UEC - UECmin (kwh/year) lower if SCC is included 20

21 Incentive-equivalent Carbon Prices LCC equations (incl. the carbon price signal) are equalized for pairs of efficiency classes and solved for the carbon price: CP = P A++ P A+ + UEC PWF ++ UEC + P E UEC + UEC ++ EF 21

22 1000 GBP/t A+ to A+++ (742) Refrigerators (373) A+ to A % % 50% A+ to A+++ (549) there is already an incetive to switch. Emission factor Electricity price Present worth factor 500 A+ to A++ (180) 0 150% 100% 50% 22

23 GBP/t 3000 Dishwashers 2000 A+ to A+++ (1462) 1000 (812) A+ to A % 100% 50% 23

24 GBP/t Tumble Dryers A+ to A+++ (742) The co classe dryers negati there 500 (373) 0 A+ to A++ 150% 100% 50% 24

25 Policy implications The climate externality of home appliance use can be easily captured by MEPS that are not much more stringent than those currently set. Ambitious MEPS can achieve efficiency improvements and corresponding climate mitigation that cannot realistically be incentivised by carbon pricing. The best time to apply stringent MEPS for climate change mitigation is now as electricity grids are still decarbonising and there is still large efficiency potential. 25

26 » It is a sustained delusion of energy policy that efficiency improvements can be realized by the market and sovereign consumers alone. «Sonnenschein & Hennicke,

27 References Sonnenschein, Jonas, Jessika Luth Richter, Robert Van Buskirk, and Carl Dalhammar. When Prices Don t Steer Mimicking Ambitious Carbon Pricing with Energy Performance Standards. ECEEE summer study. Toulon, Sonnenschein, Jonas, Jessika Luth Richter, Robert Van Buskirk, and Carl Dalhammar. Driving Deep Decarbonization with Minimum Energy Performance Standards the Effective Alternative to Stand-Alone Carbon Pricing. Energy Efficiency (under Review),

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